Payment arrears in health insurance increase

With inflation on the rise, many people are struggling to pay their health insurance premiums. ABN AMRO and the debt collection industry have estimated that in the first nine months of 2022, more than 320,000 arrears were transferred from health insurers to collection agencies. This represents an increase of more than 17 per cent compared to the same period last year.

What does this mean? It is certainly a sign of problems arising from inflation. Simply put, people are struggling to make ends meet. Payment arrears with health insurers are often seen as the first sign of economic problems, because insurance premiums tend to be the first thing not settled during times of hardship. Unlike rent arrears, which can cause eviction, unpaid health insurance premiums are somewhat abstract and have fewer consequences.

Phone calls for payment arrangement
The number of phone calls to collection agencies has risen by 10 per cent last year. Most of these phone calls are from people who have payment arrears, asking to have the amount in their repayment arrangement reduced. It’s not just low-income earners who are keeping the lines busy. It has been reported more phone calls are coming from households earning average or above average income. These households, which are not used to contacting collection agencies, are also trying to find solutions. In this group, the number of non-payment cases has increased by 34 per cent in the first nine months of this year compared to the same period last year.

Health insurer DSW has also seen a significant increase in the number of customers who have problems paying their premiums. The number of people who have applied for a payment plan rose by 50 per cent in August, compared to a year earlier. DSW has made 900 more payment arrangements than last year.

The question among many is how serious the situation is. To put matters into perspective, the increase in payment arrears is still lower than before the pandemic. Health insurers CZ, Menzis and Zilveren Kruis have not seen a significant increase in cases handed over to debt collectors.

What happens when defaulting
If a policyholder defaults on their health insurance premium, the health insurer will initially send them letters and payment reminders. The insurer will also announce a payment scheme, ideally arranged in cooperation with the customer. After six months of non-payment have passed, the insurer will report the policyholder to the Central Administrative Office (CAK).

After being reported to the CAK, the policyholder can no longer pay their premiums to the insurer. Instead, the amount due will be withheld from their salary and remitted to the CAK. The policyholder will continue to be insured under the basic insurance package, which is compulsory for all inhabitants of the Netherlands. In case the policyholder has an additional package, the insurer may cancel it. Being referred to the CAK comes with additional cost to the customer: the premium will be increased to 120 per cent of the standard premium. This will also apply to those whose income is at or below the level of the social insurance benefit.

In case the premium cannot be withheld because the customer’s income is irregular or too low, the Central Juridical Collection Agency (CJB) will contact the customer about payment. During this time, the policyholder cannot end insurance or even change insurers, since this will be considered debt avoidance.

After successfully paying the debt, CAK will be formally notified by the health insurer and the administrative premiums will no longer be withheld. The CAK will in turn notify the policyholder and the employer to end the withholding of the premium from the salary. The customer may then pay their premium directly to the insurer again, and is also free to change insurers.

Written by Stephen Swai