Growing importance of capitation in Switzerland

Since its liberalization the Swiss health insurance market has shown risk selection activities of the insurance funds, which call for risk adjustment. Because risk selection continues to be profitable under the current risk adjustment formula, fast growing HMO and PPO plans are (mis)used to attract good risks rather than to contain costs. For fear of being replaced by one centralised fund, social health insurers are themselves proposing improvements of the risk adjustment formula, to be applied to funds. The revised formula proposed in this paper, applicable among funds for risk adjustment and to gate-keeping models to calculate fair capitation, explains 12.4% of the variance of health care expenditure, halves profits from risk selection, and uses only the (few) data that are available in Switzerland.