Health Insurance Based on Social Solidarity Is Non-economic

insurance protected

I am grateful to Peter Staviczky for comments on an earlier version of this article. I am, of course, solely responsible for the views expressed here.

Public funding of health insurance systems based on social solidarity does not constitute State aid.

Limited competition for the purpose of increasing efficiency does not affect the non-economic nature of such systems.

Update on Temporary Framework:

Number of approved and published covid-19 measures, as of 26 June 2020: 169*

Legal basis: Article 107(2)(b): 15 Article 107(3)(b): 141; Article 107(3)(c): 16

The 15 measures that compensate for losses on the basis of Art. 107(2)(b) have been implemented by nine Member States.

Five Member States have implemented more than 10 covid-19 measures each: Belgium, Denmark, France, Italy & Poland.

* Excludes amendments to previously notified measures


Certain judgments have changed how whole sectors operate or how whole policies are designed. Think, for example, of the impact of “Bosman” [C-415/93] on football or that of “Altmark” [C-280/00] on services of general economic interest.

The judgment which is reviewed in this article is important in the opposite way. It maintains the status quo. Had the Court of Justice confirmed the judgment of the General Court, many Member States would have to reform their health systems.

On 11 June 2020, the Court of Justice examined whether the Slovak health insurance system was economic in nature in joined cases C‑262/18 P and C‑271/18 P, European Commission v Dôvera zdravotná poist’ovňa & Union zdravotná poist’ovňa.[1] The Commission had appealed against the judgment of the General Court in case T-216/15, Dôvera zdravotná poist’ovňa v European Commission in which the General Court annulled Commission decision 2015/248 which had found that limited competition among health insurance providers was not enough to characterise them as undertakings.[2]

The judgment of the General Court was reviewed here on 27 February 2018 [].

What is an undertaking?

The essence of the judgment of 11 June 2020 was whether health insurers were undertakings. In order to understand the significance and shortcomings of the judgment, it is instructive to consider what is that which makes an activity economic in nature and turns the entity that carries it out into an undertaking.

EU courts have stated in numerous cases that an undertaking is any natural or legal person who engages in an economic activity, regardless of its legal status and the way it is financed [see the seminal cases C-41/90, Höfner and Elser; C-244/94, Fédération Française des Sociétés d’Assurances; C-55/96, Job Centre; C-67/96, Albany].

This definition raises the question what is economic activity. The answer is that it is the offering of goods and services on a given market [see case 118/85, Commission v Italy]. This immediately leads to the next question of what is a market? But here the trail in the case law stops. Instead, we find descriptions of economic activity: payment for services rendered, supply in response to demand, assumption of risk, and bearing of any deficit from an imbalance between expenditure and receipts [see C-35/96, Commission v Italy; C-180/98, Pavlov; C‑475/99, Ambulanz Glöckner].

In other cases concerning the freedom to provide services [Article 56 TFEU], in particular medical and educational services, EU courts have stated that the Treaty applies to services normally provided for “remuneration”. And, they have gone on to explain that the essential characteristic of remuneration is that it is “consideration” for the services in question and that provision of services for remuneration constitutes economic activity [see C-263/86, Humbel; C-157/99, Smits & Peerboms].

The essence of the market is that it enables voluntary interaction. And because the interaction is voluntary, both the buyers and sellers enter into transactions only if they become better off than without the transaction. Therefore, by combining the different strands in the case law, we may infer that the concept of the market covers those transactions which are conducted voluntarily and which involve remuneration that covers the cost of the seller and enables it to make a profit [otherwise it would not be willing to bear risk or any deficit]. At the same time, the remuneration paid by the buyer represents the value of what is obtained by the buyer [that is why remuneration is for consideration].

With respect to social insurance systems or public health systems, EU courts have found those systems which are based on solidarity rather than market transactions not to be economic in nature and insurers not to be undertakings. Since in solidarity-based systems persons contribute according to their ability pay [i.e. they are linked to personal income] rather than the amount and quality of benefits actually obtained by each person, contributions are compulsory, the rates and benefits are defined by the state, and risks are often equalised among insurers.

