The beginnings of the German health care system can be traced back to the Middle Ages, when craftsmen were members of guilds. The guilds provided an early form of health insurance based on the principle of solidarity: All guild members paid into a fund which was then used to help individual members if they had financial difficulties, for instance because of an illness. There were also insurance funds organized for factory workers as early as the beginning of the industrial revolution. These different forms of social insurance were then standardized through Otto von Bismarck’s social policies in the late nineteenth century. Health insurance was introduced first, in 1883. Its primary goal was to provide insurance in the event of illness, mainly for workers involved in both industrial and non-industrial production.
Anyone who was insured was granted the right to free medical treatment and medicine, as well as sickness benefits and a funeral allowance. At that time, about 10 percent of the population had health insurance – compared to nearly 100 percent in Germany now.
The introduction of health insurance in 1883 was closely followed by the introduction of statutory accident insurance (1884) and pension funds (1889). Unemployment insurance was introduced in 1927.
Accident insurance covers things like medical services needed for work-related accidents or illnesses, and includes payments in the event of work-related disability or death. Accident insurance is also compulsory for employees, but it is funded solely by employers.
Statutory pension funds are funded in equal parts by employees and employers. These funds are used to pay retirement pensions, disability pensions and rehabilitation costs for employees.
Long-term care insurance – the fifth branch of the social insurance system – was not introduced until 1995. It covers part of the costs for nursing care and assistance if these services are needed.
The legal basis of these five branches can be found in the German Social Code ("Sozialgesetzbücher").