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Why large families are set to pay less for German care insurance

Germany's highest court has issued a landmark ruling stating that families with lots of children should ultimately pay less for their social security. Here's what you need to know.

Children eat ice cream in Berlin.
Children eat ice cream in Berlin. Photo: picture alliance/dpa | Annette Riedl

What’s going on? 

On Wednesday, the Constitutional Court in Karlsruhe ruled that parents with more than one child should pay a reduced rate of care insurance compared to people with fewer children – or those with none at all.

The case had been brought by 376 families in a campaign called Elternklage (Parents’ Complaint), who were supported by the Family Federation of Catholics in the Archdiocese of Freiburg. The families had argued that the amount of health insurance, pension insurance and care insurance they pay should be directly linked to the number of children they have.

Since raising a family costs time and money, this contribution to society should be taken into account when setting insurance rates and people with more children should pay lower contributions, the parents argued. 

What does the current law say? 

At present, Pflegeversicherung (care insurance) – a type of social security designed to fund care in old age – is already paid at different rates by parents and non-parents. Since the beginning of 2022, people without children pay 3.4 percent of their income towards social care, while parents pay 3.05 percent of their income.

The decision to have two different rates dates back to an earlier court ruling from 2001. At the time, the judges decided that charging people with children and those without the same amount of care insurance went against the Basic Law. This is because, in the view of the judge, parents pay a “generative contribution to the functioning of a pay-as-you-go social security system”, since their children pay back into the pot later in the life. The two-tiered system for people with and without children was adopted shortly afterwards.

At the same time, however, the judges ruled against a reduction in pension or health insurance contributions for parents. They said it was legitimate for the state to subsidise parents in other ways, such as through free education or topping up the pensions of people who had raised a family. 

READ ALSO: EXPLAINED: Who pays the most German tax and who benefits the most?

So if parents already pay less, what’s the problem?

According to the plaintiffs, the 2001 ruling made a false equivalence between small and large families and didn’t fully take into account the loss of income, time and cost associated with raising kids. 

The lawyers argued that the plaintiffs suffered a double loss of earnings when raising their children and looking after the older generation, and pointed to the fact that women’s pensions are often much lower than men due to time spent bringing up children.

The Catholic Family Federation also suggested that families didn’t really receive free healthcare for their children. That’s because the parents’ contributions are only assessed on their overall earnings, which means that the number of children they have and the costs associated with that aren’t taken into account.

READ ALSO: What you need to know about Germany’s new parental benefits reforms

The Constitutional Court in Karlsruhe.

The Constitutional Court in Karlsruhe. Photo: picture alliance/dpa | Uli Deck

And what were the counterarguments? 

Arguing against the constitutional complaint, a spokesperson for the Health Ministry said the costs associated with bringing up a child should be shouldered by society as a whole rather than any given insurance fund.

The National Association of Statutory Health Insurance Funds (GKV) pointed out that children may not necessarily grow up and pay into the same insurance pot that their parents’ did, making it hard to calculate parents’ contributions based on their children’s future ones. Some children may grow up and move abroad, which would mean they would pay into a different pension or health insurance fund entirely, they pointed out. 

The GKV advocated for reimbursing parents through child benefits rather than through reductions in insurance contributions. 

READ ALSO: What you need to know about the complicated world of German insurance

Did the judges agree with the plaintiffs? 

Partly – but only on the care insurance issue. According to the judges, the 2001 ruling didn’t go far enough in taking into account the number of children in a family. The more children a family has, the greater the effort and the associated costs for parents, they wrote in a statement announcing the ruling.

“This disadvantage occurs even from the second child,” the statement reads. “Charging the same contribution rate to parents regardless of the number of children they have is not constitutionally justified.” 

School pupils in a German classroom

School children sit in a classroom in Neckartailfingen, Baden-Württemberg. Photo: picture alliance/dpa | Marijan Murat

On health insurance and pensions, however, they disagreed with the plaintiffs. 

They said that time taken out by parents to look after children was already factored into the statutory pensions system and pointed to the fact that people benefit from free healthcare as a teenager and child as part of their parents’ health insurance plans. 

