CAIRN-INT.INFO : International Edition

■ Introduction

1In 2004, health costs in Switzerland overshot the psychological threshold of 50 billion Swiss francs (51.7 billion), which corresponds to 11.6% of GDP (OFS 2006). With per capita health spending of 4055 PPP-$, [1] Switzerland heads the ranking of European countries in terms of resources allocated to the health care sector and the growth rate of expenditure, which has been amongst the highest since the mid-1990s (OFS 2005: 44).

2At the heart of the Swiss health system is a health insurance model that is a halfway-house between a social insurance and a private insurance system. Although insurance is compulsory, it is managed by several private nonprofit health insurance companies, which officially compete with each other and provide an identical benefit package at prices (premiums) varying according to the average risk of each health insurer’s clientele within the 26 cantons. The features that distinguish this model from a public insurance system are, especially, the premiums, which are not income-related, and the fact that insurers (whose business in the mandatory health insurance sector is framed by social law) may simultaneously offer a range of complementary health insurance policies governed by private law. It is therefore not surprising, as we shall subsequently demonstrate, that the dynamic triggered by this model over the last ten years was not able to effectively counter rising health care costs. Such a development weighs heavily from a social viewpoint, given the fact that the financing of the Swiss health system is one of the most unfair in Europe. Indeed, according to the concept of vertical equity formulated by the World Bank, a health system is considered as being at its most equitable, vertically speaking, when costs are financed in a manner that reflects citizens’ ability to pay (being proportional or even progressive to their income). In Switzerland, two thirds of health expenditure is, on the contrary, financed independently of income, which leads to an increasingly intolerable financial burden for a growing proportion of the population (Bolgiani et al. 2003). The organisation of the Swiss health sector is, furthermore, characterised by its complexity, exacerbated by excessive federalism and direct democracy, which make any significant reform of the system problematic.
This article is divided into four chapters: the first outlines, including from a historical perspective, the Swiss health insurance model; the second chapter provides an appraisal of the regulatory role of health insurance and of competition amongst sickness funds, while the third part deals with the major reforms of the system being discussed in parliament. The conclusion illustrates the tensions to be overcome to achieve significant reform of the current model, and sketches out the worst-case scenario that would result from the probable absence of radical reform.

■ The health insurance system resulting from the law of 1996

The political-institutional framework: historical background

3So as to better understand the way in which the Swiss health care system is organised, it is useful to review the existing institutional and political framework. Switzerland is a federal state with three institutional levels: the Confederation (the central state), the cantons (of which there are 26) and the municipalities (of which there are 2,740). At each level, specific tasks and responsibilities are allocated, financed by taxation at the federal, cantonal and municipal levels. [2] The allocation of responsibilities between the Confederation and the cantons is defined by the federal constitution, which confers upon the cantons full sovereignty in all fields not specifically within the remit of Confederation (the subsidiarity principle). The federal constitution [3] explicitly allocates to the central state only very few responsibilities in the field of health, which are limited to:

  • organising and regulating health insurance;
  • control and eradication of communicable diseases as well as health protection;
  • regulating reproductive medicine, genetics and medical research;
  • defining study programmes for most health professionals.
As a consequence, it is the cantons who are responsible for organising and managing the supply of health care. Due to the sovereignty that the 26 cantons enjoy in this field, it may be argued that in Switzerland, 26 different models exist where the planning, organisation and management of the health care sector is concerned. The various cantonal systems are however interlinked, like communicating vessels, by the federal law on health insurance.

4The first law on health insurance, which entered into force in 1911 and which is deeply anchored in the tradition of corporatism and mutual aid (Muheim 2003), remained practically unchanged until the mid 1990s. There have been many attempts to amend the law, but because of the system of direct democracy, several reform projects proposed by the parliament and many popular initiatives have been rejected by the majority of citizens. It is however worthwhile pointing out that, despite several failures at federal level, numerous projects of reform regarding the way in which health care is organised at cantonal level have been seen through to a successful conclusion, particularly during the second half of the 1970s and during the 1980s. [4] Such changes contributed to further increasing diversity in the cantonal systems. Differences among the 26 cantons in terms of the organisation and regulation of the health care sector, per capita expenditure, the supply of hospital and ambulatory care (number of doctors’ surgeries per 10,000 inhabitants as well as number of acute beds), use made of services and outcomes (e.g. the mortality amenable to medical intervention) are nowadays significant. [5]

5In 1996, after having overcome (thanks to a very small majority) the obstacle of the popular vote following a referendum, the new federal law on health insurance (LAMal) entered into force. It dramatically altered the Swiss health landscape. According to the government’s report to the parliament, the three main objectives of the reform were the following:

  • to strengthen solidarity between insured persons (objective of equity);
  • to introduce efficient measures of cost control;
  • to promote fair competition between health insurers.
LAMal introduced major changes at an institutional level as well since, without modifying the Constitution, it transferred, through social insurance, responsibilities from the cantons to the federal State. Indeed, beyond strengthening the traditional role of the Confederation in regulating the health insurance sector and in particular the business of the health insurance companies, this law also imposed upon the cantons uniform organisation principles (such as that of hospital planning), principles which hitherto had fallen with the remit of the 26 cantons. To sum up, LAMal paved the way for a reallocation of responsibilities towards the central state, but this devolution has not been followed up by a transparent discussion in the appropriate legal context, i.e. that of the reform of the federal constitution (Crivelli and Filippini 2003). It must also be stressed that this transfer of responsibility has not been accompanied by a redistribution of public expenditure. The federal state continues to finance directly 0.3% of public health expenditure (and around 15–20% if one takes into account subsidies earmarked for premium reductions for people on low incomes).

