Changes in health insurance financing
1945/46 | General health insurance financed by capped contributions
Health insurance under the General Scheme is financed exclusively by capped contributions from active employees or civil servants and their employers (employee and employer share of contributions).
The special health schemes are financed by contributions (employee and employer share), but some of them are also subsidized by the State budget.
Employee or civil servant contributions are deducted from their remuneration by their employer and paid to the appropriate bodies. Initially, contributions were collected by health insurance funds in particular, but specialized bodies, URSSAF, were set up in 1948 and extended nationwide in 1960.
The choice made in 1945-46 was to finance Social Security through contributions based on earned income, both for reasons of principle – that of Social Security’s autonomy from the tax-financed State – and for economic reasons, as it was not possible at the time to mobilize other, very low incomes (pension schemes had collapsed following the economic crisis of the 1930s and the Second World War; income from capital – from investments or assets – was of little significance in an economy under reconstruction). The idea of taxing risky behaviors that generate health insurance costs is not yet in the air.
The choices made in terms of deduction and collection (withholding of contributions; and fairly quickly recourse to specialized organizations) have proved to be very appropriate. They have given employers a sense of responsibility and, to a large extent, ensured that contributions are paid correctly. They recognized that the business of service and benefits management is very different from that of revenue collection, which had appeared marginalized and inefficient within the health insurance funds very soon after 1945.
1965 | The new health scheme for self-employed workers is financed solely by capped contributions
For this new scheme, the same choice was made as for the Régime Général in 1945, i.e. financing by contributions and capped contributions, thus limiting the solidarity dimension of the scheme.
1967-1984 | De-capping of general scheme health insurance contributions in very gradual stages
Employee and employer contributions are de-capped.
1967 | Creation of a voluntary health insurance contribution for the general scheme, a health contribution for retired civil servants and a tax on motor vehicle insurance policies.
From 1967 onwards, a long process began to move away from a health insurance system financed exclusively by contributions from active employees and their employers.
Cover for sickness and maternity insurance benefits in kind is provided for the insured volunteer by a contribution calculated on a flat-rate basis that takes into account, in particular, the resources of the insured volunteer.
Civil servant pension schemes now provide significant pensions, and retirees consume on average more healthcare than working people, given the relationship between health and age. It was decided to ask retirees to contribute to the financing of health insurance.
This is the first step in a process that will see the majority of replacement income recipients (retirement, early retirement, disability pensions, unemployment insurance benefits) contribute to the financing of their health insurance, alongside active employees or civil servants.
The introduction of a tax on motor vehicle insurance contracts is a first step towards ensuring that high-risk behaviors that affect the health of those insured contribute to the financing of health insurance. For the first time too, a tax has become a revenue of the health branch of the general scheme, which until now has been financed 100% by social security contributions. This tax takes into account the scale of health insurance expenditure arising from road accidents, both in terms of benefits in kind and cash benefits.
Of course, this is not an alternative to strong measures to prevent dangerous behavior on the road, which, after much effort, have led to a considerable reduction in the number of accidents.
1978 | Creation of the personal health insurance contribution to the general scheme
A premium adapted to the inactive status of the personal insurance member has been introduced. It is based on the individual’s total income. It is only a flat-rate amount, as it cannot be calculated on this income. This is different from the 1967 voluntary insurance contribution scheme that personal insurance replaced.
1979 | Creation of a health contribution for private-sector pensioners
As the Régime Général now provides significant pension benefits, it has been decided to ask retirees to contribute to the financing of health insurance. We saw above that civil service pensioners have been doing this for the same reason since 1967.
1981/1982 | Creation of a health contribution paid by some recipients of replacement income other than pensions: unemployment insurance benefits, disability pensions and early retirement
This is the final stage in the process that leads the majority of replacement income recipients (retirement, early retirement, disability pensions, unemployment insurance benefits) to participate in financing their health insurance, alongside active employees or civil servants.
