The members of a professional chamber would like a screening programme and quick access to specialists, a trade union would like to retain its members with a tangible service, and the members of a hobby or sports club ask why only companies can get group health insurance. The answer: it is not only companies that can get it. Anyone can be the policyholder of group health insurance if the insured persons are linked to them by a legal relationship independent of the insurance – here, membership. What is different without an employer is not the service but the logic of joining, paying the premium and taxation. This article presents these three differences from the perspective of membership organisations; our article on groups from two people covers the company rules for the smallest headcounts.
- A group can exist without an employer: membership is a criterion independent of the insurance, the organisation is the policyholder and the member is the insured person – the service is the same care-coordinator-based health insurance as in company packages.
- The difference lies in joining: with voluntary participation, insurers typically require a minimum headcount or participation rate, a health declaration, a waiting period and an enrolment window, so that it is not only people with health complaints who join.
- If the member pays the premium, there is no taxable event; if the organisation pays, the premium may be the member's income or a certain specified benefit (a Hungarian employer-taxed benefit category) – benefits from trade unions to their members fall under a separate rule, to be clarified with a tax adviser.
Who are the parties, and what is the service?
Under Section 6:442(1) of the Hungarian Civil Code (Ptk.), in group insurance the insured persons are defined on the basis of their belonging to an organisation, their legal relationship with the policyholder or some other connection, and the insurer accepts the risk with regard to the group. For members of associations, chambers or trade unions, the organisation is the policyholder, the member is the insured person, and the membership relationship is the criterion that forms the group; under Section 6:440 of the Ptk., the organisation may conclude the contract for the benefit of the interested person. There are real examples: the Hungarian Medical Chamber (Magyar Orvosi Kamara) maintains group life and accident insurance, paid for out of the membership fee, for its members under the age of 80 who have given an authorisation for this; in one association's health insurance initiative, the provider required at least fifty people to join, and the members paid the premium. The service itself does not differ from company packages: the member calls the care coordinator, who books an appointment in the partner network, and the insurer pays the provider; the outpatient, diagnostic and screening elements, the limits and the exclusions are the same concepts as those described in our article on the care coordinator. One difference shows here too: membership is nationwide, so for a membership group the network's coverage outside Budapest is not a detail but the basis of whether the programme can be used at all.
Joining: membership gives the right, the declaration gives the cover
There are two models. In one, the organisation brings all its members into the cover and builds the premium into the membership fee, and each member declares in writing that they consent – in personal insurance, Section 6:475 of the Ptk. requires the insured person's written consent to conclude and amend the contract if the insured person is not the policyholder. In the other, participation is voluntary: members decide for themselves whether to join and pay the premium themselves, and the organisation provides the framework contract. For the insurer, the second model is the harder one, because with voluntary enrolment it is typically those who already have health complaints who sign up – the industry calls this anti-selection (adverse selection). Hungarian policy conditions for voluntary membership groups therefore typically require some of the following: a minimum number of joiners or participation by a set proportion of the membership, a health declaration or an exclusion for pre-existing conditions, a waiting period (up to 180 days in some conditions), and an enrolment window, meaning that people can join only at the start or at the renewal date, not at any time. These requirements are not directed against the organisation; they protect the stability of the premium: if the risk pool is balanced, the following year's premium adjustment is also easier to manage. A member's leaving the organisation means the end of their cover, because belonging to the group is its basis; the organisation keeps the list of names and typically updates it monthly, which can be done from a membership register just as from a payroll list.
Who pays, and how is it taxed?
This is where a membership group differs most from a company group, because there is no employer, so the rules on employer benefits – internal policy, benefits budget – cannot be applied. Under Section 3 point 89 of the Personal Income Tax Act (Szja tv.), a premium paid by another person is a taxable insurance premium for the insured individual; in group insurance – unless it can be determined otherwise on the basis of the contract – it is the part proportionately attributable to the individual, and the group premium as a whole is taxed at the payer as a certain specified benefit (a Hungarian employer-taxed benefit category) only if the premium attributable to the individual cannot be determined even by apportionment (Szja tv. Section 3 point 89 sub-point bb and Section 70(6)(b)), with 15% personal income tax and 13% social contribution tax on 1.18 times the premium. For a membership organisation, three routes follow from this.
