Statutory or private: the two German systems

Germany’s public system is statutory health insurance (SHI, gesetzliche Krankenversicherung). Competing non-profit sickness funds, the Krankenkassen, run it, and the Federal Ministry of Health counts 93 of them in 2026. Residents are free to pick their own fund, with a few exceptions, so the employee normally chooses the fund rather than the employer.

Private health insurance (PHI) is the second system, and it is a full alternative to SHI rather than an add-on. Only certain groups may switch to it: the self-employed, civil servants and employees whose pay is above the compulsory insurance threshold.

Long-term care travels with the choice. Joining SHI enrols a member in social long-term care insurance (Pflegeversicherung) automatically, and anyone who goes private must buy private long-term care cover instead.

What a German employer pays and provides

For an employee in SHI, contributions are a percentage of salary, and the general rate is split evenly between employer and employee. Each fund adds its own supplementary contribution, shared the same way. Long-term care contributions are shared too, except in Saxony, which uses a different employer and employee split, and childless members pay an extra care amount themselves.

Sickness brings its own employer duty. When an employee is ill, the employer keeps paying full wages for the first six weeks; after that, the sickness fund pays sick pay, currently 70% of gross income. Plan for that six-week window when you budget a German hire, because it stays with the employer whatever benefit you add.

For a privately insured employee, the employer pays a subsidy toward the compulsory long-term care cover. German law also provides for an employer contribution toward the private health premium itself, but the financial regulator BaFin ties it to policies that meet statutory conditions, so the wording of the policy matters.

The opt-out threshold, and why the year matters

Whether an employee can leave SHI depends on pay. The compulsory insurance threshold was EUR 77,400 gross a year in 2026, up from EUR 73,800 in 2025. It is reset every year, so check the current figure before you set a salary or tell a candidate they can choose a system.

An employee earning more than the threshold can stay in SHI as a voluntary member or move to PHI. Below it, membership is set by law, and neither you nor the employee can trade it for a different plan.

Where an international plan fits

Because SHI membership is compulsory below the threshold, an international plan cannot replace it for that employee. For people outside SHI, private cover has to count as substitutive health insurance under Section 193(3) of the Insurance Contract Act (VVG) to satisfy the duty to be insured. In guidance published some years ago, BaFin said it is often doubtful whether policies from insurers based elsewhere in the EEA meet those requirements, and that such policies do not qualify for the employer subsidy.

In practice, a global plan in Germany normally works as a top-up on SHI or PHI rather than a substitute. Whether one particular plan could stand in as substitutive cover is a case-by-case question, and the insurer is the one who answers it.

Dental shows where a top-up earns its place. SHI covers panel dental care, and patients pay the extra when they choose treatment beyond it, such as inlays or alternative fillings. That gap is a common reason people buy supplementary dental cover.

Families can decide the system

Family insurance is one of SHI’s defining features. A spouse and children with no income or low income are covered at no extra contribution, and the ministry’s 2026 guide puts co-insured family members at about 16 million.

PHI works differently. Premiums depend on health, entry age and risk rather than income, each family member needs their own contract, and patients usually pay the provider first and are reimbursed afterwards. For an employee above the threshold with a non-earning partner and children, those differences often decide which system suits them.

Employing someone in Germany without a German office

Law firm guidance says a foreign company does not need a German entity to employ staff. It can run a German payroll through a local payroll provider, which handles social contributions and wage tax. Many companies look at an employer of record (EOR) instead, and that route has legal limits in Germany.

The same law-firm guidance describes German law as generally treating an EOR arrangement as employee leasing under the Temporary Agency Work Act (AÜG). On that reading, the provider needs a licence from the Federal Employment Agency, and a worker can generally be leased for no more than 18 months. That makes an EOR in Germany a licensed, time-limited arrangement rather than an option you simply pick. Our guide to health coverage for EOR and contractors abroad explains in general terms how cover follows each arrangement.

Whichever route you take, the German employer of the person enrols them in SHI or pays the subsidy toward their PHI, and a US-held international plan sits on top of that. Treat this page as general information rather than legal or tax advice, and check payroll, contribution and benefit questions with a local adviser or tax professional.

Asking for an introduction to a benefits partner

On health cover, our part is the introduction: we can introduce you to a benefits partner that works with international and remote-team health coverage. Use the quote form on this page to tell us that your employee lives in Germany, how many people are on the team and whether partners or children would be included, and we will pass it to the partner. Eligibility, plan design and pricing are decided by the partner and the insurer.

Hiring in more than one country? Start from the international health insurance overview, or see every benefits topic on the employee benefits hub.

A few useful answers

Common questions

Can a US company give a German employee an international plan instead of statutory insurance?

Not for an employee whose pay is below the compulsory insurance threshold, because SHI membership is set by law. An international plan can sit on top of statutory or private German cover.

What is Germany’s opt-out threshold for health insurance?

It was EUR 77,400 gross a year in 2026, and it is reset every year, so check the current figure. Employees above it can stay in SHI voluntarily or move to private health insurance.

Does the employer contribute to a privately insured employee’s cover?

Yes. The employer pays a subsidy toward the compulsory long-term care cover, and German law provides for a contribution toward the health premium where the policy meets the statutory conditions.

Are a German employee’s spouse and children covered?

In SHI, a spouse and children with no income or low income are covered at no extra contribution. In private health insurance, each family member needs their own contract.

Can we hire in Germany through an employer of record?

It is possible, with limits. Law-firm guidance from 2023 describes an EOR arrangement in Germany as employee leasing in most cases, which calls for a Federal Employment Agency licence and generally caps the lease at 18 months.

International Health Insurance for Remote Employees in Germany