20th anniversary of the Swiss Federal Health Insurance Act – is it worth celebrating?

Daliah Kremer/Alice Fiorentzis, null

Rapidly increasing costs, unfair subsidies and reduced benefits. All these factors made it necessary to introduce a new Federal Health Insurance Act (KVG) in 1996. It is a law which to this day makes feelings run high among the Swiss population. What are the positive aspects of the KVG? What issues are still unresolved? A provisional appraisal to mark the 20th anniversary.


About 60 per cent of OKP is financed through premium income. The remaining approximately 40 per cent is funded through cantonal and federal taxes. Outpatient costs are financed exclusively through premiums. The cantons take on a bigger burden than the federal government because they finance at least 55% of inpatient costs. On the other hand, the federal government funds a large percentage of premium reductions. In 2014, a total of 22 billion francs was borne by premium payers and 16 billion was borne by taxpayers.

Virtually no other topic generates more headlines: 200 different media reported on the healthcare system as many as 23,000 times in 2015. Health-related issues are also regularly voted on at the ballot box. 13 initiatives have been voted on since the introduction of the KVG. This accounts for 20 per cent of all initiative votes. Neither taxes, immigration policy, old age and survivors’ insurance (OASI) nor energy-related issues make Swiss people’s blood boil more intensely.

This great interest is hardly surprising as we all use the healthcare system. Contact with doctors, pharmacies, hospitals and health insurance companies is a lifelong companion and confronts us with lots of questions. Is the cheaper generic medication really just as good as the more expensive original preparation? Is an MRI necessary or do I just need some ointment to relieve the pain? Would I prefer a lower health insurance premium or an unrestricted choice of doctor?

Solidarity is a long-standing tradition

The principle of solidarity is another issue which is regularly debated: why do people who lead a healthy lifestyle and therefore generate lower medical expenses pay the same amount as those who obviously damage their health? Even though it was only with the introduction of the KVG that the principle of solidarity was properly institutionalised, there is a long-standing tradition of it in Switzerland. To demonstrate this, it is necessary to look back to the 19th-century industrial revolution which greatly changed Swiss society. More and more people were employed in factories. Workers were increasingly exposed to the risk of illness, accident and disability. Private and company assistance funds compensated ill persons for their loss of income and paid for their treatment costs, albeit only on a modest basis. They financed themselves from voluntary employee contributions. That is how the principle of solidarity between healthy and ill persons was established.

The Zurich Cantonal Councillor – and from 1902 Federal Councillor – Ludwig Forrer was responsible for an important milestone where solidarity was concerned. The “Lex Forrer”, which was named after him, envisaged creating a public and private health insurance system based on the German model. One component was compulsory health insurance for individual occupational groups, first and foremost for industrial workers. The bill initially failed to pass and was only enshrined into law in 1912, but it made a clear impact: shortly before the KVG came into force in 1996, 97 per cent of the Swiss population already had health insurance.

1996 – paving the way for a new KVG

The course was set for the new Federal Health Insurance Act in the early 1990s. Between 1960 and 1990, there was an eightfold increase in healthcare costs, whereas other costs only doubled over the same period. Health insurance companies felt constrained to cut benefits. The ill paid more than the healthy, women more than men, and the old more than the young. Since insurers were allowed to reject customers, elderly or ill insured persons had no chance of changing to a different insurer. At that time, government subsidies were paid to health insurance companies in the form of per-capita contributions and not according to a needs-based approach as is now the case. This meant that the funding also benefited the well-to-do, who would not have actually needed it. All of these facts paved the way for a new Federal Health Insurance Act. The aim was for it to increase solidarity among insured persons, to guarantee high-quality medical care and to curb benefit costs.

Since 1996, insured persons have been able to influence their premium by choosing their deductible. Everyone is subject to the same conditions and has a free choice of health insurance company. Risk compensation ensures fair competition within the new structures. In other words: in principle, insurers with a high percentage of young and male insured persons pay for insurers with lots of elderly and female insured persons.