These systems differ from market-based insurance systems in which participation is voluntary, prices correspond to remuneration for consideration according to risk and each insurer bears all costs without any risk equalisation.

Risk equalisation arrangements certainly do not correspond to market conditions. They make it easier for insurers to remain in business by not having to bear the full deficit of their operations [remember, bearing the consequences of deficit is an essential element of the market]. Therefore, this inevitably raises the question, that has yet to be answered explicitly by EU courts, whether risk equalisation makes it less or more likely for profit-seeking operators to offer their services in such systems. We know from BUPA [T-289/03, BUPA v Commission] and from the recent judgment on the Dôvera case that is reviewed here that profit-seeking insurers do operate in these systems. As we will see later on, the Court of Justice followed previous case law and again identified risk equalisation as an indicator of non-economic activity.

In fact, it seems to me that risk equalisation is not a decisive factor on whether a market can exist in the sense that an insurer would voluntarily offer its services in the expectation that it will generate profit. Since in solidarity-based systems insurers cannot compete by adjusting the main benefits they offer, nor can they avoid high risks [which anyway becomes mostly irrelevant under risk equalisation] or lower their premiums, then they can only compete on the basis of the efficiency of their internal operations. This means that their competitive advantage lies largely in maximising economies of scale which makes it imperative for them to sign up as many customers as possible. Indeed, we will see that this is what happened in the Slovak health insurance sector.

If price is fixed, competition for customers will develop instead in terms of quantity or quality. This is the kind of competition that emerged in Slovakia. Non-price competition sometimes leads to higher profits, sometimes it leads to lower profits and sometimes it seeks to protect profits. But when profits disappear, so does the market. The defining feature of the market is the charging of a price that can cover costs and generate a surplus. Otherwise no voluntary transactions can take place either on the side of sellers or the side of buyers.

It follows that when an entity voluntarily assumes risk on the expectation that the remuneration it will obtain will cover its costs and hopefully earn it a bit of profit, its activity is economic and itself is an undertaking. In the Slovak health insurance case, the Court of Justice was unwilling to draw this inference.

Background to the case

Until 2005, only state-owned entities were permitted to provide health insurance. In 2005 Slovakia allowed both state and private for-profit entities to operate in the sector for health insurance. Any resident in Slovakia could choose to obtain cover from two state and two private health insurers [state-owned Všeobecná zdravotná poisťovňa (VšZP) and Spoločná zdravotná poisťovňa (SZP), which merged in 2010, and privately-owned Dôvera zdravotná poisťovňa (Dôvera) and Union zdravotná poist’ovňa (Union)].

After receiving a complaint from Dôvera concerning several public measures in favour of VšZP and SZP, the Commission launched the formal investigation procedure which led to decision 2015/248. In that decision, the Commission concluded that VšZP and SZP were not undertakings within the meaning of Article 107(1) TFEU.

The General Court agreed with the Commission’s finding that the Slovak health insurance system was compulsory, based on social solidarity and was extensively regulated [Slovak authorities fixed benefits and prices]. We will see below in more detail what social solidarity means in this context.

In the end, however, the General Court disagreed with the conclusion of the Commission on the grounds that, despite the fact that insurers had to offer the same package at the same price to all, insurers tried to attract customers by offering extra benefits and that SZP and VšZP, by competing with private profit-seeking companies, became undertakings by “contagion”. The use of the word “contagion” by the General Court to describe the interaction between insurers was unprecedented. The Commission appealed against the judgment of the General Court to the Court of Justice.

Meaning of social solidarity

The Court of Justice recalled, first, that Article 107(1) TFEU applies only to undertakings and that undertakings are entities engaged in an economic activity, irrespective of their legal status and the way in which they are financed. Economic activity is the offering of goods or services on a given market.

Then it applied these concepts to social security and public health systems.