1982-88 | Temporary allocation to health insurance of a solidarity contribution on the income of individuals liable to income tax
This measure, which could be seen as a further diversification of health insurance revenues, was not followed up as such. The idea of mobilizing income from sources other than work to finance health insurance took a different route, with the creation of the Contribution sociale généralisée (CSG) in 1990.
It should be noted that in the 1980s there were also occasional allocations of a contribution on corporate profits and a general tax on polluting activities. No further action was taken.
1983 | Creation of a first contribution based on investment and wealth income
Following a complicated history, this capital income is definitively called upon to finance several Social Security bodies, including health insurance. Above all, this income will become part of the basis for the Contribution sociale généralisée (CSG) – see below.
1983 | Creation of a specific tax on tobacco, an additional tax on alcohol consumption duties, and a tax on pharmaceutical laboratories' advertising expenditure on health products and medical devices
A new step has thus been taken – with great difficulty – towards involving high-risk behaviors in the financing of health insurance.
Since then, pharmaceutical companies have also been contributing to the financing of the French health insurance system, with the dual aim of regulating expenditure on healthcare products and medical devices, and making a financial contribution. Other levies with a complicated history also exist on laboratories (sales tax, tax on wholesalers and distributors, conventional rebates).
1990 | Contribution sociale généralisée (CSG) introduced
CSG is a contribution levied on earned income, replacement income (including pensions and unemployment insurance benefits) and capital income (investment income and wealth). It will be extended to include games in 1996. It is payable by working people and most recipients of replacement income, including pensioners.
In its initial years, the CSG will only partially finance family benefits and non-contributory old-age insurance benefits. Part of this contribution will be used to finance the general health insurance scheme from 1997 onwards.
This new social levy, which is intended exclusively to finance Social Security, was created for several reasons:
- relating to employment policy: the aim was to reduce the proportion of social security contributions levied on salaried and self-employed income in order to lower the cost of labor;
- equity: the aim was to take into account the fact that those insured by social security have income other than that from salaried or self-employed activity, and therefore to transfer the burden of social security contributions from low incomes to the wealthiest incomes with capital or the highest pensions (which, incidentally, often refers to the same people);
- the need to ensure consistency between the way in which social benefits are allocated and the way in which they are financed: in 1978, in order to extend the benefits of social security to the entire population, a criterion of regular residence in France was introduced for family benefits; there was therefore no justification for limiting the base of the social levy to income from professional activity alone.
The reform met with strong administrative, social and political opposition. The new levy’s status as a tax rather than a contribution, and the very creation of a new levy destined to develop, have focused this opposition. With little support, the government forced the bill through Parliament, as permitted by the Constitution. The subsequent motion of censure tabled by opponents was defeated by a very narrow majority.
However, this opposition quickly faded. Less than two years later, a government made up of some of the opponents of the 1990 reform passed an increase in the CSG as part of a pension reform to finance this branch’s non-contributory benefits.
1995 | Introduction of a general reduction in employers' social security contributions on low-wage earners, including sickness contributions
This system, which was later to undergo a number of changes and whose history is complicated, was set up as part of a policy aimed at maintaining jobs (in highly competitive sectors) or creating low-paid and therefore often low-skilled jobs. It primarily concerns employers’ health insurance contributions.
1996 |Creation of the Caisse d'amortissement de la dette sociale (CADES) (social debt amortization fund)
The Caisse d’amortissement de la dette sociale (CADES) is financed by the Contribution pour le remboursement de la dette sociale (CRDS), which has a slightly broader tax base than the CSG. It is payable by the same persons as the latter.
CADES is called upon to take over and finance the deficits of the French social security system, including health insurance.
A brief but sharp economic recession in 1992/93 led to an equally sharp drop in contributions, generating a very high Social Security deficit. Unanticipated, this situation is driving Social Security, and therefore health insurance, into debt for the first time since 1945.
After setting up a provisional mechanism for managing this debt in 1994, the public authorities decided to entrust it to a dedicated amortization body, CADES, with a new revenue stream allocated exclusively to it, the CRDS.
