Statutory health insurance competition in Europe: A four-country comparison

Abstract

This article considers the potential for insurer competition to improve health system performance by strengthening purchasing. Economic theory suggests that insurer competition will enhance efficiency if: (1) people have free choice of insurer, (2) competition is based on price and quality rather than risk selection and (3) insurers have tools to influence health care costs and quality. The article assesses the extent to which these assumptions hold in Belgium, Germany, the Netherlands and Switzerland. It finds that health insurance market reforms in these countries have had mixed results in fulfilling these assumptions. In spite of significant investment in risk equalisation, incentives for risk selection remain. Consumer mobility is lower among older and chronically ill people, possibly due to close interaction between statutory and voluntary coverage. Although insurers in some countries increasingly have tools to enhance value, they may not always use them. The analysis suggests that the instrumental value of insurer competition rests on multiple assumptions that can only be upheld through frequently complex interventions often requiring elusive data. Making it work therefore requires action on several fronts, particularly to ensure incentives are aligned across the health system, and awareness of the political nature of some barriers to success.

Belgium: Enhancing the Cost Efficiency and Flexibility of the Health Sector to Adjust to Population Ageing

“…They slightly differentiate themselves on their offer for complementary insurance, which covers services such as optic and dental care and alternative medicines, and supplementary insurance, which covers certain copayments, mainly in hospital. Patients seldom change fund (Thomson et al, 2013).…”

“…Their large reserves of bonuses, accumulated in the period of generalised budget underspending in the late 2000s, could also undermine funds incentives for cost-control as funds could use them to offset future overspending (Court of Auditors, 2011). A potential downside is that reinforced financial incentives could increase funds' incentives to "select" members to lower costs, which are currently low because of the low level of financial risk borne by the sickness funds (Thomson et al, 2013). This should be countered by reinforcing the risk-equalisation scheme that adjusts funds' budgets for the risk profile of their members (for example, funds with older members receive larger budgets) but which only covers one third of their budget.…”

The Changing Role of Government in Financing Health Care: An International Perspective

“…Until recently, the federal government used a system of matching grants to encourage cantons to offer a minimum level of subsidy. In spite of this, there can be large differences in eligibility for subsidies and household premium costs across cantons (Thomson et al 2013). The other countries avoid the need for administratively complex and potentially inequitable subsidies by imposing a national contribution rate and linking contributions to income.…”

“…These efforts can result in increases, rather than decreases, in the differential payments (the original payment given to the insurer to cover someone minus the counterfactual costs if the government had covered the costs for the person), which would be counter to the objectives of the government in providing the risk adjustment to the insurer. The European health systems with competitive health insurance featured in this review-Germany and Switzerland-have significantly improved their risk equalization schemes in the last ten years and now have relatively sophisticated formulas that include health-based risk adjusters (Thomson et al 2013). In spite of this, insurers' incentives to select risks can be substantial and there continues to be (largely circumstantial) evidence of risk selection (van de Ven et al 2007) and hence, potential inefficiencies in risk pooling.…”

How Do Consumers Choose Health Insurance? An Experiment on Heterogeneity in Attribute Tastes and Risk Preferences

“…Recent policy reforms in the U.S. and in Europe have been directed towards more consumer choice (Cronqvist and Thaler, 2004;Coughlin et al, 2008;Thomson et al, 2013). The underlying reason is that consumers can best express their needs and preferences via their own choices.…”