It reiterated that with respect to “(30) the field of social security, the Court has held that EU law does not, in principle, detract from the powers of the Member States to organise their social security systems. For the purposes of assessing whether an activity carried out in the context of a social security scheme is non-economic in nature, it makes an overall assessment of the scheme at issue and, to that end, takes the following into consideration: the pursuit, by the scheme, of a social objective, its application of the principle of solidarity, whether the activity carried out is non-profit-making, and State supervision of that activity”.

“(31) In the context of that overall assessment, it is necessary to examine, in particular, whether and to what extent the scheme at issue may be considered to be applying the principle of solidarity and whether the activity of insurance bodies organising such a scheme is subject to State supervision”.

“(32) Social security schemes applying the principle of solidarity are characterised, in particular, by the compulsory nature of affiliation both for insured persons and for the insurance bodies; contributions which are fixed by law in proportion to the income of the insured persons and not the risk they represent individually on account of their age or state of health; the rule that compulsory benefits set by law are identical for all insured persons and do not depend on the amount of the contributions paid by each; and a mechanism for the equalisation of costs and risks through which schemes that are in surplus contribute to the financing of those with structural financial difficulties”.

“(33) In that context, the Court has pointed out that the fact that a Member State entrusts the management of a social security scheme to various insurance bodies rather than to a single body does not cast doubt on the principle of solidarity underlying that scheme, a fortiori where, within that scheme, the bodies concerned equalise costs and risks between themselves”.

“(34) The Court has also held that the introduction, in a scheme having the characteristics referred to in paragraph 32 of the present judgment, of a competitive element – in so far as this is intended to encourage operators to operate in accordance with principles of sound management, that is to say, in the most effective and least costly manner possible, in the interests of the proper functioning of the social security system – does not change the nature of that scheme”.

“(35) Conversely, it has also consistently been held by the Court that organisations which manage an insurance scheme based on a system of optional affiliation, operating according to a principle of capitalisation under which there is a direct link between the amount of the contributions paid by the insured person and their financial performance, on the one hand, and the benefits provided to that insured person, on the other, and incorporating extremely limited elements of solidarity, are not applying the principle of solidarity and are, therefore, engaging in an economic activity”.

It is difficult to know how it can be established that the elements of solidarity are “extremely limited”, apart from the fact that, for profit-seeking operators, the costs of these elements of solidarity must be spread across the total number of affiliated persons and that these costs plus all other costs must be covered by the total revenue of the insurer. Limited “solidarity elements” are standard commercial practices: free entry for children; part of profits donated to charities, etc. Since a profit-seeking operator does not give away anything for nothing, a more sophisticated statement by the Court would have been that insurers incorporate limited elements of solidarity so as to make their products more attractive to the average person or to organisations that offer collective insurance to their members or employees. They are part of the competitive offering of insurers and, as such, they need to ensure that the extra profits from attracting more illness-prone clients exceed the losses from healthier clients who opt for other insurers. Therefore, the Court could have said that these elements of solidarity do not make the services of private insurers non-economic in nature not because they are limited but because they are voluntarily offered and aim to raise profits. By contrast, the real solidarity elements whereby healthy persons or rich persons pay much higher premiums than the cost they represent to insurers are unsustainable in a market system. That is why compulsion is an essential feature of health care systems based on social solidarity.

The system in Slovakia

Then, in the light of the principles outlined above, the Court went on to examine the Slovak system of health insurance.

First, the Court of Justice reviewed the reasoning of the General Court which, “(37) having endorsed the Commission’s conclusion that that scheme has predominant social, solidarity and regulatory features reflecting the characteristics of a scheme that is pursuing a social objective and applies the principle of solidarity under State supervision, nevertheless found that that conclusion was undermined by the fact that, within that same scheme, the insurance bodies were able to seek profits and, moreover, engaged in a certain amount of competition as regards both the quality and scope of the services offered and in procurement.”