CADES was initially set up for a 13-year period. It was to disappear with its proceeds in 2009. The vagaries of social security spending policy, and above all the effects of the economic (2001, 2007-2008) and health (COVID 19) crises, have led us to extend its existence until 2033. This extension has been accompanied by a broadening of its revenue base, with CADES now also receiving a fraction of CSG revenues, in addition to CRDS revenues and an annual payment from the Fonds de réserve des retraites (FRR).
1997-1998 | CSG substituted for employee health insurance contributions financing benefits in kind, which were abolished
This two-stage substitution of CSG for employee health insurance contributions financing benefits in kind (or their equivalent in the case of self-employed workers’ health insurance contributions) was designed as a measure to increase the purchasing power of working people, both salaried and non-salaried. The increase in the CSG is in fact lower than the eliminated contribution, as one third of the CSG is levied on replacement income (including pensions) and capital income (investments and assets).
This operation can also be seen as a new stage in the universalization of the health insurance deduction base, anticipating the new stage in the universalization of health insurance benefits that will take place the following year (1999), with the introduction of Universal Health Coverage (CMU).
Cash benefits (daily allowances in the event of work stoppage) continue to be financed by contributions (employee and employer share).
1999 | Creation of a health contribution for inactive workers
This contribution, which is used to finance the CMU, applies above the income ceiling applicable to this scheme.
It is in line with the process of generalizing the benefits of health insurance: all insured people must contribute to its financing, and on all their incomes.
1999 | Start of taxation on supplementary health insurance contracts
The law creating the CMU marks the start of taxation on supplementary health insurance contracts (since 2011: additional solidarity tax and tax on insurance agreements). Complementary health insurance has a very complicated history.
This is a further step away from a health insurance system financed mainly by contributions from active employees and their employers, by making complementary health organizations contribute, with the dual aim of regulating their offer and providing financial support.
2002 | Creation of a health insurance contribution for people who are covered by health insurance but do not meet the French tax domicile requirement for CSG
This reform follows a ruling by the Court of Justice of the European Union in 2000 on the compatibility of French CSG legislation with the European regulation on the coordination of social security schemes. The CSG, considered a tax under domestic law, is considered a social contribution under Community law.
2006 | Health insurance financed by value-added tax (VAT) revenues
Since that date, the health insurance scheme has been financed by the proceeds of value-added tax (VAT) on various economic sectors (tobacco, alcohol, pharmaceuticals), then from 2011 by a global fraction of VAT, in particular to compensate for revenue losses resulting from the introduction of exemptions from social security contributions or the transfer of the burden of expenditure from the State to the health insurance scheme.
The aim here is to offset revenue losses (compensation for reductions in employer contributions introduced as part of employment policy) and, more recently, to finance the transfer of expenditure between the State budget and the health insurance scheme (since 2020, public health expenditure has been boosted by the COVID 19 health crisis).
VAT was increased in 2014, and half of this increase was earmarked for this operation to compensate for the reduction in contributions financing health insurance. This measure is part of the recurring debate in France on whether or not it is necessary to finance part of social protection with “social VAT”.
2012 | Introduction of taxes on sugary drinks, sweetened drinks and energy drinks
These taxes on sugar-sweetened drinks, sweetened beverages and energy drinks will be fully allocated to health insurance starting in 2013.
This is a new stage in revenue diversification, involving the participation of high-risk health behaviors by insured persons in the financing of health insurance. This is the case with the over-consumption of sweet products. This tax was reformed in July 2018, introducing a levy depending on the level of added sugar or sweetener, in a more incentive-based behavioral tax logic, a logic preferable to the “yield” tax logic that prevailed until now.
2018 | Substitution of CSG for employee health insurance contributions financing cash benefits - daily allowances - which are abolished
This is the second stage, following on from the 1997-1998 phase – see above – when employee contributions to health insurance were abolished and replaced by the CSG.
As in 1997-98, this measure was designed to increase the purchasing power of both salaried and non-salaried workers. But more than ever after the creation of PUMA in 1996, it helps to ensure that the financing of health insurance is consistent with the conditions for entitlement.