The actual cost of the General Health System

The system’s impact on citizens, businesses and the real economy

By Theodoros Mantis*

In the rush of preparations leading up to the implementation of the General Health System (GHS), reasonable questions emerge with regards to the socioeconomic impact of this whole effort. The public’s concerns intensified following data published by the Association of Cyprus Insurance Companies, which presented an increase in the turnover of the private health insurance sector for 2019. A reasonable explanation for this increase appears to be the considerable uncertainty about the GHS and its extended structures, which has increased due to the public disagreements between stakeholders.

The newly established health system will be mainly funded by the contributions, which have already started being paid from the 1st of March 2019, and will be increased on the 1st of March 2020, when the system will be fully implemented. The categories of contributors include employees, employers, the state, the self-employed, pensioners, income earners, government officials and persons responsible for the payment of remuneration to government. The contributions of employees, employers and self-employed citizens, which make up the majority officials of the contributions of the private sector, have been determined at 1.70%, 1.85%, and 2.55% respectively for 2019, while in 2020 they will be increased to 2.65%, 2.90% and 4% respectively.

As can be seen by the above, the implementation of the GHS will bring about significant changes for employees and businesses, causing a chain reaction and potentially affecting the entire Cypriot economy. These contributions will cause an immediate increase in the average cost per employee for the employer, while they will also simultaneously decrease the net income of the employees. Specifically, businesses that already offer health insurance coverage through private insurance companies will face a serious dilemma on whether they should continue providing private health insurance plans to their employees or not. Specifically, since the public debate and clashes in relation to the GHS continue, employers and employees are still uncertain about whether they should discontinue their private health insurance plans.

In the case where employers choose to continue providing private health insurance, the net income of their employees will be potentially reduced; either because they will pay the whole amount of the premium (whereas usually in the past, the employer covered half of the employee's premium, with the employee covering the remaining half) to private insurance companies, or because of a potential salary decrease equal to the employer’s compulsory contribution to the GHS.

Additionally, those who wish to continue with private insurance, in order to offer complementary coverage through their companies, they will likely be burdened with additional taxes through the PAYE system. This may occur because private health insurance plans may be considered as a ‘Benefit in Kind’, when offered selectively and on an exceptional basis to only some of the company’s employees, given that health coverage will be available through the GHS.
At the same time, the competent authorities should also clarify another point: the clause requiring employers to submit a private health insurance certificate for third-country nationals as well as EU nationals with A1 certificates, whom they wish to employ in Cyprus. This clause clashes with the present legislation, which stipulates that everyone must contribute to the GHS.

Without a doubt, the GHS is a social necessity. Each modern state, in the context of its social policy, must offer its citizens equal access to high-quality healthcare services. The skilful management of the new health system by the competent bodies and the timely identification of serious issues, such as those mentioned above, are of paramount importance for the successful implementation of the system.

*Head of People Asvisory, Payroll and Corporate Immigration services of Ellinas Finance