Germany will reintroduce parity funding of the statutory health insurance scheme in 2019 by lowering the contribution rates for employees and raising those for employers. This reduces the wedge taxes drive in between the marginal product and the disutility of labour. After a small demand impulse on impact, followed by a small downturn in the first two years after implementation, an estimated New Keynesian DSGE model indicates small positive long-run output and employment effects. However, the reduced tax wedge leads to lower public revenues. Aggregate and individual welfare effects will depend on how the government compensates for these revenue losses.