Switzerland – A Government Regulated Consumer Driven Healthcare System

By Zeena Johar, President – ICTPH

Having accomplished my PhD in ETH, Zurich I was always fascinated by the perfection of Swiss Healthcare System. Transitioning to India and my close involvement with Health Systems Research in our sub-continent allowed me an opportunity to closely reflect on the learnings the Swiss Healthcare System has to offer. In my attempt to better understand their healthcare system, two readings: 1) The Swiss Health System – Regulated Competition Without Managed Care by Uwe E. Reinhardt (JAMA. 2004; 292(10): 1227-1231) and 2) Consumer-Driven Health Care: Lessons From Switzerland by Regina E. Herzlinger, and Ramin Parsa-Parsi (JAMA. 2004; 292(10): 1213-1220) were of immense value. Through this post I summarise my learnings of a health-system which efficiently provides for universal healthcare requirements of its populace.

Switzerland with a population of 7.2 million (as in 2004) inhabitants reside in 26 cantons. Health is primarily a cantonal subject. The 1994 Health Insurance Law instituted the obligatory purchase by households of private health insurance coverage for a mandated, fairly comprehensive package of health benefits. With a network of 90 private insurance providers, three quarters of the population is covered by 15 large providers, one of which holds 15% of the market share.

The benefits of the compulsory insurance are tightly controlled. The premium is adjusted only for the enrollees’ canton, age and the urbanisation of their residence. The compulsory/obligatory health insurance as defined by the State can only be offered by an insurer complying with a not-for-profit structure.

Switzerland is the only developed country with a long-standing Consumer Driven Health Care (CDHC) system. CDHC combines free demand and supply, transparency and active governmental oversight; create a competitive market with increased efficiency, effectiveness, and access to care. Switzerland’s consumer-driven health care system achieves universal insurance and high quality of care at significantly lower cost than other employer-based systems and without constrained resources that can characterise government-controlled systems.

The positive impact achieved by their system may be attributed to its consumer control, price transparency of the insurance plans, risk adjustment of insurers, and solidarity. However, given the constrained demand by mandated benefits and supply by uniform prices and information about quality of providers almost non-existent offers an incomplete model of CDHC.

Despite their mandated benefits, compulsory policies may offer differentiating features, including high deductibles, health maintenance organisations (HMOs) closely managing access, and bonus plans rewarding enrollees, have a substantial impact on price. For example, average premiums in 2003 ranged from $119/- per month for a high-deductible policy to $159/- for an HMO and $199/- per month for a low-deductible plan. Supplementary plans are even more differentiated – for example, a nonsmoker option with savings of up to 20%.

Insurers vary the annual deductible (called franchise) from a mandated minimum of CHF 300/- to a legislated upper limit of CHF 2500/-. The Federal Government also regulates the maximum discount off the standard premium for the lowest deductible that can be offered to the insured for higher deductibles. In addition to the deductible, all insured individuals pay a coinsurance rate of 10% on all health care included in the standard package, up to a maximum of CHF 700/- per year.

Cantons provide tax-financed, means-tested subsidies to low-income individuals ensuring access to compulsory health insurance. In 2001, 32.7% of the insured received subsidies and nearly 19.1% of enrollee premiums for the obligatory health insurance were government financed.

Insurers can reject supplementary insurance applicants but are obliged to accept all applicants for compulsory insurance. Supplementary insurance prices may be adjusted for enrollee history, risk, and sex. These policies can be offered by the for-profit insurers as well.

The Federal Government oversees the financial solvency of insurers and their fees. The government also risk-adjusts compulsory insurers. Those with above average medical care costs receive transfers from those with lower-than average costs. The adjustment is based on the insurer’s deviation from the average medical costs for enrollees in 30 different age and sex categories.

Switzerland’s health care system maintains the status of the private sector insurers and a mix of public and private providers, granting the government authority to require the purchase of health insurance, mandate benefits, affect pricing, and transfer tax revenues to individuals to enable universal coverage.

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