The major organisational principles

6The Swiss health insurance model combines some elements of a social insurance with features of a private insurance system (Crivelli 2004a):

7• Health insurance, whilst being compulsory, [6] is managed by a range of private companies fulfilling criteria determined by law (sickness funds [7]), and which officially compete with each other.

8• The main characteristics of health insurance ( “basic” health insurance or “social” health insurance) are:

  • individual affiliation (each member of the family must sign an insurance contract and pay the respective premium);
  • universal access to a benefit basket defined by the central state (Confederation) (see insert below);
  • the right to change health insurer every year;
  • uniform insurance contracts.
In particular, the insurer is obliged to contract with all service providers authorised to operate in the canton in which the insured person resides and, in the event of medical emergency or medical need, also those operating in other cantons. It is important to note that the medical profession in Switzerland is exercised by freelance professionals who work in private practices on a fee-for-service basis. The individual insurance contract defines the amount of economic risk that is to be borne by the insured, i.e. an annual deductible (of 200 euros), and, for that part that exceeds the deductible, a 10% co-payment, up to a maximum threshold of 460 euros per year. The only aspects that distinguish one health insurance company from another are the price of basic insurance (the flat-rate premium paid by the insured) and the quality of the administrative service provided (reimbursement time, telephone support, etc.).

9Health insurance premiums are calculated independently of revenue, property and the individual health risk of the insured person. Each health insurance company is required to define a flat premium rating (community rating) applicable to all insured adults of a particular region (rates may indeed be different at the same insurer across the 26 cantons). Insurers have the possibility of offering a premium discount to young adults (19– 25 years) and are obliged to do so for children (up to the age of 18). Finally, it is important to recall that the independence of insurers in defining premiums is limited since premiums must be approved by the Confederation, which also has a say in the business of health insurance companies.

10So as to cushion the impact of flat health insurance premiums, the state intervenes by allocating subsidies to low-income individuals and families for paying premiums. The funding of these subsidies is ensured by general taxation and the way in which its distribution is organised is the responsibility of the cantons, which also determine the income and asset limits giving entitlement to public aid. In 2004 the total amount of subsidies allocated to low-income households came to around a fifth of total health insurance premiums.

11Some of the services are jointly financed by social health insurance and by the state through general taxation. In particular, the cantons and the municipalities make a contribution to the financing of public and publicinterest private hospitals. [8] It is incumbent on the cantons to define what services hospitals provide, by allocating service agreements to the different categories of hospital (public, private, for-profit or non-profit). Social health insurance solely covers services provided by institutions included in cantonal planning.

12In 1993, so as to adjust the risks amongst the various insurance companies, a risk equalisation fund was set up. It imposes a reallocation of resources between health insurers on the basis of the age and gender profile of the client base of a given company, in relation to the profile of Switzerland’s general population.

13Under the “classic” insurance contract, each citizen has the freedom to choose his or her service provider within his or her canton of residence. The law, however, authorises insurers to run specific forms of insurance that limit freedom of choice: Health Maintenance Organisations (HMO), Preferred Provider Organisations (PPO), Independent Practice Associations (IPA), i.e. networks of family doctors. In exchange for a discount on the flat-rate premium, insured persons who so desire (or who have been compelled to make such a choice because they cannot afford the premium) may therefore be exempted from the classic format and select a managed care insurance contract. Currently, in particular in the French and Italian-speaking cantons, only a small minority of people have opted for these systems.
As of 1996, health insurance companies were authorised to operate in the profit-oriented complementary health insurance sector (which comes under private law). The possibility given to “social” insurers to also offer contracts under private law, thus subject to the rules of the free market, creates major problems in terms of patient mobility (it influences the “competition”) and risk selection (in particular for those who have or who wish to buy complementary insurance).

Box 1. Benefit basket covered by compulsory health insurance

Compulsory health insurance covers the costs of services aiming to diagnose or treat an illness and its after-effects.
These services include: – examinations;


  • treatment and care dispensed during outpatient surgery or at the home of the patient, in a hospital or semi-hospital environment or in nursing homes by doctors, chiropractors, or by persons providing services on prescription or medical order;
  • tests, pharmaceuticals, diagnostic or therapeutic means and equipment prescribed by a doctor;
  • a contribution to the cost of a thermal cure prescribed by a doctor;
  • rehabilitation measures carried out or prescribed by a doctor;
  • a stay in the public ward of a hospital;
  • a stay in an institution dispensing hospital-like care;
  • a contribution to medically required transport expenses as well as rescue costs.
Services provided by compulsory health insurance must, according to the law, be efficient, appropriate and economical. Their effectiveness has to be demonstrated using scientific methods.

