Health insurance premiums: who are we kidding?

As you know, I am not really friends with social insurance. Not only do they encourage social laziness, but above all, they allow a multitude of intermediaries (like rich insurance companies) to prosper on the backs of the middle class.

Speaking of social security, I have mainly focused my articles so far on old age provision. I had highlighted the following scandals:

• From 1998 to 2015, one of the worst stock market periods, including two major bear markets, the Swiss Performance Index more than doubled the mediocre profitability of the minimum LPP rate
• From 1998 to 2021, the performance of the SPI is even more than four times higher than the minimum LPP rate
• By putting together a portfolio that meets the LPP criteria, a return of five percentage points higher than the minimum LPP rate provided for in the law should be obtained.

Organized flight

Today, I am focusing on the other major theft organized by insurance companies on the backs of the people: basic health insurance (LAMal). As for the LPP, this insurance is mandatory and paid for by wealthy companies under the complicit eye of the State. The premiums for this insurance have continued to increase for several decades and represent an increasingly large share of household budgets (14%). Economic and political circles justify this increase by the increase in health costs, itself linked in particular to the increase in life expectancy.

Health costs

To get to the bottom of this, I had fun compiling several data available from the Confederation. While we can see that health costs have been increasing regularly for many years (125% from 1999 to 2023), premium costs are increasing even faster (163% during the same period). Worse, this phenomenon accelerated after the crisis Covid, as can be seen below.

We remember that the government promised us that the measures put in place during the health crisis would not have an impact on premiums. This was indeed the case as long as the country was governed under the aegis of the "extraordinary situation" linked to Covid. This was all the more true since popular votes then threatened the government's plans. However, we note that costs continued to increase, and even more rapidly, during this period, reflecting the completely out-of-control expenses linked to the almost compulsory mass vaccination and the exponential increase in nose cleanings. Unsurprisingly, as a catch-up effect, premiums exploded, the crisis barely over, retrospectively undermining government promises.

Life expectancy

One of the arguments put forward for the increase in health costs, as for those of old-age pensions, is the increase in life expectancy. This has certainly progressed well over the period analyzed, but at such a modest rate (5% from 1999 to 2023) that it is barely perceptible on the graph. Of course, we understand that for an additional year of life, expenses do not increase linearly. The health costs of an 85-year-old are in fact five times higher than those of a thirty-year-old.

But is this determination to prolong life, which at this age is most often synonymous with dependency and dementia, worth it? Wouldn't the money be better invested in younger generations? For example, in preventing obesity and cardiovascular diseases? Or simply by not overwhelming them with bonuses that ruin their purchasing power? Paradoxically, there has been virtually no improvement in life expectancy since the health crisis, even though healthcare costs have exploded.

Costs relative to GDP

Another interesting element, although health expenditure is exploding, the increase in costs according to GDP remains rather measured (32% between 1999 and 2023). In other words, compared to the wealth of the country, the increase in expenditure is certainly perceptible, but absorbable over time, in any case much more than that of premiums payable by individuals (163% increase during the same period). Something to think about in relation to the distribution of costs...

Evolution of salaries

Moreover, if we compare this increase in bonuses with that of salaries, there is reason to wonder. Nominal salaries rose by only 30% during the same period, while shareholders of Swiss companies were enriched by 223%. Worse, real salaries, excluding inflation, have only increased by 12%. In fact, these have only been decreasing since the health crisis. It should be noted that health insurance premiums do not explain this recent drop in real wages. In fact, they are not taken into account in the consumer price index. This means that in reality purchasing power has deteriorated even more.

Since the Chinese virus, life expectancy has been falling or at least stagnating, real wages are declining and health insurance premiums are exploding. And yet, in Switzerland, we have been relatively spared from inflation compared to our neighbours.

Money gets lost along the way

As with the LPP insurance, we see that for the LAMal, it is impossible to justify such a waste of money by actual and truly useful needs. Premiums are increasing much faster than health expenditure. The latter themselves seem disconnected from the needs of the population and their effectiveness is more than questionable.

On the contrary, an incalculable number of intermediaries have for years built their business model on the LAMal. This mandatory state ecosystem has allowed them to build their fortune, with the more or less interested help of the political world. In Bern, there are 90 parliamentarians, from all parties, who lobby in the health sector. The center and the right defend the interests of insurance and the pharmaceutical industry, while the left defends (surprisingly) those of doctors.

For individuals, these arrangements between friends translate into a significant and increasing drain on their income, which is impossible to escape and on which they have very little return on investment. How can it be justified that a family with two children pays around CHF 12,000 per year in basic health insurance premiums, and almost never uses it, especially since dental costs are not even covered?

The obligation to take out insurance: a false good idea

The obligation to insure against health risks, as is the case for old-age risks with the LPP, is based on a good idea at its core: that of covering the entire population against these risks. However, this obligation fundamentally distorts the freedom of the market, even if the insured person has the choice between multiple health insurance funds or insurance companies (for the LPP).

This is one of the first things you learn in economics classes: prices are set according to supply and demand. By legally constraining the latter, it becomes inelastic: a price increase does not reduce the volume of sales. Turnover thus increases proportionally to prices, whatever the latter. And profits obviously follow the same logic.

The massive influx of money generated by the obligation to insure does not encourage providers in the health (and pension) sector to improve their operations or to innovate. Whatever they do, money comes in from all sides. And the more the premiums increase, the richer they become. They have inherited the goose that lays the golden eggs: the obligation to insure, for them, is the obligation of guaranteed earnings.