Anyone who takes company health insurance to senior management will almost inevitably come up against three objections: it is expensive, it is limited, and it does not let you differentiate between employees. These arguments are not plucked out of thin air – they typically come from the voluntary health fund (egészségpénztár) side, from cafeteria (flexible-benefit) advisers or from an earlier bad experience, and there is some truth in each of them. In this article we do not set out to refute them but to show when they hold and when they do not: expensive compared with what, what the limits mean in practice, and how far differentiation can go. The aim is for the decision-maker to say yes or no knowing the rules and the proportions, not on the strength of a catchy line.
- “Expensive” only makes sense in comparison: under a genuine group contract with an undivided premium, the premium is taxed at the company as a so-called “specific defined benefit” (egyes meghatározott juttatás), with a total employer burden of 33.04%, whereas delivering the same net value to the employee as salary costs nearly 70% extra – but if the premium can be shown per person, it is taxed as employment income.
- Limits are part of every package – annual benefit limit, per-module caps, waiting period, exclusions; the question is not whether there is a limit but where it lies and how high it is, and this differs by insurer.
- Differentiation is possible through package tiers based on objective criteria (job role, organisational unit, management level); individual choice and per-head premiums put the favourable tax treatment at risk.
“Expensive” – compared with what?
On its own, the word “expensive” is not a statement; it is simply missing a point of reference. Compared with nothing, every benefit is expensive; compared with salary, the picture looks different. If the company gives the same value as a pay rise, the 15% personal income tax, the 18.5% social security contribution and the employer's 13% social contribution tax are added to the employee's net amount – which is why the same net amount reaches the employee as salary only at nearly 70% extra cost. By contrast, under the Personal Income Tax Act, the premium of a genuine group health insurance contract with an undivided premium is a so-called “specific defined benefit” (egyes meghatározott juttatás): the total employer burden is 33.04%, it is borne by the company, and the employee pays nothing on it. For contracts concluded after 2018, services used under the package are typically tax-free. Our article comparing salary and insurance illustrates this ratio with a worked example.
The favourable treatment comes with a condition, however, and this is where the objection is partly right: the 33.04% applies only if the contract is a genuine group contract with an undivided premium, where the part of the premium attributable to one insured person cannot be determined even by apportionment. If the premium can be shown per person – because the package can be chosen individually, or because the policy itemises the premium by person – the amount is the employee's employment income and is taxed as salary; in that case the label “expensive” is justified. The health-fund side's argument comes from a different direction: on payments into a health fund, the member can claim a 20% tax refund, up to HUF 150,000 a year, out of the personal income tax they have paid, and the amount is credited to their individual fund account. This applies to payments credited to the member's individual account – besides the member's own payments, it also covers the employer's contribution, which under the current rules is taxed as the employee's salary income; an employer amount paid for a targeted service, on the other hand, may be taxed as a specific defined benefit, but no tax refund is available on it – it is worth clarifying the specific accounting treatment with your accountant. So the two tools do not serve the same purpose: the fund is a savings vehicle from which the member pays up to the amount of their own balance, while insurance is a risk pool that covers individual employees' care out of the shared premium. Which one suits the company, and when, is discussed in our comparison of health insurance and health funds.
“Limited” – yes, but what is the limit?
This objection is literally true: there is no health insurance without limits. The insurer pays only for what is an insured event under the contract, and the policy conditions typically set limits on several levels: an annual benefit limit (the monetary cap per insured person), per-module limits (diagnostics, laboratory tests, high-value imaging, dental care), a maximum number of uses for certain services, waiting periods and exclusions. The details differ by insurer and by package, so before deciding it is worth reading the limits and exclusions sections of the policy conditions rather than the list of services – the terms are explained in our article on the vocabulary of policy conditions.