“(38) In so doing, the General Court attributed undue significance to the latter elements in view of the case-law recalled in paragraphs 28 to 35 of the present judgment, and took insufficient account of the way in which they relate to the social, solidarity and regulatory features of the scheme at issue.”

Again, we see a qualitative assessment, this time concerning “undue significance”, that is difficult to know what it may mean.

“(39) As regards, in the first place, the ability of the insurance bodies managing the Slovak compulsory health insurance scheme to seek to make a profit, it should be noted that the fact that, under Slovak legislation which entered into force on 1 January 2005, those bodies were required to have the status of for-profit joint stock companies governed by private law does not mean that they can be classified as ‘undertakings’ under EU competition law. Such classification depends, according to the case-law recalled in paragraph 28 of the present judgment, not on the legal status of the entity concerned but on all of the elements characterising its activity.”

There are two problems here. First, the pursuit of profit is linked to both the legal status of a company and the nature of its activities [“the elements characterising its activity”]. The Court seemed to conflate these two aspects in the paragraph above. Second, in paragraph 30, the Court said that “not-for-profit” is one of the factors that is taken into account. It is also true that in the same paragraph the Court referred to an “overall assessment” which implies that no single factor is decisive. However, certain factors can be necessary without being sufficient. The case law seems to make a subtle but important distinction of how it treats profit: Being “not-for-profit” is not necessarily proof that an entity is not an undertaking [see C-244/94, Fédération française des sociétés d’assurance; C-67/96, Albany; C‑49/07, MOTOE; C-74/16, Congregación de Escuelas Pías Provincia Betania]. Rather, being “not-for-profit” is necessarily a requirement for an entity not to be an undertaking [see T-220/13, Scuola Elementare Maria Montessori].

The Court went on to add that “(40) while any profits that may be obtained by those bodies can be used and distributed, such use and distribution is subject to the fulfilment of requirements intended to ensure the continuity of the scheme and the attainment of the social and solidarity objectives underpinning it. It is thus apparent that the ability to seek to make a profit is strictly regulated by law and cannot be considered, contrary to the General Court’s findings set out in paragraphs 63 and 64 of the judgment under appeal, to be a factor liable to affect the social and solidarity character that arises from the actual nature of the activities concerned.”

I find this statement of the Court surprising. Companies in several regulated sectors [e.g. telecoms, energy, transport, etc.] have their profits controlled through a variety of mechanisms such as price caps, ceilings on rates of return, claw-back obligations, etc. They are also subject to regulation to ensure the viability of their operations. These elements of state supervision and control do not convert them to non-undertakings. Since making zero profit is not enough to remove a company from the realm of economic activities, it is puzzling why control of positive profits should be any different. Above all, since a market transaction is a voluntary transaction that can occur only when the price covers the costs of the transaction, it is not clear at all why the Court of Justice concluded that strictly regulated profit could not be considered as a relevant factor. Has there ever been a case of an entity charging a profit in excess of costs that has been found to be non-economic? By contrast, in the seminal cases cited by the Court itself, insurance providers who were not undertakings did not appear to be either for-profit or to be owned by private investors for the purpose of obtaining a return. Rather they were set up to meet requirements imposed by national law [from the related judgments it seems that in case C‑218/00, Cisal, the provider [INAIL] was “classified as a public-service providing body and […] subject to supervision by the Ministry of Employment and Social Security”; in case C‑264/01, AOK Bundesverband, “sickness funds [were] independently managed bodies governed by public law possessing legal personality”; in case C‑350/07, Kattner Stahlbau, “employers’ liability insurance associations have the status of non-profit bodies governed by public law”; in cases C‑159/91 and C‑160/91, Poucet and Pistre, the status of the insurers was not clear from the text of the judgment].

