Why are Premiums Rising Faster than Health Care Costs?

In 2015, the per capita costs in basic insurance of CSS clients stood at 3,613 Francs; ten years later, they amounted to 4,410 Francs. This increase of 797 Francs per person can be attributed to several factors, with the trends described in our report on the development of healthcare costs largely continuing. Physician services and medications, at 303 and 219 Francs per capita respectively, still account for the largest share of the cost increase, while costs in the inpatient sector continue to shrink. The data also shows that demographic aging explains only one-sixth of the cost growth, and that relative growth in younger age groups is significantly higher than among the elderly. Below, we examine some of the factors that explain these trends.

Over the long-term average, the share of costs attributable to outpatient medications in basic insurance is over 20 percent. Despite a slight upward trend due to the ongoing shift towards outpatient care (Ambulantisierung), this share has remained relatively stable (total spending on medication is unknown because medications administered in inpatient settings are not recorded separately). However, if a cost group’s share of total costs remains stable over the years, its contribution to cost growth must correspond to this share. A look at the data confirms exactly this: costs for medications dispensed by doctors and pharmacists rose by 158 Francs, or roughly 19.9 percent of the total 797 Francs increase. The reason for this cost increase is "new" medications that were added to the basic insurance benefit catalog after 2015. While the proportion of patients using "old" medications increased slightly between 2015 and 2024, these medications also became cheaper over the years. Had only the medications available in 2015 existed in 2024, medication costs today would presumably be lower than in the past. The situation is completely different for new medications: the share of recipients rose from zero to 21 percent, causing per capita medication costs to rise significantly. This means that the inclusion of new medications in the benefit catalog explains the entire cost growth within this cost group.

Another expansion of the benefit catalog during the period under review was the regulatory change regarding psychological psychotherapy. Since mid-2022, psychological psychotherapists have been able to bill basic insurance directly upon a doctor's prescription. On the one hand, this facilitated access to such therapies; on the other, it changed the financing and tariff structure. The total growth in psychological psychotherapy services between 2015 and 2024 amounts to 53 Francs, with the increase accelerating significantly from 2022 onwards. Assuming that costs would have developed identically before and after 2021 without the regulatory change, the expansion of the benefit catalog triggered an additional cost growth of 25 Francs (for comparison: per capita costs for the much-discussed GLP-1 "weight-loss drugs" such as Ozempic and Wegovy increased by around 7 Francs in the same period). However, this growth is not distributed equally across all age categories. As can be seen in the chart below, psychological psychotherapy accounts for a large share of cost growth, particularly among younger insured persons up to the age of 45.

Regarding the benefit catalog, the regulatory change in psychological psychotherapy is not an isolated case. While part of the service expansion in basic insurance is attributable to novel therapies – such as new medications, diagnostic procedures, etc. – another part occurs through the inclusion of already existing treatments into the benefit catalog. This includes many services that were previously covered either by supplementary insurance or paid for out-of-pocket by patients. Consequently, a continuous shift in financing is taking place: the privately financed share is decreasing, while the collectively financed (solidarity-based) share is increasing. In 1996, basic insurance financed 30 percent of total costs in the healthcare system; by 2022, this had reached 37 percent. Simultaneously, the share paid out-of-pocket or financed by private insurance dropped from a total of 41.5 percent to 29 percent. Accordingly, health insurance premiums are growing faster in relative terms than healthcare costs, because they must finance an ever-increasing proportion of these costs. While insured persons receive continuously more benefits under basic insurance, they must also expect disproportionately rising premiums every year in return.

Rising healthcare costs are only attributable to a small extent to factors beyond our control, such as demographic change. The far greater part is determined by the expansion of the benefit catalog. On the one hand, medical care is constantly improving thanks to technological progress. However, this progress only impacts costs in basic insurance if the corresponding therapies are actually paid for by it. On the other hand, existing treatments are also being added to the benefit catalog, such as psychological psychotherapy, podiatry, or alternative medicine therapies. Viewed individually, these expansion steps may incur few additional costs, but their combined effect is substantial. It is important to bear in mind that every expansion of the benefit catalog is based on a political or regulatory decision. The costs of basic insurance – and thus the premiums – are growing because we, as a society, want this. Furthermore, it seems nearly impossible to remove services from basic insurance, even if they prove to be of little utility. Conversely, this means that if we truly wanted to curb premium growth in basic insurance, we would have to forego new therapies in the future, halt the shift of financing toward the general public, and/or remove services with low added value.