Voluntary health insurance taxation in Lithuania may change again: MP Edita Rudelienฤ proposes removing the income-tax treatment now applied when employer-paid additional health insurance exceeds EUR 350 per year. She points to first-quarter 2026 data showing that contract value fell by 5%, while the average policy amount dropped from EUR 454 to EUR 386.
The proposal is not law yet, so employers and employees should not assume the current tax rule has already disappeared. Still, the initiative has enough concrete numbers and a clear effect on employee-benefit packages to matter now. Some companies use additional health insurance as a key retention tool, while employees often value it more than a small cash add-on. Below we explain what exactly is proposed, what the current figures suggest, and what practical steps make sense while the law remains unchanged.
A proposal in the Seimas would remove the tax treatment applied to additional voluntary health insurance above EUR 350 per year. The initiator argues that after the tax rule was introduced, employers reduced policy value, so employees received weaker health coverage while the state did not gain much extra revenue. Until any amendment is adopted, the current rule still applies and employers cannot act as if the tax has already been abolished.
- What is proposed: remove the tax treatment on additional voluntary health insurance above EUR 350 per year.
- Status: this is only a proposal to be submitted in the Seimas, not a rule already in force.
- Main argument: in Q1 2026, total contract value fell 5%, while average policy value fell 15%.
- Who is affected: employers using health insurance as a benefit and employees covered by those policies.
- What to do now: keep following the current rule, but review benefits-package scenarios in case the proposal advances.
What does the voluntary health insurance taxation proposal change?
The proposal is very specific. MP Edita Rudelienฤ wants to remove the income-tax treatment applied to employer-paid additional health insurance when the annual amount exceeds EUR 350. This is not a general political promise about employee well-being. It is a targeted attempt to change one concrete tax threshold that affects how employers design benefit packages.
But the legal status matters most here. The change has not been adopted. The MP said she would present the amendment to the Seimas in the opposition agenda. That means employers must still work under the existing framework until a vote is held, the text is adopted, and the effective date is known. Wanting a change and having the change in force are two different stages.
The proposal is based on the argument that additional health insurance is becoming more important as both a motivation and social-protection tool for employees. According to the MP, the current tax rule pushed employers to reduce the value of one policy so it would stay closer to the threshold or avoid the extra tax burden. If that is correct, the employee still nominally has insurance, but the actual value of the benefit becomes weaker.
This is the practical policy question behind the headline. If the state expected to collect more tax, but employers simply reacted by shrinking policy value, the budget effect may be limited while the employee still loses coverage quality. That is the central economic argument used to justify the proposal.
Who does this matter to among employers and employees?
The first group is employers, especially those that use additional health insurance as a real part of total compensation rather than as a decorative extra. These companies often compete for staff not only with salary, but also with benefit quality. If the current tax rule remains in place, some employers may keep trimming policy value in order to control the tax cost.
The second group is employees. Many workers do not know the exact annual value of the insurance their employer buys for them or how tax treatment affects the employer’s decision. Yet the impact can be simple and direct: a narrower list of services, lower limits, more co-payments, or fewer available clinics. For employees, this is not only a political debate. It affects the real usefulness of a benefit they may rely on.
The third group is finance and HR teams that build compensation packages and compare different ways to reward staff. They need to decide whether it is more efficient to increase cash compensation, reimburse specific health costs, or fund a wider insurance policy. If the tax rule changes, companies may return to more generous policies. If it does not, many teams will keep working inside the current threshold.
This issue also belongs to the wider tax and compensation environment in 2026, which we summarised in What Will Change in Lithuania from 2026 โ New Taxes, Labor Rights, and Pension Reforms. For employers reviewing the bigger picture, it helps to place this proposal inside the wider design of pay, tax, and employee benefits.
Important: this article covers a proposed change, not a rule already in force. Until the law is amended, employers should continue applying the current taxation rules.
Which numbers and thresholds matter most here?
The proposal relies on a small set of figures that make the issue easier to evaluate. The first one is the threshold itself: additional health insurance is taxed when the employer-paid amount goes above EUR 350 per year. In practice, this becomes the budget line around which many employers start designing or cutting one policy.
