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Company Perspectives
The AOK is more than just a Health Insurance Fund. It has established an extensive health management system, which guarantees that consistent quality management results in a higher efficient healthcare. For the medically insured, this means the best healthcare at an affordable price.
The AOK-Bundesverbund (Federation of the AOK) is Germany's largest health insurance provider. AOK is one of a handful of public Krankenkassen, literally "sickness funds," that Germans whose annual earnings fall below a certain income ceiling are required by law to join. In 2004 AOK and its national network of over 1,700 offices in 17 autonomous regions throughout Germany insured more than 18.55 million people, nearly one-third of the nation's total population. Although based in statute and regulated by the German federal government, AOK is a self-administered entity. It is managed by a board consisting of individuals directly elected by members and their employers. Members are insured by local AOK member funds—the Ortskrankenkassen—located in the geographical region in which they live and work. Premiums are paid in equal amounts by the insured and their employers and are calculated according to the so-called solidarity principle. Rather than risk factors such as marital status, family size, age, or health, the premiums are based solely on a member's wages up to a specific statutorily determined ceiling. The amount of an individual's premium payment varies according to which local fund provides coverage, from as low as 12 percent of income in Saxony to as high as 14.6 percent in Berlin. Hospital treatment comprised AOK's largest outlay in 2004 at approximately EUR 19 billion. Medication for members was in second place at EUR 9 billion. In addition to providing a forum for communication of its various member Krankenkassen, AOK also represents their interests before the German parliament and the professional associations of physicians and other healthcare providers.
The invention of German Statutory Healthcare in the 19th Century
AOK's history goes hand in hand with the history of Germany's long and sometimes rocky experience with statutory healthcare. Organized health insurance was available to Germans decades before the introduction of government-mandated Krankenkassen by many years. In the Middle Ages, guilds set up funds to help members in time of hardship. By the early 1800s many German communities were empowered to organize and regulate Krankenkassen, as well as to require local citizens to join them and employers to contribute a percentage of premiums. These local public healthcare funds were the first significant predecessors to AOK. However, the local organization of such healthcare was as chaotic as Germany's preunification political organization; in 1870 it consisted of four kingdoms, five grand duchies, 13 duchies and principalities, and three free cities, each of them fully independent. There was little intercommunication between the local Krankenkassen. There was no standardization of coverage and next to no national commercial organization. By 1880 these local providers had been joined by various private commercial insurance companies. A long wave of industrialization followed the founding of the German Empire in 1871 and with it an explosive growth of the working class and poor, which quickly outstripped the resources of existing private and public healthcare funds. A period of social tensions ensued. Workers' political parties, especially the Socialist Party, seemed to pose a mortal danger to the status quo. In an adept move to head off the threat, the German government led by Chancellor Otto von Bismarck proposed a wide-ranging series of social welfare laws designed to appease the workers and ease their lot. In November 1881, a message from German Kaiser Wilhelm I to the Reichstag called for "cooperative societies under state protection and with state support" that would provide universal healthcare for Germans. The resulting bill, the Krankenversicherungsgesetz (KVG) or Health Insurance Law, became law in late 1884.
Termed "a revolutionary turning point in social policy" by Franz Knieps in his history of AOK, the KVG authorized communities to form local insurance funds, so-called Ortskrankenkassen, to provide insurance coverage for their residents. The coverage was based on a series of basic principles: Healthcare was provided according to need, not the ability to pay; premiums were based solely on income, not risk or actuarial calculations—the so-called "solidarity principle"; and the funds would be administered directly by the insured and their employers, not by the government. These principles remained in force at the AOK in the 21st century. Ortskrankenkassen were originally set up not only for local residents, but also for workers in different trades or industries. One reason for this was that members of the same profession shared many of the same health risks, evening out the per capita expenses. In addition it was felt that members would be less likely to file fraudulent claims against monies of friends and co-workers. Self-administration was also considered a means of combating insurance fraud by members.
Few new Ortskrankenkassen were founded as a result of the KVG. Most were older local funds that had been reorganized under the law. Older Krankenkassen won an important advantage from the KVG. Previously the funds were run at the community's own expense. Under the KVG, however, additional funds were allocated for administrative costs. In Berlin, for example, one year after the law went into effect only seven of 68 Ortskrankenkassen were new. In all, the Berlin Ortskrankenkass had about 160,000 members.
The largest of these, with some 52,000 members, was the Allgemeine Ortskrankenkasse, or "General Local Health Fund." This was an organizational forerunner to the current AOK. At the time the premiums its members paid were among the lowest of any local fund Germany (about 0.77 Marks) and the AOK's administration was considered one of the best in the country. As a result, Berlin's public officials came to see larger Ortskrankenkassen as preferable to smaller ones; they provided better service, while operating more efficiently and at a lower cost to members. A central Ortskrankenkasse for all Berlin was recommended. Nonetheless, the resulting Allgemeine Ortskrankenkasse was not a true "general" health fund in the later sense but rather an Ortskrankenkassen only for commercial workers. When general local funds were introduced in the early 20th century, they were still limited to a specific geographical area but were required to accept workers from all trades and industries.