■ The regulatory role of health insurance

The idea of managed competition

15Unlike ther countries that have opted for public health insurance, Switzerland decided to institute a social health insurance system characterised by competition between non-profit private institutions. In 1996, when the new law on health insurance was passed, the Swiss legislative drew its inspiration from the model of managed competition, [9] which had already been adopted by other European countries such as the Netherlands. This model is based on the premise that the rules of the free market do not work perfectly (or even adequately) in the health care sector; [10] consequently an alternative path to fostering competition in the system involves “shifting” the competition mechanism away from the consumer (patient) to the health insurer. The citizen is therefore requested to choose an insurer, thereby leaving it to the latter to exercise competitive pressure on doctors and hospitals by concluding contracts with them.
In Switzerland, one of the major reforms of health insurance that entered into force in 1996 (LAMal) was the definition of an insurance contract and a uniform benefit basket at national level, as well as the right of insured persons to switch insurer every year. These changes aimed to facilitate choice and promote the mobility of the insured. Through this legislative change, competition between health insurers could only play out at the level of the quality of administrative services provided (reimbursement time of bills, client support) and on the price of the insurance. Furthermore, in accordance with the wishes of the legislator, the possibility given to insurers to offer alternative insurance models (of the “managed care” type) could play an important role in competitive terms. The latter kind of contract, whilst reimbursing the same range of services, was to bring under control health care costs (and thus contain the increase of the insurance premiums) through instruments such as selective contracting, limiting the choice of doctor (gatekeeping), the use of guidelines, the introduction of bonus insurance and through other management instruments. This reform of the law was thus based on the assumption that Swiss health insurance policy holders would become, as time went by, more attentive and sensitive to the differences in premiums (therefore more mobile), which would encouraged insurance companies to invest more resources in the development and advertising of these new insurance products and win new clients.

The structure of the market

16In reality, the mobility of insured persons within the framework of compulsory health insurance has been and remains even today somewhat limited. This has highlighted weak demand elasticity with respect to the price
of health insurance. Figure 1 shows, for the 26 cantons, the variability of the monthly premiums for the various insurers in 2006. One notes, for example, that in the canton of Zurich (ZH), the minimum monthly premium for the compulsory insurance of adults came to around 160 euros with the least expensive insurer and to 250 euros with the most expensive (average premium: 195 euros). Despite the large differences in premiums (to have access to an identical benefit basket), only 2.7% of policyholders switched insurer between 2005 and 2006. This percentage is lower than that of the two previous years. [11]

Figure 1

Monthly premiums of compulsory health insurance (LAMal): differences between insurers in 2006 (26 cantons and Switzerland as a whole)

Figure 1

Monthly premiums of compulsory health insurance (LAMal): differences between insurers in 2006 (26 cantons and Switzerland as a whole)

Source : Federal office of Publics Health, 2006.

17What emerges is that the majority of insured persons stick with their insurance company even if premiums are 50% higher than the least expensive offer. This means that the information and transaction costs are still very high for those insured. Indeed, they are not always capable of taking optimal decisions regarding such a technically complex item as an insurance contract. Furthermore there is another complicating factor: as indicated above, insurers may offer, alongside basic insurance, complementary insurance contracts, subject to private law. For these products, customer mobility is limited due to the fact that, when taking out such a policy, the insurer may request a medical examination and use the information obtained to calculate risk-adjusted premiums and to introduce limits to coverage in the contract.

Figure 2

Sprend of alternative insurance models in the 26 cantons (2004)

Figure 2

Sprend of alternative insurance models in the 26 cantons (2004)

Source : Federal Office of Public Health, 2006.

18Reduced demand elasticity with respect to the price of health insurance has hardly contributed to the spread and promotion of innovative insurance products based on the models of “managed care”. After an initial enthusiasm, [12] a period of stagnation ensued. Insurers themselves are partly responsible for this phenomenon. They actually withdrew managed-care type products from the market, because they did not guarantee the expected cost savings. In 2001, only 8% of insured persons had opted for a form of insurance with a limited choice of service providers (Moser 2004).

19It is only as of 2004 that one once again observes an upsurge in the popularity of managed-care models (24% between 2003 and 2004) Indeed, instead of switching health insurer, one can see that a growing number of policyholders, in an attempt to contain the increase in premiums in the “classical” form of insurance contract, are opting for these alternative models. The difference between cantons is however particularly sizeable (see Figure 2 in particular, showing other forms of insurance). In some cantons, 20 to 30% of the insured decided to limit freedom of choice with regard to doctor, whereas in other cantons this percentage is lower than 5% of the population.
Finally, it is important to stress that during the last ten years, there has been a large-scale merger and acquisition process underway in the health insurance market. In 1995, the number of health insurance companies operating in the basic health insurance market still came to 166; ten years later, in 2004, the number had fallen to 92 (–45%). Furthermore, some of these firms have been grouped together into a holding company. All the concentration indices (G4 and G8) remained more or less stable (47% and 67% in 1996, 47% and 70% in 2004), the ranking of health insurers (as far as market share is concerned), however, has undergone considerable change. [13]

