Proposal for co-financing within health insurance

Within the framework of the Government’s action plan for improved health and reduced absence due to illness, the Ministry of Health and Social Affairs and the Ministry of Finance have proposed changes in the law implying co-financing within health insurance. This means, amongst other things, that the cost of health insurance fees for employers will be unpredictable.

The memorandum, “Hälsoväxling för aktivare rehabilitering och omställning på arbetsplatserna” (Health exchange for more active rehabilitation and work place adaptation) (Ministry Report series 2016:8), has been produced by a working group comprised of officers from the Ministry of Health and Social Affairs and Ministry of Finance. This working group has had the assignment of analyzing and producing a proposal regarding employers’ motivation to undertake activities to assist in ensuring that employees who are absent due to illness during a longer period can return to their work. With the aim of seeking to abate the increasing ratio of employees absent due to illness, the working group is of the opinion that employers should assume an increased responsibility for the cost of employee illness and rehabilitation compensation.

The proposal in brief

Proposed in the memorandum

• that the employer pays a special health insurance fee of 25 percent of the employee’s sickness pay from and beginning day 91 of his or her illness
• a free allowance of SEK 33,500 is be established for all employers, and this is to comprise protection against small employers incurring excessively high costs,
• as regards individuals with difficult positions in the labour market, the employer will not incur this responsibility of co-financing sickness pay,
• employer’s contributions are to be decreased by 0.16 percentage points (from 31.42 percent to 31.26 percent),
• the special health insurance fee is to be calculated and determined by the Swedish Social Insurance Agency and will be charged via the employer’s tax account.

This proposal implies that a law on special health insurance fees will be introduced. The special health insurance fees are to be paid by the employer and are, with certain limitations, to be calculated based on the amount of sickness benefits and rehabilitation benefits provided to the employee via the employer. According to the proposal, the employer is to pay the special health insurance fee of 25 percent of these benefits. A free allowance of SEK 33,500 will be introduced. This implies that only special health insurance fees exceeding SEK 33,500 during a given fee year will have to be paid. This applies to all employers but is intended to comprise protection against small employers incurring excessively high costs.

The special health insurance fees will be calculated and determined by the Swedish Social Insurance Agency and will be debited against the employer’s tax account. The Swedish Social Insurance Agency is to inform the Tax Agency of these decisions and of any other details required for payment and repayment of the fees. Assessments on special health insurance fees will come into effect immediately.

Time schedule

This proposal is now on referral and comments on the proposal from slightly more than 80 consultation parties are to be presented to the Ministry of Health and Social Affairs on no later than 7 June 2016.

The changes are proposed to come into effect on 1 June 2017.

Comments

As it is the Ministry of Health and Social Affairs who is responsible for the memorandum, there is a major risk that many companies will not be aware of the fact that this is a proposal which can imply increased costs for employers having employees who are absent due to illness during a period in excess of three months.

However, already at this time, the proposal has received criticism and the Confederation of Swedish Enterprise has initiated a campaign to stop this proposal. The criticism is based on, amongst other things, the view that it implies unpredictable costs for companies as a company cannot know, in advance, whether they will have an employee who will be absent due to illness during a longer period of time and, in addition, the company has very limited possibilities of impacting such a negative development.

The proposal gives rise to many question, both of a principle, as well as of a more practical, nature. Today, we have a system in which the employer’s contributions are in the form of collective insurance, that is, all employers are jointly responsible for paying in employer’s contributions financed by the social security system. With this new proposal, one abandons this principle and it is the companies with long-term absence due to illness who are responsible for a major portion of the costs of such absence. Practically speaking, companies must continue to pay in employer’s contributions (reduced by 0.16 percentage points) and, in addition to this, they must pay in the proposed special health insurance fees. Consequently, there is good reason to monitor this proposal and see if your company could be impacted by it should it succeed in being adopted. Feel free to contact us so we can provide more information and help to answer any questions you may have about this.

Author: Karin Norberg, former employee at PwC.