The question, therefore, is not whether there is a limit but where the limit lies compared with what the team actually uses. The health-fund side rightly points out that a health-fund balance can be spent on many things – medicines, glasses, medical aids – but in a fund, the limit is the balance itself: the member can spend as much as is in their account. Insurance works as a risk pool: an employee can access a high-value examination within the limit even if the premium attributable to them is only a fraction of its cost, because the group pays the premium together. So the limit is not a flaw but the price of the structure – it becomes a real objection if the package limit is lower than the team's actual needs, or if the company chose on the basis of the length of the list of services and the limits only come to light when they are first exhausted.
“One-size-fits-all” – how far can you differentiate, and where is the line?
The third objection is partly outdated, and for the rest, it is worth knowing where the line lies. In group health insurance, employees can be given different package tiers – basic, extended, executive – if they are assigned on the basis of objective, work-related criteria: job role, organisational unit, management level, site. This must be laid down in the benefits regulations, and because of the requirement of equal treatment, the distinction must be based on a verifiable, work-related reason. Moving between tiers – for example on promotion – is a separate process, typically with a waiting period and administration under the policy conditions; the procedure is described in our article on changing package tiers.
The line lies where differentiation turns into individual choice. The condition for the favourable tax treatment is a genuine group character with an undivided premium: the company defines the group; employees do not choose a package for themselves. If the structure can be chosen per person and the premium can be shown per head – everyone asks for a different tier, the premium is broken down by person – it is no longer a group benefit but an individual one, and the premium is taxed as employment income. So if you want every employee to put together their own benefits, a cafeteria or health-fund solution is a better fit; group health insurance differentiates at group level, not individually. This is neither a drawback nor an advantage, simply the different logic of the two tools.
When do the objections hold after all?
To be honest: there are companies where the three objections do stand. Some typical situations:
- Small headcount and very mixed needs – here the group is hard to define, and the advantage of the risk pool carries less weight.
- Low utilisation: if the team does not book appointments, the premium really is expensive, regardless of the tax treatment – what helps here is communication and employee information, not the policy conditions.
- Oversized package: executive tier for everyone, while most of the team would use specialist examinations and lab tests – in that case the limit is not a constraint but an unused allowance.
- A need for individual choice: if the company's culture rests on the principle that “everyone decides for themselves”, the logic of a group structure clashes with it.
- Short-term thinking: if the company plans only one year ahead, the programme cannot realise its value because of indexation at renewal and the waiting periods.
In these cases, it is not the product that is bad but the fit that is missing – and it is worth saying so before the decision, not after it.
How should you take the debate to the decision-maker?
Four steps are usually enough to turn the three objections from slogans into questions you can put figures on. First: present the planned budget to management converted into a salary equivalent, with the 33.04% burden and the salary-based burden side by side – premiums from the insurer's quote, rates from the current rules. Second: when comparing quotes, compare the limits and exclusions tables module by module rather than the lists of services. Third: lay down the package tiers and the objective criteria for assigning employees to them in the benefits regulations before the scheme is introduced. Fourth: clarify the tax treatment – genuine group character, premiums for family members, employees joining during the year – with your accountant before you sign the contract. The questions the finance director is likely to ask are collected in our article on CFO questions, and the accountant's considerations in our accountant's quick guide. If you let us know, we prepare the comparison of the quotes – the decision remains the company's, and the only objections left standing will be those that still hold true against your own figures.
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Sources
- Act CXVII of 1995 on Personal Income Tax (Szja tv.) – Section 3, point 89 (group insurance premium, proportional attribution), Section 70 (6) b) (specific defined benefit), Section 44/A (health-fund tax refund), Annex 1, point 6.6 (tax-free insurance benefits)
- NAV (Hungarian tax authority) – Taxable insurance premium (guidance, 14 May 2020): the premium of a genuine group risk insurance with an undivided premium is a specific defined benefit; a premium that can be determined per insured person is income under the legal relationship
- Act CXXV of 2003 on Equal Treatment and the Promotion of Equal Opportunities (Ebktv.) – differentiation applied to benefits
- egeszsegpenztarak.hu – the health funds' arguments: 20% tax refund, up to HUF 150,000 a year
