Cyprus Prepares For the National Health Insurance System

Employers in Cyprus must adjust to changes in the Social Insurance Fund - and to the introduction of the National Health Insurance System…

Cyprus is set to overhaul its existing public healthcare system by introducing the National Health Insurance System (NHIS) - which will come into effect on 1 March 2019. The move to the NHIS follows a unanimous vote by the Cypriot Parliament in 2017, and will see the country transition from a system which provides only some healthcare services for free (and others for an income-based fee), to a universal system financed by contributions from employees, employers, and the government.

In addition to the NHIS, in January 2019 Cyprus also updated its social insurance contribution rates and aspects of its tax return process. If you are an employer in Cyprus, it’s time to adjust to the new landscape and make sure your payroll is ready...

SIF Contribution Rate Adjustments

Effective 1 January 2019, contributions from employers and employees to the Cyprus Social Insurance Fund (SIF) were raised by 0.5% (from 7.8% to 8.3%). The SIF offers benefits including pension and unemployment funds - and further contribution increases have been scheduled at five year intervals into the future:

Year

Employer Contribution

Employee Contribution

Contribution Rate

2019

8.3%

8.3%

21.5%

2024

8.8%

8.8%

22.8%

2029

9.3%

9.3%

24.1%

2034

9.8%

9.8%

25.4%

2039

10.3%

10.3%

26.7%

Insurable Earnings Increase

Adjustments have also been made (effective 1 January) to the maximum amount of insurable earnings used to calculate employee contributions to the country’s Social Insurance Fund. Under the new regime, the maximum amount of insurable earnings has been raised to €54,648 a year (up from €54, 396) - translating to €4,554 per month (up from €4,533).

National Health Insurance System

The introduction of the National Health Insurance System will be phased: 1 March 2019 will see the introduction of outpatient care services, while full implementation of inpatient services is expected to be completed by 1 June 2020. Once up and running, the NHIS will give all Cypriots equal access to a range of services including GPs and specialist doctors, surgery, and laboratory services.

Based on a single-payer model, patients in the NHIS will be able to choose their healthcare services from a list of approved providers, and access those services for free (although some may require capped co-payments). The NHIS has been designed to create a financially viable healthcare system for Cyprus, and contribute to the growth of the country’s health sector by utilising a skilled medical labour force and high technology infrastructure. As a knock-on effect, the government hopes the introduction of the NHIS will also stimulate Cyprus’ healthcare tourism industry.

Paying for the NHIS

The NHIS will be paid for through contributions from employees and employers, and government funding. Contributions rates are as follows:

From 1 March 2019 (outpatient care only),

  • Employees (and pensioners): 1.70%
  • Employers: 1.85%
  • Government: 1.65%
  • Self-employed: 2.55%

From 1 March 2020 (inpatient and outpatient care),

  • Employees (and pensioners): 2.65%
  • Employers: 4.70%
  • Government: 4.70%
  • Self-employed: 4%

NHIS contributions will be deducted from employee earnings up to a threshold of €180,000.

Consequences for Employers

Employers in Cyprus should have adjusted their payrolls to accommodate the new tax rules and social insurance rates - and should, if they haven’t already, prepare for the imminent introduction of the NHIS. The NHIS will mean higher payroll costs for employers but is projected to reduce out-of-pocket spending: according to the OECD, at 50% Cyprus currently has the highest out-of-pocket healthcare expenditure in the EU.

Private schemes will continue to play a significant part in Cyprus’ healthcare landscape but will depend on the various regulations and coverage limits which accompany the introduction of the universal scheme.

Learn more about Cyprus’ tax and social security landscape with activpayroll’s dedicated Global Insight Guide to Greece...