Israeli Court Questions Health Funds’ Discount for Fourth Child in Family Plans

Last week, the Tel Aviv Regional Labor Court 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 in supplementary health plans (Shaban). The lawsuit, filed in May 2024 by four mothers with three or fewer children, argues that this exemption violates the National Health Insurance Law’s principle of equality. The court did not rule the policy illegal but found a reasonable chance it might be, while largely dismissing claims for retroactive compensation due to the funds’ reliance on regulator approval over the years. The key issue now is the potential cancellation of the exemption going forward. Currently, the exemption remains in effect, and the health funds will submit their defense by October 30. Meanwhile, the Ministry of Health has formed a committee to examine the matter without setting a timeline, signaling reluctance to act swiftly.

The court’s decision hinges on the Ministry of Health’s silence regarding the legality of the discounted family rate, which the ministry neither endorses nor rejects. Economically, the exemption serves as a marketing tool for health funds, which receive capitation funding based on registered members weighted by age. Adding children, who generally consume fewer health services, increases funds’ budgets more than their costs, making the exemption a strategic incentive to attract larger families. Clalit acknowledged this in court, stating that recruiting young, large families lowers the average age of members and increases resources for older patients.

Demographically, the exemption disproportionately benefits large families, especially in the Haredi (ultra-Orthodox) sector, where fertility rates are significantly higher than in secular populations. The health funds have openly targeted this sector with dedicated marketing efforts. The exemption was established based on a 2005 internal document without clear legal authority, raising questions about its normative status after 21 years.

The court emphasized that any lawful discounted family rate should be established through legislation, but the Ministry of Health has avoided taking a definitive stance, likely due to the political sensitivity of affecting large families, particularly in the Haredi community. The health portfolio has often been held by representatives of ultra-Orthodox parties, and removing the exemption could have immediate political repercussions. For now, the exemption continues, but the health funds face pressure to justify a policy whose legality is now in doubt.