It is also important to know the nature of regulation of profits in the Slovak system. Initially, Slovak law prohibited the distribution of profits. After the Supreme Court of Slovakia ruled that that prohibition was unconstitutional, Slovakia allowed the distribution of profits but at the same time obliged insurers to use profits to create reserves to cover potential losses. It follows that insurers could subsequently distribute profits freely once the reserves reached the required size. There is nothing unusual about this. Similar rules can be found in the banking sector. The difference is that instead of reserves, banks have to have sufficient capital to absorb losses. It is also interesting that the Commission had initiated infringement proceedings against Slovakia on the grounds that “the prohibition on health insurance companies to freely dispose of any profits resulting from the provision of public health insurance […] constitute[d] an unjustified restriction on the freedom of capital movements guaranteed by Article 63 of the Treaty”. The case was closed after the ruling of the Slovak Supreme Court. It is rather strange how insurers could rely on Article 63 TFEU to make profit-making investments which would later be found not to be economic under Article 107 TFEU.

The Court of Justice continued its criticism of the General Court. “(41) In the second place, the General Court also erred, in paragraphs 65 to 67 of the judgment under appeal, in finding that the various features that introduced a certain amount of competition into the Slovak compulsory health insurance scheme were such as to call into question the social and solidarity-based nature of that scheme.”

“(42) Apart from the fact that, as the General Court itself indicated in paragraph 66 of the judgment under appeal, there can be no such competition either in respect of the compulsory statutory benefits or on the amount of the contributions, it should be noted first that, while the Slovak health insurance bodies may supplement the compulsory statutory services with supplementary services, the latter are free of charge, related services, such as better coverage for certain complementary and preventive treatments in the context of the compulsory services or an enhanced assistance service for insured persons, enabling those health insurance bodies to differentiate themselves, in a residual and ancillary manner, in terms of the scope and the quality of the services offered.”

Although it has no bearing on the legal analysis of the Court, it is instructive to recall that one of the main findings of the extensive economic literature that preceded and partly spurred the deregulation of the 1980s and 1990s was that in heavily regulated industries companies either let quality deteriorate or competed on non-price items.

“(43) However, according to the case-law recalled in paragraph 34 of the present judgment, the introduction, in a scheme having the characteristics referred to in paragraph 32 of this judgment, of a competitive element which is intended to encourage operators to operate in accordance with principles of sound management, that is to say, in the most effective and least costly manner possible, in the interests of the proper functioning of the social security system, is not such as to change the nature of that scheme.” [The Court referred to case C‑264/01, AOK Bundesverband. Although this is an often cited case, it is the only previous case where the Court found that some competition did not alter the non-economic character of health care systems.]

“(44) It is, moreover, common ground that those supplementary services are provided on a free of charge basis, so that the ability to offer them in the context of the Slovak compulsory health insurance scheme cannot in any way call into question the social and solidarity-based nature of that scheme.”

“(45) As regards, second, the freedom of insured persons to choose their health insurer and to switch once a year, while that freedom has a bearing on competition between those insurers, it serves the interests of the proper functioning of the Slovak health insurance scheme and must be understood in the light of the obligation of all Slovak residents to affiliate to one of the bodies participating in the management of that scheme, and the obligation of those bodies to enrol everyone who makes a request to that effect, irrespective of the person’s age and state of health. Such obligations are among the decisive characteristics of the principle of solidarity, as is apparent from the case-law referred to in paragraph 32 of the present judgment.”

“(46) It should be added that the competition introduced into the Slovak compulsory health insurance scheme by the features referred to in paragraphs 42 to 45 of the present judgment is closely related to the fact that the management of that scheme was entrusted to various insurance bodies rather than to a single body. In so far as that scheme includes a mechanism for the equalisation of costs and risks, the General Court’s assessment in paragraphs 65 to 67 of the judgment under appeal, that that competition calls into question the principle of solidarity underpinning that scheme, is also at odds with the case-law referred to in paragraph 33 of the present judgment.” [The Court cited case C‑350/07, Kattner Stahlbau.]

