Friday 28 September 2018
The controversy over the PUMA health charge continues, with a case heard in the Constitutional Council leaving the status of the charge in some doubt.
As regular readers will be aware, in August we reported that the French Constitutional Council had been asked to consider whether the charge introduced under the recently introduced Protection universelle maladie (PUMA) health insurance regime was legal.
This state insurance scheme guarantees health cover for those who are not otherwise covered for health via business or employment, so it applies to expatriate early retirees in France.
In order to be liable for the charge (called the Cotisation Maladie Subsidiaire - CMS), two cumulative conditions are set:
• That you have no professional activity (business or salaried), or that you have a professional activity, but your income from this activity is no greater than a minimum threshold, currently €3,862pa (2016 income).
• That you are not in receipt of any kind of pension or unemployment benefit.
The insurance contribution rate for PUMA is 8% of eligible income, after a deduction of an allowance of €9,654, a figure that is revised annually.
The only income that is taken into consideration in determining the amount payable is 'revenus de patrimoine'. That is to say, investment income, rental income and capital gains.
One of the main problems of this formula, and the principal reason why the case was brought, is that it could result in unequal treatment between those who earn their living mainly from a professional activity and those who rely more on capital income.
Thus, a person who has small professional income, but an average capital income could pay a much higher contribution than a person who has a professional income above the threshold but who also has significant capital income. This is a particular problem for self-employed person whose activity may be very weak or in deficit. Some of your e-mails to us have demonstrated precisely this point.
The absence of a ceiling threshold to the amount payable under PUMA can lead to absurd levels of liability, such as in an example cited in court where one individual who met the two conditions for eligibility to PUMA received a bill from URSSAF, the social security collections agency, for €732,000!
The amount of contributions paid for health insurance can also be very different for identical income from work or from capital.
The lack of equality between those with similar incomes but from different sources was the principal reason why the legal advisor to the court (Rapporteur) reasoned that the law was illegal, an opinion that was not accepted by those sitting on the Constitutional Council. In their view, the government was quite entitled to treat those in different circumstances in a different manner. Equality before the law did not mean everyone was treated the same.
Nevertheless, the court considered that the lack of a capping mechanism was contrary to the principle of equal treatment, but that it was a matter for the government to correct it through regulatory measures.
Nicolas Philippe, an avocat with Cabinet Bornhauser who spoke in court for litigants, considers that this reservation on the judgement will lead logically to its invalidation, stating: "The fact that criticism of the law is dismissed on the grounds that the disputed measures are within the regulatory power of the government opens up new prospects for litigation", and that "the decree fixing the PUMA rate at 8% of property income without providing for any capping measure to avoid a serious breach of equality before public charges is unconstitutional". As a result he considers PUMA to be "fatally wounded".
In their statement to the council the government representative acknowledged that some further changes to the law were necessary to take account of those with a substantial and sometimes exceptional level of capital income and low professional income. They promised to introduce a measure before the end of the year.
It may well be that this undertaking was enough to persuade the CC that they should let it pass, albeit with the reservation.
Since the hearing the government have published their draft social security finance bill for 2019 in which they state that:
"With a view to providing legal certainty and fair treatment between self-employed workers and other workers, the cotisation subsidiaire maladie will be adjusted to eliminate its current inconsistencies. In this respect, self-employed workers and farmers will be exempt from this contribution if they are otherwise subject to social security contributions because of their professional activity at least equal to the minimum contribution level. In addition, the procedures for calculating the contribution will be simplified and rationalised, while a ceiling will also be introduced'.
Details of how this will be accomplished have yet to be published.
Although the CC may have said their last word on the matter, that is by no means the end of the litigation, for there remain several cases going through the tribunal system concerning the aggressive and incompetent way in which the charge was introduced, which may yet bear fruit for some of those who have suffered unfairly from it.
We are aware that many of you have already been successful in appeals to URSSAF, but that in other cases the agency is adopting an intransigent position. This is notably the case with those who obtain their health cover in France through a private health insurance policy, who have not obtained exemption from the charge.
A further question that has yet to be addressed is the liability of early retirement pensions to the charge, for whilst the law states that those in receipt of pension income are exempt, the rule has not been consistently applied across the country. Most of you, it seems, escape substantial liability, in part because the pensions exemption, but also the fact that the allowance of €9,654 is granted on an individual basis, meaning a couple would effectively need an income of €20,000 to pay the charge.
As we have stated previously, whilst it is of course entirely appropriate that expatriates in France who are early retirees with pension income should pay into the system, there is no provision in the current law that makes them liable.
Those with an S1 are exempt from the charge, and many of the reported cases about which we have been informed concern those with an S1 who received a demand for payment, which has since been withdrawn.
Do please continue to tell us about your experiences. You can contact us at email@example.com.