The Swiss and Dutch Health Insurance Systems: Universal Coverage and Regulated Competitive Insurance Markets
As the United States resumes debate over options for achieving universal health coverage, policymakers are once again examining insurance systems in other industrialized countries. More recent attention has focused on countries that combine universal coverage with private insurance and regulated market competition. Switzerland and the Netherlands, in particular, have drawn attention for their use of individual mandates combined with public oversight of insurance markets. This paper provides an overview of the Swiss and Dutch insurance systems, which embody some of the same concepts that have guided health reforms adopted in Massachusetts and considered by other states and by federal policymakers. The two systems have many features in common: an individual mandate, standardized basic benefits, a tightly regulated insurance market, and funding schemes that make coverage affordable for low- and middle-income families. Differences include degree of centralization, basis of competition among insurers, availability of managed care, and reliance on patient cost-sharing to influence care-seeking behavior.
As the United States resumes active debate over options for achieving universal health coverage, policymakers are once again examining insurance systems in other industrialized countries. In the past, discussion often focused on the merits or deficiencies of single-payer social insurance models, such as Canadian or French approaches, or public systems. More recently, attention has turned to countries that combine universal coverage with private insurance and regulated market competition. The systems in Switzerland and the Netherlands, in particular, have drawn attention for their use of individual mandates combined with public oversight of insurance markets. Prepared at the request of the Swiss and Dutch national governments, this paper provides an overview of the Swiss and Dutch health insurance systems with a focus on insurance markets. The health insurance systems in the Netherlands and Switzerland embody some of the same concepts that have guided the health reforms adopted in Massachusetts and that have been considered in other states and at the federal level. Differences as well as similarities in core policies thus provide potential insights for the United States and international opportunities to learn, as the countries pursue shared goals of universal access, improved quality, and improved cost performance.
* Universal coverage attained through a mandate that every individual purchase a basic insurance plan.
Building on a previous system of social and private insurance, the individual mandate in the Netherlands took effect in 2006. The Swiss have operated with a mandate since 1996. In both countries uninsured rates are low (estimated at about 1.5 percent of the population in the Netherlands and below 1 percent in Switzerland). An additional 1.5 percent is insured but behind on premium payments—a policy concern in both countries. Both countries subsidize premiums for low-income households, with about 40 percent receiving such premium assistance.
* National standards for basic coverage for private insurance.
In both countries, benefits are comprehensive in scope for acute care services (doctors, hospitals, prescription drugs, and lab/diagnostic tests). Insurance systems bring the working-age and elderly populations into a single pool.
Switzerland imposes much higher cost-sharing, including deductibles and coinsurance. The Netherlands has notably low cost-sharing, with additional protections for the chronically ill.
In both countries, the majority of the population buys supplemental policies, often purchased from the insurer providing basic coverage. Insurers providing supplemental coverage are subject to fewer (Netherlands) or no (Switzerland) risk-rating restrictions. This has had complex effects on competition and mobility of the insured in the supplemental insurance market.
* Tight regulation of basic health insurance markets, with requirements for open enrollment and community rating.
Both countries require that insurers accept all applicants and prohibit variations in premiums by health status—community rating, with guaranteed offer and renewal. The two countries differ markedly, however, regarding insurance market oversight, the way premiums are set, and the extent of risk equalization efforts across competing plans.
The Netherlands operates a national insurance market for its 16 million residents. Plans may operate on a for-profit or nonprofit basis. The insurance market is highly concentrated, with the top five plans accounting for 82 percent of enrollment. Plans typically offer coverage in all areas of the country and include all providers, although selective contracting is allowed. Children are covered in full through public funds. Premiums charged for adults represent 50 percent of the expected annual costs. In addition, plans receive allotments from a national risk equalization fund, financed by income-related contributions. The allocation uses a sophisticated range of risk factors. As a result of this process, the premiums facing Dutch adults when selecting a plan vary within a narrow range.
In contrast, the Swiss insurance system (7.5 million people) is highly decentralized, with plans operating and setting premiums at the canton level (26 divisions). In Switzerland, only nonprofit insurers may participate. The 10 largest of some 85 carriers insure 80 percent of the population. Swiss insurance risk equalization efforts adjust only for age and sex factors at the moment. Currently, Swiss premiums vary widely by health risks of insured pools across the country and within regions.
Since 2006, premium competition in the Netherlands has been vigorous, with carriers accepting initial losses under the new system to build market share. Both Dutch and Swiss insurance systems operate with relatively low overhead costs by U.S. standards: administrative and profit-margins account for about 5 percent of premiums.
* Risk equalization systems are intended to reduce incentives for insurers to seek healthier enrollees.
In both countries, funds are redistributed among insurers on the basis of measures of population need. The measures in the Netherlands have grown steadily more sophisticated and have proven better able to predict utilization than the simpler system adopted in Switzerland by the government. As a result, differences in insurer prices in Switzerland often reflect levels of enrollee risk, rather than relative efficiency. It is expected that the modification of the risk formula in 2012 will substantially reduce these differences.
* Use of managed care plans and selective provider contracting.
In Switzerland, 12 percent of the population is enrolled in HMOs or other managed care plans. However, savings have been limited because most of these enrollees are in the least integrated plans, and plans have no ability to negotiate prices with providers. Outside such plans, Swiss patients have open access to physicians and can self-refer to specialists. Swiss provider fees are generally set by negotiations between provider associations and insurance associations. Hospitals are mostly paid per diem rates, although a large fraction has already changed to prospective reimbursement. A nationwide diagnosis-related group (DRG) system (SwissDRG) will be introduced in 2012. Cantons finance more than 50 percent of hospital costs either directly or through DRGs.
The Netherlands has historically had a strong primary care system that required primary care referrals for specialized care. The 2006 insurance reform maintained this provision. It also enabled selective contracting and payment variations to improve cost and outcome performance. These arrangements are just beginning to emerge in the Netherlands. Hospital budgets and physician payments have historically been tightly regulated. To promote this development of payment innovation and more integrated systems, the scope of services for which plans may negotiate prices is gradually being expanded.
The Dutch health insurance system is a work in progress, with the 2006 universal coverage law just the latest in a series of gradual reforms overseeing regulated insurance markets. This process has required consensus and ongoing commitment by successive governments to a basic framework for health reform. The Swiss program has been in place since 1996. Some of its shortcomings, in areas such as risk adjustment and provider contracting, have proved difficult to address, in part because of split responsibilities for health care under Switzerland’s federal system of government. This may have important implications in considering the right balance of federal and state responsibilities in health reform in the United States.
Despite the challenges, both systems can boast many successes as well. Both have achieved universal health coverage among their citizenry, with patient choice, broad access, and low disparities. Residents in both countries enjoy among the longest life expectancies in the world (Switzerland is second only to Japan), and both systems have wide support of the citizenry. These achievements highlight the potential value of investigating the experiences of both countries.
The Swiss and Dutch health systems provide real-world prototypes for a regulated competitive model with multiple insurance plans, which many believe is the most likely route to universal coverage in the United States. Both countries’ systems are in transition, with ongoing reforms focused on improving cost and quality performance. Tracking and understanding their experiences—both challenges and successes—offers potential insights for U.S. policymakers.
R. E. Leu, F. F. H. Rutten, W. Brouwer et al., The Swiss and Dutch Health Insurance Systems: Universal Coverage and Regulated Competitive Insurance Markets, The Commonwealth Fund, January 2009
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