Israeli Labor Court Questions Health Funds’ Child Discount Policy Amid Legal Challenge

The Tel Aviv Regional Labor Court recently approved a class-action lawsuit against Israel’s four health funds, Clalit, Maccabi, Meuhedet, and Leumit, challenging the legality of their policy exempting families from paying insurance fees for the fourth child onward under supplementary health plans (Shaban). Filed in May 2024 by four mothers with three or fewer children, the suit argues the exemption violates the National Health Insurance Law’s equality principle, as families with more children pay less despite identical conditions otherwise.

The court did not rule the policy illegal but found a reasonable chance it might be deemed so, while largely dismissing retroactive compensation claims due to the funds’ reliance on regulator approval over the years. The key issue remains the potential cancellation of the exemption going forward. Currently, the exemption continues, with the health funds expected to submit defenses by October 30. Meanwhile, the Ministry of Health has formed a committee to examine the matter but has not set a timeline, indicating reluctance to address the politically sensitive issue promptly.

The legal basis for the court’s decision hinges on the Ministry of Health’s silence regarding the discounted family rate, interpreted as withdrawal of support. Economically, the exemption serves as a marketing tool: health funds accept losing about 370-410 shekels annually per exempt child to attract larger families, which increase their capitation-based budgets. Larger families, especially in the Haredi sector where fertility rates are highest, bring more registered members and thus more funding, despite lower actual healthcare usage by children.

Data from the Central Bureau of Statistics shows Haredi women have an average of 5.26 children, compared to 2.57 among secular women, concentrating the benefit in certain demographic groups. Health funds openly run marketing campaigns targeting the Haredi sector, including dedicated managerial roles. The exemption was established based on a 2005 internal document of unclear legal status, never legislated or budgeted by the Knesset.

The court emphasized that any lawful discounted family rate must be enacted through legislation, but the Ministry of Health’s avoidance reflects the political sensitivity, as canceling the exemption would heavily impact large families, particularly Haredi ones. The health portfolio has long been held by parties representing these communities, making the issue politically charged. For now, the exemption remains, but the health funds face pressure to maintain a policy whose legality is now in doubt.