Development of the Ortskrankenkassen between 1890 and World War I
Membership in the Ortskrankenkassen grew rapidly, from 1.7 million members in 1886, to 2.68 million in 1891, to 4.22 million in 1900, when they accounted for over 46 percent of total health fund membership. In 1894 a national association of local funds was established in Frankfurt am Main, the Centralverband von Ortskrankenkassen im Deutschen Reich (Central Association of Local Health Funds in the German Empire). The Centralverband was founded to represent the interests of individual Ortskrankenkassen before lawmakers, other insurance groups, and physicians and other medical service providers, as well as to be an advisor and information clearing house for member funds.
The founding of the Centralverband came at the beginning of a decade of heated discussion on the future of the Ortskrankenkassen in Germany. Physicians were increasingly unhappy with the payment schedule built into the participating provider system, a system which required Ortskrankenkassen members to use doctors approved by their fund. Physicians formed their own association in 1900 and on various occasions before 1913 went on strike for improved contracts with the Ortskrankenkassen. At the same time employers were growing dissatisfied with what they perceived as the socialist control of the Centralverband. In the 1900s they organized their own association to lobby parliament in healthcare matters. In 1910, in response to the calls for change, the Reichstag opened debate on a comprehensive new system of national health insurance regulations, the Reichsversicherungsordnung (RVO). Its two sections were passed in 1911 and 1914, respectively. The RVO specified Ortskrankenkassen as the country's fundamental health insurance providers. It was the RVO that introduced the concept of the allgemeine Ortskrankenkasse—under its provisions local funds were no longer required to restrict their membership to particular professional groups. It was the beginning of the age of the general local fund. The RVO capped a period of intense growth in the local funds. Transportation and office workers were first given coverage in 1901, agricultural, forestry, and domestic workers in 1911, and civil servants in 1914. By 1913 Ortskrankenkassen had 7.74 million members, 57 percent of the total for all German insurance providers. After 1914, however, the number of Ortskrankenkassen declined as local funds consolidated their operations and membership.
Economic Upheaval Between the World Wars
The start of World War I in autumn 1914 launched a long period of political and economic difficulty in Germany. The changeover to a war economy led to disruption in employment. At the same time large numbers of working-age men left the economy altogether to enter the military. Rather than relieving these problems, the armistice in 1919 only made matters worse. With millions of Marks in reparations imposed by the Allies, the shattered country soon found itself in a far more serious unemployment crisis as millions of former soldiers and refugees from eastern territories lost to Poland, precisely at the moment that Krankenkasse coverage had been extended to the unemployed.
By 1923 Germany entered a desperate period of runaway inflation. Because of their premium structure, the Ortskrankenkassen were hit by the inflation particularly hard. During this time, wages were rising by the millions every working day, far outstripping the statutory ceilings above which premiums were not calculated. With no legal means of keeping up with inflation, the Ortskrankenkassen were financially crippled. Eventually assistance came when legislators authorized the local funds to raise premiums to as high as 8 percent of wages, with an additional 2 percent "emergency fee", and by the end of 1923 the currency had restabilized. The government, by contrast, remained debt-ridden. Politicians in the Weimar Republic were the first to juggle public health funds, in this case from the Ortskrankenkassen, to pay for other government expenses.
If the Ortskrankenkassen experienced relief from their financial woes in the mid-1920s it was only short-lived. During the Great Depression, the local health funds had nearly 13 million members—many unemployed—and were under tremendous pressure to cut costs. To avoid premium hikes, the local funds started limiting service to the most urgent cases and introduced general service cuts as well as procedures designed to make filing claims more difficult. In the early 1930s the Ortskrankenkassen were targeted by the Nazi Party as a sort of Communist elite that should be abolished. After Hitler came to power in 1933, virtually every employee of the Hauptverband deutschen Krankenkassen, as the Centralverband had been renamed, lost his job. In 1935 the Hauptverband itself disappeared when it was merged into a Nazi-controlled national health insurance association, the Reichsverband der Ortskrankenkassen.
