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Swiss Health Insurers Increase Premiums Despite Falling Costs

Summary:
It is a very interesting discrepancy: Health Care Costs Have Fallen By 0.6%  On one side, Swiss Statistics regularly publishes the consumer price index. In this statistic health care prices have fallen by 0.6% against the previous year: one major reason is the stronger franc that allowed for buying health equipment at lower price abroad. We should remind that Swiss Statistics uses these effective prices for inflation calculation and NOT the premiums paid to the insurers. Falling Health Care Prices in Switzerland(see more posts on health care, ). Insurers continue to raise premiums from Swiss Statistics The health insurance premium index (KVPI) has registered an increase of 3.0% for premiums in 2016 compared with the previous year, reaching an index level of 178.5 points (basis 1999=100). By means of the KVPI, the effects of the evolution of premiums on the growth of disposable income can be calculated. According to the Federal Statistical Office’s KVPI model calculation, rising premiums curbed the growth of the average disposable income by 0.2 percentage points in 2016.

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It is a very interesting discrepancy:

Health Care Costs Have Fallen By 0.6% 

On one side, Swiss Statistics regularly publishes the consumer price index. In this statistic health care prices have fallen by 0.6% against the previous year: one major reason is the stronger franc that allowed for buying health equipment at lower price abroad. We should remind that Swiss Statistics uses these effective prices for inflation calculation and NOT the premiums paid to the insurers.

Falling Health Care Prices in Switzerland

(see more posts on health care, )
Swiss Health Insurers Increase Premiums Despite Falling Costs

.

Insurers continue to raise premiums

from Swiss Statistics

The health insurance premium index (KVPI) has registered an increase of 3.0% for premiums in 2016 compared with the previous year, reaching an index level of 178.5 points (basis 1999=100).

By means of the KVPI, the effects of the evolution of premiums on the growth of disposable income can be calculated. According to the Federal Statistical Office’s KVPI model calculation, rising premiums curbed the growth of the average disposable income by 0.2 percentage points in 2016.

 While health care prices are apparently falling

Why do insurers raise premium when costs are falling?

At first sight, one could think that insurers just raise prices, while their costs are falling, obviously an abuse of their oligopoly. It might be a part of the issue.

But one other aspect is not price but quantity.  We all consume more health care, but costs for a single medicine might be unchanged for years.

The consumer price index does not capture the quantity consumed directly.

Swiss Statistics captures it indirectly with the weight:

Weight of Healthcare in 2009:  14.07%

Weight of Healthcare in 2016: 15.58%

Hence a difference of 1.5%. We have consumed 11% more health care services in 2016 than in 2009.

Health Care Weight in the Swiss Consumer Price Index 2009

(see more posts on health care, )
Swiss Health Insurers Increase Premiums Despite Falling Costs

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Consumers must pay higher premiums, while total costs for insurers are stable

Hence the weight adjustment (aka quantity consumed) justifies a premium increase of 1.5% per year, while costs per unit – as denoted in the CPI – have fallen by nearly 1% per year.

This implies that costs of insurers must have been mostly stable since 2009, if one can believe the data from Swiss Statistics. But who knows if the weight of health care in the Swiss CPI is really correct and that health care prices are really falling? Or if Swiss Statistics is just artificially keeping inflation rates low so that the Swiss National Bank can keep rates low for longer. Cheating with the CPI is easier than cheating with the insurance premiums.

Healthcare is taking a bigger and bigger pie of consumption

Healthcare is taking a bigger and bigger pie of consumption. We showed that in Switzerland prices per unit were falling (thanks to the stronger franc). But in the United States, both health care prices and quantity are rising.

For reference see my global comparison of CPIs or the newest post by  Charles Hugh Smith Healthcare: Inflation Hidden in Plain Sight

If we do not stop our behaviour as for health, then finally most of our consumption will be for health care.

Rising Health Care costs means the end of deflation

Finally we understand that this period of low inflation is only a temporary period. With the change in life expectancy and less working people per pensioners, prices must and will rise again.

For completeness here the full German data release from Swiss Statistics

Prämienwachstum 2015-2016 dämpft die Entwicklung der verfügbaren Einkommen um 0,2 Prozentpunkte

Neuchâtel, 22.11.2016 (BFS) – Der Krankenversicherungsprämien-Index (KVPI) verzeichnet für das Prämienjahr 2016 ein Wachstum von 3,0 Prozent gegenüber dem Vorjahr. Der KVPI erreicht damit einen Indexstand von 178,5 Punkten (Basis 1999=100). Anhand des KVPI lässt sich die Auswirkung der Prämienentwicklung auf das Wachstum des verfügbaren Einkommens schätzen. Gemäss der KVPI-Modellrechnung des Bundesamts für Statistik (BFS) beeinflussen 2016 die steigenden Prämien das Wachstum des verfügbaren Durchschnittseinkommens um 0,2 Prozentpunkte.

Der KVPI erfasst die Prämienentwicklung der obligatorischen Krankenpflegeversicherung und der Krankenzusatzversicherung. Die Prämien für die Krankengrundversicherungen sind 2016 um 4,8 Prozent gestiegen und erreichen damit einen Indexstand von 204,0 Punkten (Basis 1999=100). Diese Schätzung entspricht der Prämienentwicklung des gesamten Versichertenbestandes im Durchschnitt.

Die erhobenen Prämien für die Krankenzusatzversicherungen gehen 2016 um 2,9 Prozent gegenüber dem Vorjahr zurück. Dabei sinken die Prämien der allgemeinen Spitalzusatzversicherung um 13,1 Prozent, während jene der halbprivaten um 0,7 Prozent und jene der privaten Spitalzusatzversicherung um 0,6 Prozent ansteigen. Für die Zusatzversicherung insgesamt ergibt dies für das Prämienjahr 2016 einen Indexstand von 124,1 Punkten (Basis 1999=100).

Prämienentwicklung beeinflusst das verfügbare Einkommen
Die Entwicklung der Krankenversicherungsprämien verringert gemäss der BFS-Schätzung das potenzielle Wachstum des geschätzten verfügbaren Durchschnittseinkommens zwischen 2015 und 2016 um 0,2 Prozentpunkte. Wären die Prämien im gleichen Zeitraum stabil geblieben, hätte dieses Geld den Haushalten zusätzlich für Konsum- oder Sparzwecke zur Verfügung gestanden.

Prämienerhöhungen belasten – ähnlich wie höhere Steuern oder andere Versicherungsbeiträge – das Budget der privaten Haushalte. Zur Messung dieses Effekts bietet sich der Einfluss auf das verfügbare Einkommen an. Es entspricht dem Einkommen (Erwerbseinkommen, Zinsen, Renten, Rückerstattungen und Verbilligungen der Versicherungen und sonstige Einkommen) abzüglich der so genannten Transferzahlungen (beispielsweise Steuern, Sozial- und sonstige Versicherungsbeiträge) – also dem Betrag, der effektiv für Konsum- und Sparzwecke zur Verfügung steht.

Schweiz Krankenversicherungsprämien 2000-2016

Swiss Health Insurers Increase Premiums Despite Falling Costs

. - Click to enlarge

George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

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