The Netherlands has an individual health insurance mandate, but prior to the change, local health insurers were able to offer policies to a variety of groups, including employers and trade unions, at premium rates often 10% less than were available to members on an individual basis. Employers can still offer collective policies, which have other advantageous terms and conditions, but with the discounts eliminated, employers are evaluating the impact on their overall reward strategy.
The Dutch health insurance system
The health system in the Netherlands requires all individuals to obtain and pay for a basic individual health insurance policy (basisverzekering), which covers essential healthcare services, including maternity and mental healthcare. Individuals can choose from four insurance products available in the market according to their personal needs: restitutie, natura, budget and combinatie. Each meets the compulsory coverage requirements but offers different network, deductible, and coinsurance features. They also vary in the non-essential services they cover or exclude. Basic premiums are determined by the insurers and can vary based on any elected coverage top-ups.
While the new legislation does not eliminate the ability of Dutch insurers to offer collective arrangements, the Dutch government determined that the discounts offered to those within a collective arrangement put those purchasing insurance coverage outside of a collective at a disadvantage. Therefore, all persons purchasing a basic policy of the same type at the same insurer will now have to pay the same premium, regardless of their affiliation with a collective.
As employees no longer have a financial benefit for participating in an employer group plan, employers may be looking for other ways to create benefit value for employees and promote attraction and retention.
A benefit alternative
A potential solution could be the existing Work-Related Cost Scheme (WKR; werkkostenregeling). Through the WKR, employers in the Netherlands can reimburse employees, tax-free, for employment related expenses within established limits. In 2023, employers with a total wage bill of EUR 400,000 can reimburse up to 3% of gross payroll. The reimbursement limit for employers with a total wage bill greater than EUR 400,000 is 1.18% of gross payroll. These percentages are reassessed annually. Any reimbursements over applicable limits are subject to tax of 80%. A reimbursement of EUR 70 to EUR 120 per employee per year is emerging as a typical amount. Many collective bargaining agreements provide for up to EUR 150 per year. An employer should consider their budget strategy when determining an appropriate reimbursement amount for their employees, especially if they are using WKR or other items like allowances or vouchers.
Employers should consult with their local tax and legal advisors to determine how the elimination of the collective health premium discount affects their local benefits strategy and if the WKR is a good option to give additional value to employees. The Lockton Global People Solutions team is prepared to assist with identifying the right solution for your employees in the Netherlands.