Postwar Reorganization
After the defeat of the Third Reich in spring 1945, the Allies dissolved the Reichsverband. For the next three years, the individual regional associations of the allgemeine Ortskrankenkassen took over its functions. It was not until after the founding of the Federal Republic of Germany—sometimes known as West Germany—in 1948 and the adoption of the country's constitution which gave the federal government exclusive authority in public health insurance affairs that a successor organization to the old Hauptverband could be formed. It was the Vereinigung der Ortskrankenkassenverbände e.V. (VOV) (the Union of Local Health Insurance Fund Associations). The regional associations and the VOV play different roles on behalf of the Ortskrankenkassen. The VOV acted on behalf of the entire system of local funds, liaised with the German federal government, interacted with the national associations of physicians and other healthcare providers, and acted as the Ortskrankenkassen's public spokesman. The regional associations provided a forum for the exchange of ideas, regulated Ortskrankenkasse relations, and offered advice to member funds.
In 1951 self-administration of Ortskrankenkassen was reestablished for the first time since the mid-1930s. In 1955 the VOV was renamed Bundesverband der Ortskrankenkassen (BdO) (Federal Association of Local Health Insurance Funds). In the 1960 and 1970s coverage was extended to additional segments of the economy. Salespeople came under the plan in 1966, self-employed agricultural workers in 1972, and students and the disabled in 1975. The consolidation of various towns and communities in the 1970s resulted in a concurrent consolidation in Ortskrankenkassen, and their number fell.
Cutting Costs and Expanding: 1980 to the Present
During the 1970s, the healthcare community in Germany took the first steps to brake costs which were threatening to spin out of control. The year 1977 witnessed the passage of the Health Insurance Containment Act, which established a board comprised of representatives from the most important groups in German healthcare, including the Ortskrankenkassen, charged with developing non-binding guidelines for healthcare costs. The act was followed up five years later with the Hospital Cost Containment Act and Cost Containment Act Amendment, which required AOK members to make low co-payments for medication, hospitalization, dental treatment, and other treatment. By 1983 the number of Ortskrankenkassen in Germany had consolidated to 270. The number of insured had risen to 16.3 million, or about 45.5 percent of the total membership of German public healthcare plans. In 1987 the BdO changed its name to the AOK-Bundesverband, the Federal Association of Local Health Insurance Funds. Additional reforms, which placed further monetary burdens on the insured, were introduced in 1989.
The 1990s were the most ground-shaking decade in a century for the AOK. On October 3, 1990, less than a year after the fall of the Berlin Wall, the German Democratic Republic, also known as East Germany, ceased to exist. Its states and citizens were absorbed into the Federal Republic. With a stroke of the pen millions of East Germans lost their state-paid health insurance and had to be integrated into West Germany's system. For the lion's share, that meant integration into the AOK. As a result, the association not only had to process millions of new members, it also had to organize an infrastructure from the ground up in eastern Germany.
Despite more than a decade of reforms, by the mid-1990s, Germany's statutory healthcare system, represented by the AOK, was wide-reaching. It offered care by physicians of choice, hospital care, extensive dental and optical coverage, liberal maternity leave payments, physical therapy, and prescription costs. Nonetheless the 1990s were also a decade of new legislation and cost-cutting efforts. Between 1993 and 2005 no fewer than eleven major healthcare laws were passed by the German parliament, aimed primarily at cost reduction. Cuts were effected by various means: service cuts and requiring the insured to pay an increasing percentage of the cost of treatment; exerting greater oversight over the payment of physicians; renegotiating the cost of treatment by physicians and hospitals; and, raising the premium rates charged. Relief was often of short duration. The 1993 reforms brought the AOK a budget surplus of DM 2.7 billion. Unfortunately the group still had deficits of DM 4 million from 1992 on the books, and in 1995 it would suffer new shortfalls.
In 1994 a complicated risk structure compensation scheme was introduced. It was designed to minimize the financial inequalities between various Krankenkassen resulting from premiums based on the solidarity principle rather than risk. As a consequence, beginning in the mid-1990s Germans were given the freedom to join any public health fund, including national health plans organized for specific professions, the so-called Ersatzkassen or "substitute funds." Another reform established a common "risk fund" in 2002 which was contributed to and used by all public Krankenkassen, including the AOK. This fund covered a percentage of Krankenkassen costs for prescriptions, sick pay, hospital stays, and dialysis. The risk structure compensation scheme is to be extended to the entire healthcare system by 2007.
In 2003 the German parliament introduced a "capitation fee" under which members of AOK and other Krankenkassen were required to pay an extra one-time fee for every quarter in which they received medical treatment. The Health Modernization Law of 2004 introduced further cost reforms, such as patient co-payments of 10 percent up to 2 percent of the annual net income. The entire reform package was intended to save some EUR 10 billion. At the same time average AOK premiums dropped by one-tenth of a percent.
Principal Competitors: DAK Deutsche Angestellten-Krankenkasse; Techniker Krankenkasse; Barmer Ersatzkasse; DKV Deutsche Krankenversicherung AG; Debeka-Gruppe.
Principal Subsidiaries
AOK-Consult; Wissenschaftlichen Instituts der AOK.
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