The impact of competition between health insurers

20From an economic viewpoint, insurance cover is considered as being socially useful if it makes it possible to transfer an undesired risk from an individual (the financial consequences of illness) to an institution, without modifying the behaviour and choices of the various actors (effects of moral hazard – Geoffard 2004). Competition amongst insurers is, on the contrary, advantageous if:

  • it encourages firms to minimise administrative expenses;
  • it allows for better management of moral hazard (through a more efficient control of matching of care provided and costs incurred) with respect to the situation of a single insurer;
  • it makes it possible to better take into consideration the preferences of citizens through innovation and the differentiation of cover and services provided (customer service, product innovation).
If, on the contrary, the mobility of policyholders between insurers (and the competition which favours such changes) has no influence on at least one of these three dimensions, the outcome of competition will be, from society’s perspective, a “zero sum game” (or a negative sum game, in the event that marketing costs and the instruments used for the selection of risks would make the competition more costly than a single-payer solution).

21In Switzerland, no serious scientific study has ever evaluated the impact of competition between insurers on the basis of the three dimensions mentioned above. Currently, knowledge of such an impact remains partial.

Administrative expenses

22In 2002, an intermediary analysis of the efficiency of Swiss health insurers (Sheldon 2002), carried out with the Data Envelopment Analysis method, quantified the average inefficiency score of insurers at around 20%. This result has been the object of some criticism, even of a methodological nature, and the study was never completed.

Management of moral hazard by innovation

23Information is available on the economic value created by the introduction of new insurance models. Lehmann and Zweifel (2004) have attempted to separate expenditure differentials for clients who are members of the three most widespread forms of managed care (HMO, PPO, IPA) compared to expenditure of clients who selected the traditional form of contract. The authors tried to disentangle the effect attributable to risk selection from that due to product innovation. Overall, costs have been observed that are 62% lower than the average in HMO, 39% lower in PPO and 34% lower in IPA. The changes introduced into the contracts have led to two thirds of the savings recorded by HMO, half of those by PPO and only one third of savings made by IPA. The reduction of expenditure brought about by these three alternative forms of managed care thus represents a real saving, owing to the fact that it cannot be attributed solely to risk selection.

Quality of customer service

24From a theoretical viewpoint, competition between health insurers could lead to a reduction in the quality of customer service. The people who are in a position to appreciate the smooth functioning of administrative procedures (for example the rapid reimbursement of bills) are chronically ill patients who represent a high risk for the insurer. On the other hand, “good risk” patients who have less frequent recourse to the administrative services of insurers have more difficulty in evaluating the quality of service provided. The competition to acquire good risk customers could therefore lead insurers to adopt strategies aiming to lower the quality of client support services. Furthermore, if, through market pressure, premium loading were reduced, it could be more advantageous for an insurer to invest the available money in risk selection instead of checking bills more closely or improving customer service (always a costly process).

Risk selection

25While the advantages of competition have not yet been confirmed by strong empirical evidence, risk selection has, on the other hand, been proven. To limit this phenomenon, the legislator provided for a risk equalisation mechanism between health insurers based on the distribution by age and gender of members within each insurer. The role of this system is essential, since it is difficult to suppose that a homogenous distribution of risk (age and gender) between insurers may be consolidated in a natural manner through the mobility of the insured. Indeed, people who are elderly or sick distinguish themselves by the fact that they are insufficiently mobile, whereas the good-risk insured are more sensitive to the possibility of changing insurer. Those insurers that historically have a large number of “bad risks” are obliged to cover their costs until the death of the insured. To counter this, these insurers are encouraged to create holding companies which group together several insurers, some of which aim to only attract young clients who are in good health. [14]

26The importance of the contribution of insurers to the risk equalisation fund is highlighted in Figure 3. For three insurers (white histograms), the amount paid into the fund is greater than 30% of total revenues, whereas for a dozen insurers (black histograms), the contribution to the fund varies from 15 to 25% of revenues. As of 1996, the amount of compensation is constantly increasing, on average by 10% per year. In 2004, 1.1 billion francs have been redistributed amongst insurers, an amount equivalent to 6.75% of net services provided by health insurance. In recent years, a fall in the number of insurers receiving a contribution from the risk equalisation fund has fallen. The latter fell from 100 in 1995 to 23 in 2003, whereas the number of insurers contributing to the fund remained more or less constant (67 in 1995, 70 in 2003). On this basis of this observation, it seems legitimate to suppose that those insurers destined to disappear or be bought out distinguish themselves in that they have a disadvantageous composition in their risk portfolio. This evidence might encourage the management of sickness funds to further implement strategies aimed at risk selection.
Swiss law does not authorise risk selection, and stipulates so quite a formal manner. Health insurers, within the framework of compulsory insurance, are required to accept every customer without setting out conditions. The law forbids, within basic insurance, any method (even classical) aiming to encourage good risks to select certain forms of insurance coverage (contents of contracts, gathering information on risk profiles when concluding contracts, dynamic calculation). However, the ambivalent character of contractual relations between the health insurer (who offers, alongside basic insurance, private complementary cover in a less regulated market) raises additional difficulties for policyholders in understanding the distinction between the two types of contract. If, in the mind of those insured, the two types of contract cannot be clearly separated, the contents of complementary insurance may influence the choice of basic insurance. Over the last few years, health insurers have refined their techniques of risk selection. Indeed, such practices have to be carried out in a subtle manner by targeted marketing campaigns aiming at good risks (essentially young people, sportsmen, Internet users, etc.) or by offering interesting complementary insurance packages for people in good health (which offer, for example, reimbursement of fitness-club subscriptions) or even paying bonuses to health professionals (chemists, family doctors, etc.), whose mandate it is to convince bad risks of the (inexistent) advantages they could secure were they to change health insurer.