READ ALSO: Ehegattensplitting: How did Germany’s marriage tax law become so controversial?

What happens now? 

The court has given the government until July 31st 2023 to introduce a tapered system with larger discounts for larger families.

Speaking to RND on Wednesday, Health Minister Karl Lauterbach (SPD) said his ministry would implement the changes to the law within the agreed timeframe. He said officials would look closely at the reasoning for the ruling and see how it could be best applied to a new tariff system.

However, Lauterbach emphasised that the social care system still needed to be properly financed. “We also want to tackle that,” he said. 

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MONEY

How does the cost of food in Germany compare to other countries?

The cost of everyday products has been rocketing upwards due to inflation. Here's how prices in Germany compare to other European countries.

How does the cost of food in Germany compare to other countries?

The cost of living has been rising in Germany, with food prices going up at an above-average rate of 12.7 percent in June. 

But how do the prices compare to other European destinations?

Germany’s Federal Statistical Office (Destatis) looked at the price of food and drink in Germany and several other European countries for the month of April 2022. And they found a very mixed picture.

READ ALSO: Consumers in Germany face further food price hikes 

Highest costs in Switzerland, Norway and Iceland

Perhaps unsurprisingly, Germany’s wealthy neighbour is where groceries (not including alcoholic drinks) cost the most. 

“Among all selected European holiday countries, the corresponding price level was highest in Switzerland, and was 54 percent higher than in Germany,” said Destatis. 

In the northern European nations of Norway (+42 percent) and Iceland (+40 percent), grocery products were also significantly more expensive than in Germany.

A customer looks at fruit at a weekly market in Oldenburg.

A customer looks at fruit at a weekly market in Oldenburg. Photo: picture alliance/dpa | Hauke-Christian Dittrich

In the neighbouring countries of France (+1  percent) and Austria (+2 percent), consumers had to pay only slightly more for food than in Germany.

Meanwhile, shopping for food and drink products is particularly cheap in Poland, where prices stand at around -30 percent compared to Germany, and around -17 percent in Hungary.

Meat cheaper in southern European countries

Consumers in Germany have been facing major price hikes for meat in the first half of this year

But among all selected European holiday countries in the study, the price level for meat in Switzerland was twice as high as in Germany (+101 percent). In Norway meat was 25 percent more expensive, and in Luxembourg 17 percent.

The price level was slightly higher for Fleisch products in France (+4 percent) and Austria (+1 percent) than in Germany.

In Greece, however, buying meat is about 21 percent cheaper than in Germany. Consumers also paid less in Spain (-24 percent) and Portugal (-23 percent), which are popular EU holiday destinations. Buying meat is even cheaper in Croatia (-30 percent compared to Germany).

The below chart by Statista shows the price levels compared to Germany for meat in selected countries in April 2022, with Switzerland at the top. 

Source: Federal Statistical Office

What else do we know about the cost of food and drink products?

Fish was significantly cheaper in Germany than in many of the countries studied. However, in the Netherlands and Poland the price level was the lowest compared to Germany, at -29 percent. In Italy and Croatia, fish was also 20 percent cheaper than in Germany.

For fruit and vegetables, the price level was highest in Norway – consumers there have to pay 34 percent more for fruit and vegetables than in Germany. In Poland, these foods were the cheapest (-33 percent compared to Germany).

READ ALSO: Why are people in Germany clearing out supermarket shelves?

When it comes to alcoholic drinks, they were only slightly cheaper in Austria (-2 percent) and Hungary (-5 percent) compared to Germany. Alcoholic drinks were most expensive in the north of Europe: in Iceland they were 257 percent pricier than in Germany, in Norway 217 percent. In the Netherlands, the price level was 17 percent above Germany, and in France 16 percent higher.

What does all this mean?

It’s worth keeping in mind that each country has a different economy, wage and tax contribution rates. But it’s good to know how costs compare to Germany so you can consider your next trip or think about how you should budget when going on holiday or travelling.

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