Health insurance in Switzerland: do supplementary insurances harm competition in basic insurance?

Summary Many countries have introduced competitive mechanisms in health insurance, while at the same time introducing regulation to avoid risk selection and guarantee solidarity between the sick and the healthy. The "regulated competition" model is thus applied to basic health insurance in Switzerland, the Netherlands, Germany and Israel. It inspires the reform of health insurance in the United States. This article analyzes the functioning of such a system by considering the case of Switzerland, where we focus on the potential interference between the supplementary insurance market and the basic insurance market. The current organization of health insurance in France differs from that of the Swiss system. But the question of regulating the supplementary insurance market could be raised in the long run. Twelve years after the introduction of regulated competition, the results observed in Switzerland are disappointing. Although the premium differentials between insurance companies are very high, the proportion of policyholders who change insurance companies remains low. It is as if policyholders do not take advantage of competition. Our analysis shows that the low mobility of policyholders results from the coexistence of two health insurance markets subject to different rules: the basic insurance market, where risk selection is prohibited, and the supplementary insurance market, where it is allowed. Estimates show that the propensity to switch is much lower among supplementary insurance holders who perceive their health as not excellent. Since it is preferable for practical reasons to have one's basic and supplementary insurance with the same insurer, there is a de facto link between the two markets. The right to select applicants for supplementary insurance undermines competition for basic insurance.