- The member pays the premium. The organisation only passes the premium on and collects it, and the member pays out of taxed income: there is no taxable event, nothing to declare, and no tax allowance either. This is the cleanest route, and the publicly known association examples typically work this way.
- The organisation pays, and the premium attributable to the member can be determined or apportioned. The member receives income whose type depends on their legal relationship with the organisation – without an employment relationship, typically other income – with the associated payer obligations; this has to be handled by the organisation's accountant.
- The organisation pays, and the premium attributable to the member cannot be determined even by apportionment. A certain specified benefit at the organisation, with 33.04% in public charges in total; the member has nothing to do. According to insurers' tax guides, this covers so-called portfolio insurance (állománybiztosítás), where the insurer sets the premium for the group as a whole, with a headcount that changes during the year – whether a chamber arrangement financed from membership fees is such a case is an individual tax question.
There are also two separate lanes. Annex 1 to the Szja tv. contains a tax-exemption rule for non-cash benefits given by a trade union to its members; how this can be applied to an insurance premium is an individual tax question that has to be clarified with a tax adviser before the trade union pays the premium out of membership fees. For a public-benefit organisation, the tax-exemption rules tied to the public-benefit purpose require separate examination. How the organisation accounts for the premium as an expense depends on its tax status – for a civil society organisation, this does not follow the company logic of corporation tax.
What does the organisation see, and what not?
A membership organisation sees no health data, just like an employer: the care coordinator and the insurer handle who had which examination and when, and the organisation receives at most aggregated usage data. The organisation passes on members' data – name, date of birth, contact details – for the purpose of performing the contract; members must be informed of this, and the enrolment declaration also includes consent to it; the points made in our GDPR article apply here too. The organisation's task is to inform: what the package includes, how to request an appointment, what the waiting period is – in group contracts, the policyholder passes this on to the insured persons. For members, too, the complaints route is the care coordinator, then the insurer's complaints handling, and finally the Financial Arbitration Board (PBT) or the courts; the organisation helps with information, but the claim for benefit is reported by the member.
What should the organisation's leadership do?
First, the decision: a resolution of the general meeting or the board and, if the premium is built into the membership fee, the part of the statutes on member services. Second, the model: all members automatically, or voluntary enrolment – this decides what the insurer will require. Third, taxation, with the accountant, before the quote request, because the question of “who pays” also determines the structure. Fourth, the data: headcount, age profile and the distribution of members' places of residence by county – without names – because the network depends on this. Fifth, communication to members: enrolment window, declaration, waiting period, how to reach the care coordinator. If these five points are in place and the organisation lets us know, we compare the insurers' offers in a single table; the insurer pays only for what is an insured event under the contract, so for a membership group, too, the yardstick is the policy conditions, not the brochure.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) Sections 6:440, 6:442 and 6:475 – insurable interest, group insurance, the insured person's consent
- Personal Income Tax Act (Szja tv., Act CXVII of 1995) Section 3 point 89, Sections 69–70, Annex 1 point 3.3 – taxable insurance premium, certain specified benefits, benefits from interest-representation organisations
- Hungarian Medical Chamber (Magyar Orvosi Kamara) – Group life and accident insurance for chamber members (policyholder: the chamber; premium from the membership fee; member authorisation)
- Kiszámoló: Group health insurance for the association (2017) – association framework contract, at least 50 joiners, premium paid by the members
- K&H collective (group) risk life, accident and health insurance policy conditions (2011/KALT, in force from 25 October 2013) – insurable group, waiting period of up to 180 days, the insured person's consent
- RSM Hungary blog: Employer group insurance – tax treatment of the premium (apportionment, certain specified benefits)
- MNB – Financial Arbitration Board (PBT)
- Generali – Tax changes from 2019 for insurance taken out by the payer (employer) (definition of portfolio insurance – állománybiztosítás)
