German government introduced Gesetzlicher Zuschlag (Statutory Surcharge) as part of the Jan 2000 Health Reform Act. The statutory surcharge is 10% of the private health insurance premium.
Every private health insurance company must charge a statutory surcharge to its customers. The statutory surcharge is saved and invested.
The total saved amount plus the interest earned is used to keep the insurance premium stable and affordable from age 65. Additionally, from age 80, the saved capital can be used to reduce the monthly insurance contributions.
NOTE: The law prohibits insurance companies from paying the saved statutory surcharge to their customers.
In short, you pay the statutory surcharge between the ages of 21 and 60. The private health insurance provider uses this surcharge and retirement provisions to keep the monthly premium stable.