The second key figure is the overall change in contract value. During the first quarter of 2026, the total value of contracts fell from EUR 49.4 million to EUR 46.9 million. That is roughly a 5% drop. But the more revealing figure is the average value of one policy.
| Figure | Why it matters |
|---|---|
| EUR 350 per year | The threshold above which the additional insurance amount is taxed under the current approach. |
| EUR 49.4m โ EUR 46.9m | Total contract value in Q1 2026 fell by about 5%. |
| EUR 454 โ EUR 386 | The average value of one policy fell by about 15%. |
| 240,000 people | Approximate number of residents covered by this type of insurance. |
| EUR 36 | The amount the MP says employers still had to cut from one policy to keep it below the threshold. |
This is where the proposal becomes more than a slogan. The number of policies reportedly increased by 11%, but the average policy value dropped by 15%. That suggests employers may not be abandoning the benefit completely, but are reshaping it into a thinner and cheaper version. If so, the headline number of insured employees can rise while the real quality of coverage still declines.
How does this look in a real benefits package?
Example 1. A company used to fund an additional health-insurance policy worth EUR 454 per employee. After the tax change, it reduces the policy to EUR 386. The employee still has insurance on paper, but the scope of the benefit is weaker. That may mean lower annual limits, fewer specialist visits, narrower diagnostics, or less generous clinic access.
Example 2. Another employer wants to keep the richer policy, but calculates that going above EUR 350 creates additional tax cost. It must then decide whether to absorb the extra cost itself or trim the policy value. This is where the EUR 36 figure mentioned in the statement becomes important: even a relatively small cut may be enough to stay below the threshold and make the package cheaper for the employer.
That leads to the real strategic question: what is more valuable for the employee? If tax pressure turns the policy into something too limited to matter, a cash increase may be more useful. But if the insurance still gives faster access to doctors and reduces out-of-pocket costs, it may be worth more than a small salary adjustment. Employers therefore need to review not only the tax line, but also how employees actually use the benefit.
This discussion also connects with wider personal-finance questions relevant to residents this year. For example, taxpayers are also watching other money-related deadlines, such as the refund timeline covered in Lithuania Starts Personal Income Tax Refunds: What Residents Need to Know Until 31 July. The topics differ, but both show that workers increasingly need to think about total financial value, not only headline salary.
What should you do now step by step?
Because the change is still only a proposal, the safest approach is to prepare for scenarios without acting as if the rule is already gone. Planning is useful, but early compliance assumptions can create mistakes.
- Check the current annual value of the insurance policy. If you are an employer, review the amount per employee, not only the total budget line.
- Assess whether the policy was reduced because of the EUR 350 threshold. If yes, look at what employees actually lost in coverage quality.
- Do not change tax treatment on your own before the law changes. The current rules still apply even if the proposal moves forward politically.
- Prepare two scenarios. One for the current regime staying in place and another in case the tax rule is repealed later.
- Employees should ask about value, not only about existence. A policy that still exists but has become much weaker may not deliver the expected benefit.
- Track the legislative process. Until the amendment is formally adopted and comes into force, treat it only as a proposal.
Which mistakes should be avoided?
The biggest mistake is to treat this proposal as if it were already in force. The second mistake is to look only at the number of policies and ignore their value. If more people are insured but with substantially lower-value coverage, the real benefit may still be shrinking. The third mistake is to think the issue concerns only HR. In reality, it matters to finance, tax planning, and total-compensation strategy as well.
- This is still a proposal. Employers must keep applying the current rule until the law changes.
- Do not confuse policy count with policy value. More contracts do not automatically mean better employee coverage.
- Do not cut insurance automatically. For some employees, meaningful health coverage is worth more than a small tax optimisation.
- Do not rely on political messaging alone. Evaluate the issue through current law and the actual numbers.
Source: Seimas of the Republic of Lithuania, 2026-05-18. Original announcement.
Voluntary health insurance taxation has not been repealed, but there is now a concrete proposal in the Seimas to revisit it. Employers should prepare for both outcomes, and employees should check not only whether they have insurance, but how strong that insurance really is in value and coverage.
Frequently asked questions
Has the tax on additional health insurance already been removed?
No. This is only a legislative proposal. Until it is adopted and enters into force, the current rule remains in place.
Which threshold is at the centre of this proposal?
The debate focuses on the EUR 350 per year threshold above which the additional insurance amount is currently taxed.
Why does the MP argue for repeal?
Her argument is that employers reacted by cutting policy value, so employees received weaker benefits while the budget did not gain much extra revenue.
What should employers do right now?
Keep following the current law, review the actual value of policies, and prepare two scenarios in case the rule stays or is changed later.