France Imposes COVID-19 Tax on Healthcare Premiums

French COVID-19 tax on healthcare insurersThere is a new French COVID-19 tax on health insurers which will be based on insurers’ financial results for 2020. Insurers will pass this 2.6% tax of net contribution along to employers upon renewal. Because of this, employers can expect the increase for 2021 renewals to be 6% for medical insurance. (Note: Death and disability benefit costs are expected to increase by 10%-15% for employers as well in 2021.)

The French government is using this tax as a way to help bring the social security system back into balance. Over the past three years, France’s social security system has seen an increased deficit of €52 billion, and action was required to rectify the situation.

Since French people are not seeking elective health services due to COVID-19 confinements, insurers’ reimbursement levels are down by about 8% on an annual basis, therefore their profits are increasing. The French government sees a tax on this profitability as an equitable way to help balance the social security system.

Insurers will likely see this tax reduced to 1.5% for 2021 financial results, and this percentage will not exceed 2.6% in subsequent years. The hope is that this reduction will be passed along to employers. It is not clear if the tax will last beyond 2021, as was the case with the CSG CRDS (social charges).

Note: Health plan portability in France

2014 French legislation mandated that health, death, and disability plan portability is free for employees for a maximum of 1 year. The plan’s cost is directly paid by the employer’s loss ratio, and because of this, employers should anticipate that renewals for next year will be complicated.

 

This information about the French COVID-19 tax on healthcare premiums is provided by Gerep, Asinta’s employee benefits consulting Partner in France