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This paper evaluates the transition of Germany’s hybrid health insurance system to a uniform system, which could be financed through funded or unfunded premiums or payroll taxes. The findings reveal that while payroll taxes offer good insurance properties, they also create labor supply distortions and moral hazard, with compulsory deductibles decreasing overall welfare, even as they promote private health investment. Ultimately, unfunded premiums are identified as providing the greatest efficiency gains, particularly since transitioning to a funded system poses significant costs for current cohorts.