Is Premium Adjustment a Cure-All for Private Health Sector? The Case of Germany

Abstract

Health insurance companies are confronted with various tasks in order to offer life-long health care services to their customers. Increasing health expenditures and growing life expectancy necessitates doing annual calculations. At this point triggering factor is applied as a control instrument for continuously seen alteration of health expenses. On the basis of triggering factor a decision must be taken whether premium adjustment is required or not. Premiums of old people may increase seriously, but newly determined premium after premium adjustment must be limited. That means, up to a maximum of a certain premium increase can be given to an insurance holder. In this connection; old age problem in German health insurance sector, application of single premiums, their financing resources, and investment strategies of insurance companies are illustrated as a model. This paper shows that premium adjustment alone is not enough to stabilize premiums. So, the need of qualified finance department for asset management occurs.     Keywords: Health insurance companies; old age problem; premium adjustment; investment portfolio JEL Classifications: G11; G22; I13; J11