Responsibility rests on many shoulders

The KVG stipulates that responsibility must be shared between the health insurance company, the canton and the federal government. The health insurance companies assume 100 per cent of outpatient costs and a maximum of 45 per cent of inpatient costs. Insurers are obliged to negotiate agreed rates with all licensed outpatient service providers and hospitals with a service mandate. Income from premiums must cover the total costs. If healthcare costs increase, so do the premiums.

In the Swiss healthcare system, the cantons are responsible for ensuring security of supply. They are also responsible for hospital planning and help to finance the hospitals. In most cases, the cantons are also the owners of the public hospitals.

The federal government, on the other hand, is responsible for health insurance oversight and approving the health insurance premiums, among other things. The Federal Council also regulates the licensing of doctors.

Only two reforms in 20 years

In the 20 years since the introduction of the KVG, a mere two reforms have been implemented: the reform of hospital financing in 2012 and refinement of risk compensation in the same year. This improvement was unavoidable because just as “old” is not simply synonymous with “ill”, “young” is not simply synonymous with “healthy”. The new hospital financing policy in turn places a greater financial burden on the cantons. The aim is for it to encourage greater competition among hospitals and make them more efficient.

Many bills have failed to pass in recent years. It was initially surprising to hear that the Managed Care bill had failed to pass. Whereas the alternative insurance models (AIM) were popular right from the start – so far 60 per cent of all insured persons have been persuaded to sign up – citizens are unwilling to accept a law which would restrict their free choice of service provider. A majority of people are prepared to pay more for an unrestricted choice of doctor.

Inefficiencies are a burden on the system

So is the KVG anniversary a reason to celebrate? Not only. Two objectives have been met: the successful introduction of the solidarity system and a high-quality healthcare system. On the other hand, efforts to curb costs have failed. Annual expenditure on basic insurance has increased from an initial figure of 13.4 to 28 billion francs, which equates to a 3.8 per cent rise per year on average. It is not easy to answer the question as to why our healthcare system costs so much. Medical advances, prosperity, our aging society and the inefficiencies in the system – all of the above push costs up but they can also reduce them at the same time: for instance, faster operations due to new technologies. However, currently doctors benefit most from it. They save time thanks to new technologies but receive the same amount of money as before. Disincentives are another cost factor: radiology is a good example of this. A service which costs CHF 150 but for which bills of CHF 470 are issued. Given this profit margin, it comes as no surprise that the number of radiologists has doubled since 2003.

As far as prosperity is concerned, it has been observed in various countries that economic growth goes hand in hand with rising healthcare costs. Ever-increasing life expectancy is also driving up costs: care and nursing needs as well as chronic illnesses are on the increase. And this all costs money. However, there is no scientific consensus on how strongly each of these factors affects the respective costs in real terms. Nevertheless, if the inefficiencies in the system weren’t so grave, the first factors mentioned would also have a greater effect. For instance, there is no healthy competition in the hospital system. Moreover, many people are treated as inpatients when they could actually be treated as outpatients. Hospital costs could be reduced significantly in this area. Federalism also contributes to inefficiency: 26 cantons with 26 different healthcare systems. It is understandable that every canton is also intent on retaining its autonomy in relation to the healthcare system, but there is a price to pay for maintaining this system. After all, up to half a billion francs could be saved on medication too. Rigid price controls allow generic medication prices in Switzerland to be well above the global average. However, there are still no sensible solutions for these problem areas.

The KVG – a Swiss success story?

The book “Das KVG – eine Schweizer Erfolgsstory?” (The KVG – a Swiss Success Story) analyses the impact of 20 years of the Federal Health Insurance Act in Switzerland. 20 experts take stock and carry out a critical assessment of it. Thomas D. Szucs edited the book. He is Professor and Director of the Institute for Pharmaceutical Medicine at the University of Basel, Switzerland and has been the Chairman of the Board of Directors of the Helsana Group since 2010.

Published by the Orell Füssli Verlag, ISBN 978-3-280-05620-2


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