“(47) Consequently, contrary to the General Court’s finding in paragraphs 65 to 67 of the judgment under appeal, the existence of a certain amount of competition as regards the quality and scope of services provided in the Slovak compulsory health insurance scheme, as a result of the features referred to in paragraphs 42 to 46 of the present judgment, cannot call into question the actual nature of the activity carried out by the insurance bodies in the context of that scheme.”

“(48) As regards, third, the fact, also noted in paragraph 66 of the judgment under appeal, that the bodies managing the Slovak compulsory health insurance scheme compete when procuring the relevant services, that cannot, as the Advocate General noted in point 119 of his Opinion, be regarded as being a relevant factor in assessing the nature of their activity of providing compulsory healthcare insurance services in Slovakia. When determining the nature of the activity of an entity, there is no need to dissociate the activity of purchasing goods or services from the subsequent use to which they are put, since the nature of the activity of the entity concerned is determined according to whether or not the subsequent use amounts to an economic activity”.

On this point, the Court is certainly right. Even non-undertakings have to buy goods and services for their own consumption. They become undertakings when they use those goods and services to sell products or supply services to third parties.

“(49) In the third place, contrary to what the General Court held in paragraph 69 of the judgment under appeal, there is no basis for its reasoning in the case-law constituted by the judgments of 10 January 2006, Cassa di Risparmio di Firenze and Others (C‑222/04, EU:C:2006:8, paragraphs 122 and 123), and of 1 July 2008, MOTOE (C‑49/07, EU:C:2008:376, paragraph 27). It is apparent from those two judgments that, where an operator’s activity consists in the offer of services of an economic nature – that is to say, in the case that gave rise to the first of those judgments, services linked to financial, commercial, real estate and asset operations, and, in the case that gave rise to the second of those judgments, services linked to the organisation of sporting competitions based on sponsorship, advertising and insurance contracts for the commercial exploitation of those competitions – in a market environment of competition with other operators which are seeking to make a profit, the fact that that offer of services is made by the not-for-profit operator does not call into question the classification of the activity concerned as an economic activity.”

“(50) Accordingly, it cannot be inferred from that case-law that a body involved in the management of a scheme which has a social objective and applies the principle of solidarity under State supervision could be classified as an undertaking on the ground, emphasised by the General Court in paragraph 69 of the judgment under appeal, that other bodies operating in the context of the same scheme are actually seeking to make a profit.”

In other words, the Court of Justice made a distinction between competition within a health system based on solidarity and competition in other sectors of the economy. Importantly, it also confirmed that a non-profit entity can also be an undertaking.

But I would argue that competition in the Slovak health sector had the same effects and developed in the same way as in any market that is regulated by the state. The General Court, in paragraph 69 of its judgment, examined competition between non-profit and profit-seeking entities and drew on MOTOE and Cassa di Risparmio di Firenze to find that non-profit entities can become undertakings when they compete with profit-seeking entities. It applied the same principle to the Slovak situation and concluded that the state-owned insurers became undertakings by “contagion”. The Court of Justice rejected this conclusion because according to AOK Bundesverband, some competition cannot not make the provision of health insurance economic in nature. However, the comparison of the Slovak and AOK Bundesverband cases by the Court of Justice was perfunctory. It seemed to ignore three aspects of the AOK Bundesverband case that could have been decisive for its assessment of the outcome of competition in the Slovak case. First, all sickness funds in the AOK Bundesverband case had the same legal status and aims. Second, their possibility to compete on price was allowed by law. Third, the aim of the limited competition was efficiency in the provision of services to insured persons.