Figure 3

Net contribution paid to or withdrawn from the risk equalisation fund as % of total revenues (2004)

Figure 3

Net contribution paid to or withdrawn from the risk equalisation fund as % of total revenues (2004)

Source : Federal Office of Publics Health, 2006.

27An additional way of selecting risks is to be found in the freedom enjoyed by the insured person to define the amount of economic risk not transferred to the insurer, in exchange for a premium discount (higher deductibles – see Figure 2). The choice of deductible (or excess), condeductibles sidered by the – see legislator Figure as 2). being The choice an instrument of deductible capable (or of excess), limiting conthe phenomenon of “moral hazard” and increasing individual responsibility, is associated with a clear process of segmentation of insured persons and self-selection. Geoffard et al. (2006) have observed that the insured who have selected the minimum deductible have a death rate 200% greater than those of who selected an average deductible. On the other hand, those insured having selected a high deductible had, when the data was standardised by age and sex, a mortality rate 30% lower than those who selected an average deductible. This result has demonstrated that by obtaining premium discounts associated with the choice of higher deductibles, good risks can partially avoid their solidarity contribution towards bad risks.
Unfortunately, the current risk equalisation mechanism does not seem capable, in its current form, of discouraging such selection practices; this is recognised by the majority of experts (Beck 2004, Holly et al. 2004, Spycher et al. 2004) who have proposed alternative formulas to improve the current risk adjustment system.

Vertical and territorial equity of a flat premium rating

28So as to remedy the “vertical” iniquity of financing due to the flat premium rating, since 1996 the Confederation and the cantons jointly finance subsidies earmarked for premium reductions for low-income households. The main problems of the premium-reduction mechanism are the following:

29• During the last few years, the funds provided for this programme by the Confederation (two thirds) and the cantons (one third) increased at a rate lower than that of the rise in health insurance costs (therefore of premiums), which has not made it possible to offset the increased expense. Over the years, the expense represented by the compulsory health insurance premiums has become increasingly economically unbearable for a growing proportion of individuals and households (Bolgiani et al. 2003). In 1991, the federal Government made known its clear political commitment: to maintain the weight of premiums under the 8% threshold of the taxable income of households. Today this commitment is far from being respected in several cantons and for a large proportion of low-income households.

30• By respecting the responsibilities allocated by the constitution, subsidies are administered and distributed by the cantonal authorities responsible, according to a local legislation, which varies from one canton to another. These different legislations are, however, the source of considerable inequalities: indeed, for the same type of household, the burden of compulsory health insurance premiums on disposable income may vary significantly depending on the canton in which the household lives, which undermines the principle of territorial equity and social citizenship.

31The scale of this problem is highlighted in Figure 4, which demonstrates the variability in time and between cantons of the impact of premiums (after having deducted earmarked subsidies) on the disposable income of various types of households.

32The obligation to pay premiums that are independent of income, albeit partially corrected by earmarked subsidies, corresponds, in fact, for the vast majority of the population, to a regressive form of taxation. This situation is the source of a growing discontent, which has also affected a part of the middle class, and has favoured, at a political level, the promotion of a series of initiatives aiming to regulate in a more rigorous manner the mechanism for attributing subsidies. An explicit objective of vertical equity at the national level was proposed, as well as convergence in the mechanisms used at cantonal level. However, the political process has been a long and difficult one. The first draft reform, which provided for the introduction of a maximum threshold of incidence on taxable income of 8%, failed in 2001 (Crivelli 2003); the second draft, even more ambitious in terms of equity, [15] was “shipwrecked” in December 2003. However it was proposed once again by the federal government in 2004, but was significantly amended, even rescaled by the parliament. The final legislative text, approved in March 2005, was weakened from a social viewpoint and does not contain any encouragement or constraint aiming at greater territorial equity.

Figure 4

Change in net premiums as a % of disposable income for three typologies of household in the cantons having the minimum and maximum incidence of net premium and the Swiss average (1998-2004)

Figure 4

Change in net premiums as a % of disposable income for three typologies of household in the cantons having the minimum and maximum incidence of net premium and the Swiss average (1998-2004)

Source : Balthasar et al. 2003, 2005.

