Annual health insurance reconciliation for employees

Health insurance is paid in the form of advance payments during the year, but the actual amount of the contributions is determined only after the end of the calendar year. That is what the annual health insurance reconciliation is for: it settles the difference between the advance payments made and the actual liability. It concerns employees and employers above all when it results in an underpayment or an overpayment that has to be settled.

Why the annual reconciliation is carried out

Advance payments of health insurance during the year may not correspond to the final amount of the contributions, for example where there are several sources of income, several concurrent jobs, income from dividends or changes during the year. The annual reconciliation settles these differences and determines whether there is an underpayment or an overpayment and in what amount it needs to be settled.

• several concurrent sources of income or payers,
• changes during the year (starting a job, leaving a job, dividends),
• claiming the deductible allowance.

Who carries it out

The annual health insurance reconciliation is processed by the relevant health insurance company, which has data from all payers of contributions. The insurance company notifies both the insured person and the employer of the result and determines the method and deadline for settlement. The employer is involved in the process mainly as the payer of the advance payments and in settling its employees’ results through the payroll.

Underpayment versus overpayment

If the annual reconciliation results in an underpayment, the insured person or the employer must pay it within the set deadline. In the case of an overpayment, on the other hand, the amount is refunded to the person entitled to it. The result also has tax implications, as the settlement is reflected in the employee’s taxable income. The specific procedures and deadlines may change, so check the current rules before processing.

The employer’s role

The employer plays a role in deducting or refunding the amounts resulting from its employees’ reconciliation and in reflecting them correctly in the payroll and in the tax administration.

1. receive the result of the reconciliation from the insurance company,
2. reflect the underpayment or overpayment in the wage,
3. take the tax implications into account,
4. meet the settlement deadlines.

Why accuracy matters

An incorrectly processed settlement leads to errors in the wage and in the tax, and to unnecessary underpayments. Professional payroll processing ensures that the result of the annual reconciliation is reflected correctly and on time, without the risk of penalties and without an unnecessary administrative burden for the company.

When no reconciliation is needed

Not every insured person needs a balancing payment. If they paid their advance payments correctly during the year from a single source of income, with no changes and no other circumstances that would alter the calculation, the result may be zero. The insurance company nevertheless processes the data and assesses whether an underpayment or overpayment has arisen. Differences typically appear where employment is combined with a business, where there is income from capital assets or where the person had several employers during the year. For a company, it is therefore important to provide the insurance company with accurate and complete data on its employees, because the result is calculated from exactly that data. Errors in the monthly reports only become apparent in the annual reconciliation, and correcting them tends to be time-consuming. If the result concerns an employee who has since left the company, the settlement can be even more complicated, so it pays to keep your records in order throughout the year and to retain the documents even after the employment has ended.

If you are not sure how to reflect the annual reconciliation correctly in the payroll, Bilvao’s payroll team will advise you.

Related articles: Maternity and parental benefits: entitlement and calculation, Travel allowances for domestic and foreign business trips, Sick leave and income compensation: who pays for the first days.

Frequently asked questions

Who carries out the annual health insurance reconciliation?

It is carried out by the relevant health insurance company on the basis of data from the payers. It notifies both the insured person and the employer of the result and determines how the underpayment or overpayment is to be settled.

What happens if there is an underpayment?

The underpayment must be paid within the deadline set by the insurance company. If it concerns an employee, it is usually settled through the payroll. Procedures and deadlines may change, so check the current rules.