Should the cost of Switzerland's health insurance be based on income?
As the cost of health insurance is set to increase again, some politicians in Switzerland are calling for the premiums to be based on wages. But is this system realistic in Switzerland?
While the exact prices of Swiss health insurance in 2024 will be known only in October, hikes are a certainty.
This year already, premiums rose by an average of 6.6 percent nationally, although in some regions, they exceeded 9 percent.
Consumer groups and elected officials alike have been pointing out that the ever-increasing cost of the obligatory health insurance (KVG in German, and LaMal in French and Italian) is a big financial burden for many households — especially in view of other concurrently rising costs, like those of housing and electricity.
What is the current health insurance situation?
Since 1996, when the Federal Health Insurance Law, mandating health insurance coverage for everyone in Switzerland, went into effect, the amount of individual premiums is calculated independently of income, and is based only on age, place of residence, insurer and chosen insurance model.
This means that everyone, rich, middle-class, or poor, pays the same premium within the parameters mentioned above.
Clearly, this is system means that people who earn median or lower than median salaries spend a higher portion of their income on health insurance than their wealthier counterparts.
A study conducted by KOF Economic Institute found that “for the financially most heavily burdened households" the share of healthcare costs could reach nearly 30 percent of their income, while for the wealthier ones, that proportion was 5 percent.
An “average” household spends 10 percent of its earnings on healthcare costs, KOF reported.
Push for income-based premiums
Given this unequal distribution of financial burdens, some political officials are calling for changing the current system, basing it on personal or household income instead — the higher the earnings, the higher the cost, and vice-versa.
Interestingly, this is a rare issue that unites parties on the opposite sides of a political spectrum.
In an interview with NZZ am Sonntag, Green Party politician Bernhard Pulver called the current system “anti-social”, saying that premiums should be income-based.
The same message is echoed by Bern's Health Minister Pierre-Alain Schnegg, who belongs to the right-wing Swiss People’s Party.
According to him, “income must absolutely be taken into account” when setting insurance premiums.
Does this idea have a chance of succeeding?
Even though it has been making rounds — and gaining support —in various political circles, its implementation doesn’t seem likely.
The current system is widely thought to be “fair and balanced”, according to Lukas Engelberger, president of Cantonal Health Directors Association, who said Switzerland’s approach to healthcare insurance “is effective”.
The Federal Council too is against this idea, arguing that the current system is “already income-based,” because low-earners are eligible for government subsidies if health insurance premiums exceed 8 percent of their revenue.
Another point the government makes is that the system in place is based on solidarity — the idea that all insured people form a group.
You can think of this in terms of a huge pot to which each resident of Switzerland makes a contribution (that is, premium payments), so that in an emergency there are enough resources available to give someone the help they need when they need it.
READ ALSO: How the Swiss health insurance system is based on solidarity
If the present approach were to change, however, and become income-based, it would be difficult to maintain the solidarity component which, according to officials, has proven its worth.
What would have to happen to change the system?
Like all the other changes in Switzerland, this too would have to go through the democratic process.
Popular initiatives, which are citizen-driven proposals to reject or modify an existing law, require 50,000 valid signatures on a petition to get on the ballot.
Then, it would have to be approved by majority of voters and cantons.
So if the supporters of the change want to pursue this issue, they need to be patient.
Are there other proposals being debated to deal with high health insurance costs?
This is an on-going discussion in Switzerland, with various suggestions being brought up time and again.
The two latest ones involve freezing of premiums and scrapping the obligation to buy health insurance altogether.
You can find information about both here:
Why a Swiss consumer group demands the ‘freezing’ of health premiums
Should Switzerland abolish its obligatory health insurance scheme?
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While the exact prices of Swiss health insurance in 2024 will be known only in October, hikes are a certainty.
This year already, premiums rose by an average of 6.6 percent nationally, although in some regions, they exceeded 9 percent.
Consumer groups and elected officials alike have been pointing out that the ever-increasing cost of the obligatory health insurance (KVG in German, and LaMal in French and Italian) is a big financial burden for many households — especially in view of other concurrently rising costs, like those of housing and electricity.
What is the current health insurance situation?
Since 1996, when the Federal Health Insurance Law, mandating health insurance coverage for everyone in Switzerland, went into effect, the amount of individual premiums is calculated independently of income, and is based only on age, place of residence, insurer and chosen insurance model.
This means that everyone, rich, middle-class, or poor, pays the same premium within the parameters mentioned above.
Clearly, this is system means that people who earn median or lower than median salaries spend a higher portion of their income on health insurance than their wealthier counterparts.
A study conducted by KOF Economic Institute found that “for the financially most heavily burdened households" the share of healthcare costs could reach nearly 30 percent of their income, while for the wealthier ones, that proportion was 5 percent.
An “average” household spends 10 percent of its earnings on healthcare costs, KOF reported.
Push for income-based premiums
Given this unequal distribution of financial burdens, some political officials are calling for changing the current system, basing it on personal or household income instead — the higher the earnings, the higher the cost, and vice-versa.
Interestingly, this is a rare issue that unites parties on the opposite sides of a political spectrum.
In an interview with NZZ am Sonntag, Green Party politician Bernhard Pulver called the current system “anti-social”, saying that premiums should be income-based.
The same message is echoed by Bern's Health Minister Pierre-Alain Schnegg, who belongs to the right-wing Swiss People’s Party.
According to him, “income must absolutely be taken into account” when setting insurance premiums.
Does this idea have a chance of succeeding?
Even though it has been making rounds — and gaining support —in various political circles, its implementation doesn’t seem likely.
The current system is widely thought to be “fair and balanced”, according to Lukas Engelberger, president of Cantonal Health Directors Association, who said Switzerland’s approach to healthcare insurance “is effective”.
The Federal Council too is against this idea, arguing that the current system is “already income-based,” because low-earners are eligible for government subsidies if health insurance premiums exceed 8 percent of their revenue.
Another point the government makes is that the system in place is based on solidarity — the idea that all insured people form a group.
You can think of this in terms of a huge pot to which each resident of Switzerland makes a contribution (that is, premium payments), so that in an emergency there are enough resources available to give someone the help they need when they need it.
READ ALSO: How the Swiss health insurance system is based on solidarity
If the present approach were to change, however, and become income-based, it would be difficult to maintain the solidarity component which, according to officials, has proven its worth.
What would have to happen to change the system?
Like all the other changes in Switzerland, this too would have to go through the democratic process.
Popular initiatives, which are citizen-driven proposals to reject or modify an existing law, require 50,000 valid signatures on a petition to get on the ballot.
Then, it would have to be approved by majority of voters and cantons.
So if the supporters of the change want to pursue this issue, they need to be patient.
Are there other proposals being debated to deal with high health insurance costs?
This is an on-going discussion in Switzerland, with various suggestions being brought up time and again.
The two latest ones involve freezing of premiums and scrapping the obligation to buy health insurance altogether.
You can find information about both here:
Why a Swiss consumer group demands the ‘freezing’ of health premiums
Should Switzerland abolish its obligatory health insurance scheme?
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