As public insurance exchanges get off to a very rocky start, U.S. insurers and policy makers could learn from some European countries' recent experiences -- and problems -- in requiring and subsidizing citizens to purchase private insurance.
Belgium, the Czech Republic, Germany, the Netherlands, Slovakia and Switzerland all have exchanges that let consumers, often with public support for low-income earners, choose among health plans, or what Europeans tend to call sickness funds.
The experiences of Switzerland and the Netherlands are particularly relevant to the United State's policies, write Berlin University of Technology's Ewout van Ginneken, Harvard's Katherine Swartz and Radboud University's Philip Van der Wees, in last April's edition of Health Affairs.
Competitive insurance markets "by themselves will not contain costs" and "threats of tax penalties or fines for people who do not obtain health insurance are unlikely to achieve universal coverage," Harvard and other health policy researchers concluded after studying market rules and insurance exchanges set up in Switzerland in 1996 and the Netherlands in 2006.
The two countries' health policies both require people to buy private insurance, with income-adjusted subsidies and choices of standardized benefit plans that are mostly community rated. Both countries have guaranteed issue, but in Switzerland insurers can vary pricing by age with a 3:1 ratio.
In Switzerland, citizens are required to purchase individual insurance from plans sold in their home canton (quasi-states), and on average they have a choice from 59 insurers.
"It is noteworthy that premiums for the same basic plans also vary greatly within cantons -- an outcome that would not be expected in a competitive market," the researchers write. And even though people are permitted to switch plans as often as twice a year, the Swiss only do so at rates on average of 3 to 5 percent per year.
The Netherlands, meanwhile, launched a "managed competition" market for private insurance in 2006, requiring people to purchase insurance and requiring insurers to sell basic acute care policies.
Unlike Switzerland, the Netherlands lets people purchase as a group -- and 68 percent do so, such as people with diabetes who form collectives to get premium discounts. So far, the researchers found, there is no evidence that the use of group contracts has led to insurers selectively picking healthier, less-expensive enrollees, "but the existence of identifiable subpopulations such as people in a sports club raises concerns about future risk selection."
Generally insurers in the Netherlands are "clearly engaged in robust competition, resulting in relatively uniform premiums for the same plans," van Ginneken and colleagues write. But, as in Switzerland, "health care costs increased sharply in 2007 and have continued to rise," and one possible reason is "that insurers have limited ability or interest to pressure providers to reduce their costs because the government controls most payments to providers."
Looking at the Swiss and Dutch insurance markets, the researchers were left wondering about other unexpected findings. The Dutch market shows "robust premium competition," even though 94 percent of the population is insured by the five largest insurers -- while the Swiss market has substantial variation in premiums, even though the market is much less concentrated
While those markets' concentration dynamics could be good, bad or neutral for consumers, the researchers did find some problems with consumer subsidy policies -- offering some lessons for how the individual mandate and premium support may play out in the U.S.
"It took Switzerland and the Netherlands a while to realize that some people, especially those eligible for subsidies, had not chosen a health plan," the researchers write.
As premiums rose to meet growing healthcare costs in both countries, the number of uninsured, "those who choose not to enroll," increased, along with the number of insured consumers defaulting on premiums.
In Switzerland, some cantons automatically inform households of their eligibility, while others wait for consumers to apply -- and they also vary in asset criteria for subsidies and calculation methodologies for determining subsidy amounts.
"Such differences created disparities in subsidy amounts that, together with rising premiums, have led to defaulting by lower-income people," van Ginneken and colleagues write.
In 2006, the Swiss government allowed insurers to suspend coverage until defaulters paid outstanding premiums; in 2010, the federal law was amended to require cantons to guarantee premium payments to insurers for people who default, and subsidies are now sent directly to insurers.
Several Swiss studies found "a majority of defaulters had insufficient incomes to pay the premiums," and that "their incomes had been incorrectly estimated to be so high that they were ineligible for subsidies," van Ginneken and colleagues write. In early 2012, Swiss cantons began paying insurers 85 percent of unpaid premiums on behalf of people with serious financial problems.
The Dutch have seen similar problems. In 2009, the share of premium defaulters rose to almost 2 percent of the population, and about 60 percent of defaulters were receiving premium subsidies.
If subsidy-eligible consumers default on their premiums, the national Tax Office sends the subsidies directly to the insurer, and since 2011, the government has been automatically deducting contributions from defaulters' salaries. (Insurers may no longer suspend defaulters' coverage, as was permitted under the 2006 law.)
The key takeaway for the U.S., van Ginneken and colleagues write, is that policymakers should try to "make premium subsidies simple to administer, easy to apply for, and difficult to abuse."
Similarly, "states should be prepared to spend resources to determine why people do not obtain coverage and to craft responses that will help people enroll in a plan."