33There are many lessons to be drawn from this reform: in an era characterised by a structural crisis in public finances and rising health costs, it is difficult to promote ex post vertical and territorial equity in the funding of the health system. The failure of reforms in Switzerland had demonstrated the difficulty in providing sufficient fiscal resources to guarantee, over time, the efficiency of a system of transfers targeting low-income households. Federalism represents, from this viewpoint, an additional complicating factor.

■ Prospects for the Swiss health insurance system

The current context of reform

34The Swiss health insurance system is the subject of several reform proposals being discussed in the federal parliament. The ultimate objective is, according to the government (Conseil Fédéral 2004a), to bring costs under control. Indeed, since the entry into force in 1996 of LAMal, this objective remains the one where the results are the least satisfactory, even non-existent. This is mainly because of the little impact produced by instruments aiming to foster greater competition in the health insurance market (free movement between health insurers, authorisation to propose new insurance models of the managed care type, etc.) in a regulated and rather inflexible sector (hospital planning, “community rating”, obligation to contract with all service providers, compulsory benefit basket, negotiation of fees, etc.). Furthermore, the complexity of the system and the frequently diverging interests of the various actors (health care providers, third-party payers, insurers, patients-insured-citizens [16]) have not made it possible to obtain the results hoped for at the outset with regard to bringing health expenditure under control.

35After the parliament rejected in 2003 a wide-ranging revision of LAMal, which aimed at reforming the existing system, the government decided in 2004 to adopt a new approach. The proposals, although part of a uniform strategy (bringing costs under control by increasing competition and individual empowerment), were not presented in a single and unique draft law so as to avoid the proposals being altogether rejected by parliament, or in the event of a referendum, by the Swiss people. [17]

36The main objective of bringing costs under control is reflected in a series of proposals especially focussing on demand, with a view to:


  • encouraging citizens to opt for alternative insurance models of the “managed care” type, by the introduction of framework conditions favouring the creation of integrated networks of care;
  • heightening the awareness of patients (those insured) to the “cost” factor (increase of deductibles and co-payments);
  • influencing the choice of health insurer not only on the basis of price, but also on the basis of the quality of care and this by removing the obligation of health insurers to contract with all authorised service providers;
  • reforming the funding mechanism of hospitals so as to increase choice for citizens and competition between the public and private sector;
  • transferring to the individual part of the financial burden linked to the ageing of the population by removing compulsory cover for a part of care services delivered by nursing homes or at home.
These reforms therefore mainly affect demand for health care by direct action (increase in the co-payment and partial exclusion of services from the benefit basket) or indirect action on those insured, by strengthening the role of the insurer as a player able to exert competitive pressure on suppliers of care. The insured person thus has to be able to make choices between the various insurance packages that will be proposed by health insurers.

Description and contents of two draft reforms under way

38The goal of this chapter is to present in greater detail the contents of two reform proposals by stressing the effect expected by the legislator on the demand for health care.

Direct impact on demand: example of the reform of long-term care financing

39The draft law concerning the new regulation of long-term care financing has, for the first time, made a distinction between therapeutic and basic care (see Conseil Fédéral 2005). The legislator was working on the assumption that only health care that pursued a therapeutic objective and that was therefore of a medical nature should be fully financed by basic insurance. As for complementary health care delivered to elderly persons in nursing homes or at home, including tasks such as helping patients to get dressed, making them do physical exercises, rendering them mobile and preventing bedsores, health insurers should only make a partial contribution to costs. Given the fact that the above-mentioned distinction is difficult to apply in practice, partners are in the process of negotiating a compromise, which envisages only partial cover of all long-term care by health insurance.
This proposal would in any case have direct consequences on the amount of care delivered to patients. Beyond the uncertain distinction between basic and therapeutic care, one may suppose that those especially affected by this new decision would be elderly persons, and the most under-privileged would find themselves confronted with much uncertainty regarding the partial reimbursement of services. [18]

Indirect impact on demand: example of the removal of the obligation to contract with all service providers

40Nowadays “the obligation to contract” requires health insurers to conclude conventions with all authorised service providers. These conventions authorise suppliers to bill as health insurance any service as long as it is concluded in the benefit package. The obligation to contract, as well as the fee-for-service reimbursement of outpatient care, constitute obstacles to bringing costs under control, represent incentives to increase capacity in terms of supply, and, furthermore, create a favourable context in which to encourage supply-induced demand and vice-versa. With the promotion of competition in mind, a draft law proposes to give insurers the possibility of selecting “authorised” doctors, i.e. remove the automatic coverage by health insurers of all doctors located in the country (removal of the “obligation to contract”). The cantons will be called upon to define the minimum number of doctors required to guarantee the outpatient handling of the whole population (Crivelli and Domenighetti 2003).

41An emergency provision putting on hold the opening of all new doctors’ practices until 2008 has been adopted in the meantime. It temporarily strengthens state planning so as to avoid, before the adoption of the new draft law, a mass opening of new medical practices on the part of Swiss doctors acquiring specialist training in hospitals and to check the possible immigration into Switzerland of doctors from the European Union.

