Czech ombudsman warns that latest bill on debt relief does not cover all who need it

The draft legislation authored by a group of MPs from the opposition Association of Dissatisfied Citizens (ANO) movement and governing coalition members the Christian Democrats, Mayors and Independents (STAN) and Pirates continues the previous “Summers of Mercy”. If debtors apply to pay down what they owe on health insurance policies which an insurer has already placed under collections through the tax collector, they reportedly will no longer have to pay for the collections proceedings costs or the fines which have been assessed.

On Tuesday, the Czech Public Defender of Rights (the ombudsman) warned that he considers it unfair that the planned wave of debt relief would aid just some applicants and, moreover, would forgive just part of the penalties owed. According to the bill, forgiveness of additional costs and penalties would apply to the people against whom collections proceedings have been lodged by the tax system by the end of 2023 at the latest.

The debtors would have to apply to pay down their back health insurance contributions between the beginning of June and the end of November 2024. They would have to pay them back by year-end.

Debts in excess of CZK 5,000 [EUR 200] could be paid off in 12 monthly payments, while debts in excess of CZK 50,000 [EUR 2,000] could be paid off in 36 monthly payments. If a debtor fails to make a payment, the collections proceedings would be resumed through the tax system.

According to those submitting the bill, led by Czech MP Patrik Nacher (ANO), collections under the tax code are especially being used by the VZP insurance company, while the other health insurers rely on collections agents appointed by the courts. “Since the previous legislation just affected relief from the penalties and the costs of collections proceedings conducted through court order, it seems fair that the same opportunity be provided to those whose debt is the subject of collections under the tax code,” the authors of the bill said.

“The Summer of Mercy will receive its finishing touch. The Government has just approved the law I proposed on exceptional forgiveness for debts owed to health insurers. I believe its passage through Parliament will be smooth,” said Minister Výborný.

Those submitting the bill expect fewer than 10,000 debtors to apply to be released from penalties and that the total volume of back insurance contributions paid will amount to tens of millions of Czech crowns. The penalties forgiven could also represent CZK 20-30 million [EUR 800,000 – EUR 1.2 million].

Lawmakers have previously adopted two such similar special laws. Those pieces of legislation concerned the exceptional forgiveness of penalties and other additional costs for collecting back contributions to social insurance and back taxes.

Ombudsman says this expansion of the Summer of Mercy is forgetting some debtors

On Tuesday, ombudsman Stanislav Křeček warned that the current bill is forgetting about some debtors and also does not cover the full amounts of the penalties owed, which he considers unfair. According to him, the bill completely ignores those who are currently voluntarily paying down what they owe.

Even those who qualify for debt relief will not be relieved of the full amount of the penalty owed to the health insurers, but just part of it. According to the ombudsman, that could be an unpleasant surprise for many participating.

The ombudsman said people who previously took advantage of the “Summer of Mercy I and II” encountered a similar problem with court-ordered collections agents. A man from Southern Moravia complained to the ombudsman that after paying off almost CZK 300,000 [EUR 12,000] to his health insurer, the court-ordered collections agent released him from the penalties previously sought, so he assumed his debt to the insurer had been resolved, but the company then assessed more penalties against him in the amount of approximately CZK 160,000 [EUR 6,500].

The ombudsman explained to the surprised debtor how that situation arose. Health insurers do not assess penalties immediately, but charge for them over time, until they are paid off.

This means insurers also approach the collections of those penalties gradually, over time. The court-appointed collections agent, therefore, had just collected part of the penalty that was owed along with the debt.

That was also why the court-appointed collections agent just forgave part of the penalty owed during the Summer of Mercy. The rest of the penalty was not covered by the debt amnesty as it was scheduled to be collected at a later time.

However, according to the ombudsman, nobody ever warned the debtors ahead of time that this would be the case. For that reason, he is currently endeavoring to correct such cases.

The ombudsman has proposed to the Government and the lawmakers that people in such situations be able to request relief from those penalties in the next “Summer of Mercy”. “In my view, the law should make it possible for people to also achieve relief from penalties related to insurance which they have already paid off within the framework of Summer of Mercy I and II,” Křeček said.

Those who owe back contributions to a health insurer who have already been assessed a penalty but who are not yet facing collections through the tax system would be able, according to the drafters of the new bill, to apply to the insurer for what is called amelioration of the harshness of the law. Most of them will be forgiven at least half of the penalty owed, and in some cases all of it, lawmakers say.