By contrast, the elements of competition in the Slovak case were not determined by law, nor was there any hard evidence that they actually increased efficiency. Since the extra benefits did cost something to the insurers and since premiums could not be raised, or lowered, it is puzzling at first sight why insurers would compete at all. Such non-price competition would only eat into the profits of the insurers. In fact, given that basic benefits and premiums were set by the state, the Court should have examined whether under those conditions an insurer in Slovakia would have been incentivised to increase its efficiency. It is possible that they offered the extra benefits in order to attract a larger number of clients so that they could reap cost savings from economies of scale. Given that they could not pass the cost savings to clients through lower premiums, they could offer extra benefits only if the savings from economies of scale were larger than the costs of those extra benefits. In this scenario the clients were better off from the extra benefits. But, of course, the insurers could also keep some of those cost savings for themselves and in the process increase their profitability. The fact that profits were regulated did not rule out increases in profit once the required reserves were established. Therefore, it is possible that, under certain conditions, non-price competition can lead to cost efficiencies and extra profits on the side of insurance companies and extra benefits on the side of consumers. But is this not the normal outcome of market competition? In this context, the statement that competition was allowed in order to lead to efficiencies was superfluous. A regulator would want to introduce competition in a system where operators have no incentive to compete [e.g. in some health systems, public hospitals are allowed to direct the budgetary efficiencies they gain to specialised services in which they consider they have a qualitative edge over other hospitals so as to attract extra patients. Without being able to use such efficiencies, they would have no incentive to improve quality]. However, in the Slovak case, once insurers were allowed to make extra profit by reducing their costs through economies of scale, there was no need to incentivise competition as it would at any rate develop spontaneously.

In the end, the Court of Justice concluded that “(51) the General Court’s findings set out in paragraphs 63 to 69 of the judgment under appeal are vitiated by errors of law which led it, wrongly, to rule that, notwithstanding the fact that the Slovak compulsory health insurance scheme pursues a social objective and applies the principle of solidarity under State supervision, the activity of the bodies that manage it is economic in nature.”

Consequently, the Court of Justice annulled the judgment of the General Court and, instead of referring the case back to the General Court, it proceeded to give a final judgment.

It first described the Slovak system. “(59) The Slovak compulsory health insurance scheme, which pursues a social aim of ensuring that all Slovak residents have health insurance cover, has all the characteristics of the principle of solidarity covered by the settled case-law of the Court recalled in paragraph 32 of the present judgment. Membership of the scheme is compulsory for all Slovak residents, the amount of contributions is fixed by law in proportion to the income of the insured persons and not to the risk they represent on account of their age or state of health, and all insured persons have the right to the same level of benefits set by law, so that there is no direct link between the amount of the contributions paid by the insured person and that of the benefits provided. In addition, since the insurance bodies are required to ensure that every Slovak resident who requests it has health insurance cover, regardless of the risk resulting from that person’s age or state of health, the scheme also provides for a mechanism for equalisation of the costs and risks.”

“(60) The scheme is, moreover, subject to State supervision. The activities of insurance bodies within that scheme are supervised by a regulatory office which ensures that those bodies adhere to the legislative framework and intervenes when violations occur.”

“(61) The presence of competitive elements in the Slovak compulsory health insurance scheme is secondary, as compared with the scheme’s social, solidarity and regulatory aspects, and, as such, as has been set out in paragraphs 41 to 50 of the present judgment, is not capable of changing the nature of that scheme. The ability of insurance bodies to compete with each other cannot extend either to the amount of the contributions or to the compulsory statutory benefits, so that those bodies can only differentiate themselves, in a residual and ancillary manner in relation to the latter benefits, in terms of the scope and quality of services.”

“(62) In addition and above all, it is apparent from recital 94 of the decision at issue that the ability of insurance bodies to seek, use and distribute profits is strictly framed by law, the purpose of those legal obligations being to preserve the viability and continuity of compulsory health insurance. In the same vein, the requirement that insurance bodies operating in the Slovak compulsory health insurance scheme must have the legal status of a for-profit joint stock company governed by private law and the opening up of that scheme to insurance bodies controlled by private entities is intended, according to the statements in recital 13 of that decision, to strengthen efficiency in the use of available resources and the quality of healthcare provision. It thus appears that those features, as well as the freedom of Slovak residents to choose their health insurer and to switch insurer once a year, were introduced in the interests of the proper functioning of that scheme and cannot, therefore, call into question the non-economic nature of the scheme.”