42This provision was decided upon with regard to the adoption by the parliament of the removal of the obligation to contract, which probably represents one of the major changes in the way the Swiss health system is organised. If it is accepted, freedom to contract will strengthen the role of insurers as actors operating on behalf of patients. From the viewpoint of the patient/consumer/insured person, it must be stressed, however, that this proposal represents an obstacle to freedom of choice with respect to the current situation. Indeed, if this proposal is accepted, probably a significantly large number of insured will be in the situation of having to change insurer or doctor. It goes without saying that the medical profession opposes this reform.

43Because of the impact of this proposal, the risk of a referendum on the part of the Swiss federation of doctors with strong backing from the population is not unlikely.
The reforms presented show a direct and indirect shift of responsibility towards demand and thus to those insured. The consequences of these revisions are still difficult to assess, questions have been raised, however, on the effective ability on the part of the insured and the insurers – the latter as intermediary agents – to act efficiently in the imperfect, complex and uncertain market dominated by information asymmetry and conflicts of interest that is the health care sector.

■ Conclusion

44The health insurance system of Switzerland (LAMal) represents a compromise between market mechanisms and state regulation. Of the three strategic objectives pursued by LAMal, one in particular has not been attained: bringing costs under control. This problem, which weighs heavily on household budgets, will therefore be the top priority of the political agenda in years to come, since it runs the risk of undermining social cohesion. However, the success of reforms will depend on the ability to overcome a series of tensions (see table in Annex), which may well put the decision-making process on hold. To these factors one needs to add the central role of certain direct democracy mechanisms, which could either cancel the reform proposals accepted by parliament or profoundly change the foundations of the current system. [19]

45There is doubtless a second major challenge for the reforms of the Swiss health sector, and that is federalism. Since the introduction of LAMal in 1996, the Confederation has played an increasingly active role in the health field. The draft reforms currently being discussed in parliament aim to confer upon the Confederation an ever important role in defining Swiss health policy, in particular with a view to smoothing out regional differences in terms of supply and the economic burden, harnessing economies of scale and implementing appropriate instruments, so as to better control the growth of health expenditure at national level.

46However, this transfer of new tasks to the Confederation should entail an amendment to the federal constitution (and thus overcome the obstacle of direct democracy), which should be accompanied by an increase in public expenditure, to be borne by the Confederation and aimed at financing the system.

47In the absence of a constitutional adjustment, the cantons, which today bear more than 90% of public health expenditure, will not be prepared to accept radical reforms of the system aimed at transferring additional responsibilities and decision-making power to the central state or to health insurers without an equivalent transfer of financial responsibilities.

48If the reforms being discussed are not accepted owing to the impossibility of overcoming in the parliament the tensions referred to above, or if they are refused in a referendum by the population, perceived to be unacceptable constraints or obstacles to freedom of choice, or as reducing services in relation those currently available, there would be only one way out, in the absence of something better: “voluntary” membership of health “managed-care” networks already provided for by the current law.

49Indeed, as in the Middle Ages one laid siege to a castle to force its inhabitants to capitulate through hunger or thirst, the Swiss run the risk, mutatis mutandis, of “capitulating” through their “inability to pay” insurance premiums, which would be allowed to further increase although they are today perceived as already unbearable by a significant share of households: a stagnation or even a fall in real salaries, an increase in premiums (a increasingly large percentage of which remain unpaid) and growth (in the short term only, but still not proportional to premium increase) of earmarked subsidies. Consequently, there would only remain membership, on a strictly “voluntary” basis, of a much more economical form of managed care, [20] one that would be in competition with other networks, which in the meantime, thanks to the favourable situation, would have popped up like daisies (Domenighetti 2005).
The “health supermarket” of universal access at a social cost, from which the Swiss have hitherto had benefited, is therefore in the process of becoming history. [21]


Divisions to be overcome for a significant reform of health insurance in Switzerland

tableau im5
Citizens-patients versus insured Objectives of citizenspatients: Maintain the status quo through instruments of direct democracy, by opposing the limits imposed on supply (closure of hospitals, reduction in free choice of doctors and in the benefit package) and the increase of taxes. Objectives of the insured: Solve the problem of the financial burden of the flat insurance premiums by favouring systems of progressive funding and greater control of costs. Left versus right Objectives of the left: favour regulation of the state (planning of supply) and the promotion of vertical equity (public insurance, single health insurance, progressive funding). Objectives of the right: encourage competition, privatise, deregulate, make individuals more responsible, reduce state intervention. Confederation versus cantons Objectives of the Confederation: federal government to take on a more active role in defining health policy. Objectives of the cantons: bring cantonal expenditure under control, maintain control of public-interest hospitals and prevent the transfer of public funds to private suppliers and insurers. Lobby of health insurers versus lobby of doctors Objective of insurers: reduce the services included in the basic insurance package, stimulate greater contractual freedom, promote the insurer in the role of single buyer. Objectives of doctors: maintain the freedom of choice of the doctor (obligation to contract) whilst limiting the entry into the market of new providers.