“(63) Accordingly, the Commission was justified in concluding, in the decision at issue, that the Slovak compulsory health insurance scheme pursues a social objective and applies the principle of solidarity under State supervision, and that the elements identified in the preceding two paragraphs cannot affect that conclusion.”

Since the Court of Justice concluded that “(64) the Commission was, therefore, entitled to find that the activity of SZP and VšZP within that scheme was not of an economic nature and, accordingly, that those bodies could not be classified as undertakings within the meaning of Article 107(1) TFEU”, it dismissed the action brought by Dôvera.

A final thought

It is the role of courts to make distinctions and draw dividing lines that can be to some extent arbitrary. We rely on courts to do that because hopefully they can do it impartially. But judgments also provide guidance for future cases. Although the Dôvera judgment is important because it protects the status quo, the many subjective statements it contains diminish its usefulness to Member States that want to reform their public health systems to raise their efficiency and quality.

[1] The full text of the judgment can be accessed at:

[2] The full text of the Commission decision can be accessed at:

Photo by fernando zhiminaicela on Pixabay.



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He presently holds positions at the College of Europe and the University of Maastricht. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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The European Commission is working on quickly adapting the existing State aid legal framework to address the current Covid-19 pandemic. Join us on 20th April from the comfort and safety of your (home) office to get an insider update on the Covid-19 response by State aid experts from the European Commission and national governments. ✓ Join from wherever you are – […]
17. Mrz 2020
State Aid Uncovered von Phedon Nicolaides

Has an Economic Myth Become a Legal Fact? The Case of Turnover Taxes

Progressive turnover taxes are not contrary to the freedom of establishment or the right of equal treatment. Introduction Recent cases involving “turnover” taxes have sparked a debate in the literature and on the conference circuit not only because they raise novel issues but also because of their implications for other taxes which are being mooted by European governments. As Advocate-General […]
03. Mrz 2020
State Aid Uncovered von Phedon Nicolaides
State Aide_Infrastructure

Public Funding of Infrastructure without State Aid

The existence of State aid must be checked at the level of both the direct and indirect beneficiaries who are the owners and users of infrastructure, respectively. If payments to private land owners are to be free of State aid, they must be calculated on the basis of an objective formula that takes into account the size and value of […]
04. Feb 2020
State Aid Uncovered von Phedon Nicolaides

How to Compensate for the Extra Cost of Public Service Obligations: Step-by-Step Guidance on a Complex Calculation

The “net avoided cost methodology” takes into account only incremental costs. Introduction The two most difficult issues in the design of State aid measures to support services of general economic interest [SGEI] are the proper definition of the public service obligation [PSO] and the identification of the “counterfactual” on the basis of which the public service compensation [PSC] is calculated. […]
04. Jun 2019
State Aid Uncovered von Phedon Nicolaides

Not Every Compensation Is a Compensation in the Meaning of Altmark

Regulation and licensing do not constitute obligations for the provision of an SGEI. Compensation for changes in public policy is not compensation that complies with the Altmark conditions. Introduction The calculation of the compensation for the net extra costs of public service obligations [PSO] is a difficult task. On 15 May 2019, in case C-706/17, Achema et al v Lithuania […]
21. Mai 2019
State Aid Uncovered von Phedon Nicolaides

There Is No Threshold below which Economic Activities Can Be Considered to be Non-economic

Non-economic activities have to be accounted separately from economic activities. The exercise of public tasks assigned by the state cannot protect an undertaking from State aid rules. State aid distorts competition even when it aims to remedy distortions. Introduction Ports, like other transport infrastructures, may operate under public obligations some of which may be of economic and some of non-economic […]
16. Mai 2019
State Aid Uncovered von Phedon Nicolaides

Competitors’ Rights

A competitor must show that it is substantially affected by State aid approved by the Commission in order to challenge the Commission’s decision. Merely being affected by the aid is not enough. To show that aid has a substantial impact, it is first necessary to define the relevant market. This is different from the “distortion of competition” in the meaning […]