  • [*]
    Iva Bolgiani: political scientist, University of Geneva and University of Lausanne. Luca Crivelli: economist, University of Lugano and University of Applied Sciences of Southern Switzerland.
    Gianfranco Domenighetti: economist and sociologist University of Lausanne and University of Lugano.
  • [1]
    PPP-$: purchasing power parity in US dollars.
  • [2]
    Depending on the allocation of the responsibility, as defined by the federal constitution, in order to carry out certain functions the latter are financed by national, cantonal or municipal taxes (tax federalism).
  • [3]
    In 1999 the federal constitution was partly revised (
  • [4]
    A presentation of these cantonal experiences is given by Zweifel (1988) and gone into in depth by Bolgiani (2002).
  • [5]
    For more details on the determinants of this regional variability of per capita health spending, see Crivelli et al. (2006).
  • [6]
    At federal level, the obligation to take out health insurance entered into force in 1996.
  • [7]
    In 2004, there were 92 companies operating in the compulsory health insurance field.
  • [8]
    This amount must represent at least 50% of operating costs and the totality of these hospitals’ investment costs.
  • [9]
    This concept defines the mechanism of restricted competitive regulation proposed for the first time by Enthoven (1993 and 2003).
  • [10]
    For problems linked to the asymmetry of information, demand is not capable of “managing”, in an adequate manner, supply, which, in fact, enjoys considerable discretionary power. See Maynard (2005), chapters 13 and 14.
  • [11]
    See Comparis survey (
  • [12]
    Between 1996 and 1998, membership of alternative insurance models quadrupled.
  • [13]
    The largest health insurer in 1996 gave up its business in some cantons thereby losing 55% of those insured, whereas the current third largest insurer (a holding with 720,000 affiliated members in 2005) only had 50,000 insured persons in 1996.
  • [14]
    In Switzerland the three largest insurance groups (Helsana, CSS and Groupe Mutuel) established within themselves new health insurers (Arcosana, Sansan, Avanex, for example), which aimed at offering lower flat-rate premiums so as to attract good risks. Sometimes filling out a membership form has to be done by Internet, which raises problems for elderly people ( “bad risks”).
  • [15]
    In short, a spreading out of the incidence of premiums, relating them to income and taking into account the typology of the household (with or without children), from a minimum of 2% to a maximum of 12% of income.
  • [16]
    Service providers may implement cream-skimming strategies and demand induction practices, also favoured by the reimbursement scheme (fee-for-service for ambulatory care and per day in hospital). The third-party payers have incentives at their disposal for cost shifting methods, which may have repercussions in terms of the transfer of financial burdens between the different payers (the state – health insurers) and between sectors (hospitals – outpatient care). Insurers may apply risk selection practices and, finally, patients/the insured/citizens may also be at the source of the phenomenon of supply induction.
  • [17]
    Let us recall that the Swiss people may intervene at the end of the legislative process through referendum (depositing 50,000 signatures within 100 days following the publication of a law). Referendums thus may be considered as a form of “veto” on the part of the population by blocking the adoption of laws or legislative amendments promulgated by the parliament or the government. Due to strong opposition from certain interest groups (doctors, for example), which emerged during the second revision of LAMal, the Conseil Fédéral (federal council) thus felt it wiser to divide the reforms up into different legislative packages (unbundling strategy).
  • [18]
    However, the draft law does provide for measures of social coverage.
  • [19]
    In 2007, the Swiss people will have to vote on two popular initiatives that would lead to a radical upheaval of the current system (Crivelli 2004b and 2004c).
  • [20]
    A graph in the appendix to the report of the Conseil Fédéral of 15 September on managed care shows that annual expenditure of a member of an HMO is around 50 to 80% lower (depending on age) compared to that of a “traditional LAMal” insured person.
  • [21]
    Acknowledgements: For reading through this manuscript, we would like to thank the Reading and Editorial Committee of the Revue française des Affaires sociales, and Yves Martignoni at the Department of Public Health of the canton of Valais. A special thank you also goes to Herbert Känzig of the Federal Office of Public Health for his valuable help.


The Swiss health insurance system is a halfway-house between a social insurance and a private health insurance system. Insurance is compulsory and managed by a range of non-profit private health insurance companies (sickness funds) which officially compete with each other and cover an identical benefit package.
Insurance premiums do not depend on income and vary according to the canton in which the insured person lives and the average risk of the client base for the insurer (community rating). The model provides the citizen with total freedom in choosing the service provider and health insurer in the canton within which they live. Insurers may offer products with limited freedom of choice in return for a reduction in the insurance premium.
An appraisal of the regulatory role of this complex insurance model, which represents a compromise between market mechanisms and state regulation, and which is subject to a regressive financing, has shown that the objective of equity in access to health care has been broadly achieved whereas that of bringing cost increases under control has not. Major reforms of the system are being discussed in Parliament, but their successful outcome may well be called into question by the differences in the objectives of the main stakeholders and by the federalism and direct democracy that characterise the Swiss constitutional landscape.


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Iva Bolgiani
Luca Crivelli
Gianfranco Domenighetti [*]
  • [*]
    Iva Bolgiani: political scientist, University of Geneva and University of Lausanne. Luca Crivelli: economist, University of Lugano and University of Applied Sciences of Southern Switzerland.
    Gianfranco Domenighetti: economist and sociologist University of Lausanne and University of Lugano.
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This is the latest publication of the author on cairn.
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