Under Switzerland’s Health Insurance Act, cantons are required to provide individual premium subsidies to households that cannot afford their health insurance premiums. Conceived as a targeted social-policy instrument, these subsidies are increasingly reaching a broader share of the population.
In the canton of Vaud, for example, 37% of residents received premium subsidies in 2024, up from 27% a decade earlier. Much of this increase stems from a policy introduced in 2019 that limits health insurance premiums to no more than 10% of a household’s relevant income. Across Switzerland, the share of subsidy recipients rose from 27% to 30% over the same period.
The total amount of subsidies paid in Vaud increased by 82% between 2014 and 2024, while insurance premiums rose by 47%. Subsidies per recipient also increased, though more modestly, by 18%. The growth in subsidy spending therefore reflects primarily the expansion in the number of recipients rather than an increase in payments per person.
When more than one-third of the population receives premium subsidies, however, the program can no longer be viewed solely as a targeted anti-poverty measure. It not only absorbs an increasing share of tax revenues – 900 million Swiss francs in 2024, of which 588 million francs were borne by the canton of Vaud, representing roughly 5% of cantonal expenditures – but also weakens one of the key cost-containment mechanisms built into Switzerland’s health insurance system: the incentive to choose a higher deductible.
The Unintended Effects of Premium Subsidies
Individuals who opt for a higher deductible pay a larger share of their healthcare costs themselves. The deductible is designed to discourage excessive use of medical services. The higher the deductible, the stronger this effect – and the lower the insurance premium.
Premium subsidies, however, partially undermine this mechanism. By reducing monthly premiums, they create additional financial room that beneficiaries may use to purchase more comprehensive coverage, namely by choosing a lower deductible.
To be sure, deductible choices are heavily influenced by age and health status. Older individuals and those with chronic illnesses are more likely to prefer extensive coverage regardless of whether they receive subsidies.
Yet a recent study found that premium subsidies increase the likelihood of choosing a low deductible independently of age and health status. An additional subsidy of 100 Swiss francs per year raises the probability of selecting a low deductible by 5.4 percentage points.
And this choice has consequences for healthcare spending.
Another study shows that higher deductibles are associated with lower utilization of medical services. Importantly, much of the resulting cost reduction reflects actual changes in behavior rather than simply the fact that healthier individuals tend to select higher deductibles.
A More Targeted Approach
These findings suggest that premium subsidies should once again become more narrowly targeted. Cantons have considerable discretion in this regard, as they determine both eligibility criteria and subsidy levels.
Currently, entitlement to subsidies is assessed by comparing an insured person’s income with a reference premium. One possible reform would be to use the lowest available premium – typically associated with alternative insurance models such as Health Maintenance Organizations (HMOs) – as the benchmark for calculating subsidy eligibility.
Under such a system, anyone opting for more generous coverage would bear the additional cost personally.
A more targeted subsidy scheme would strengthen the program’s social-policy purpose while also underscoring a broader lesson: effective healthcare policy cannot focus solely on providers and the supply side of the system. It must also address the incentives facing patients themselves.
This article was originally published on June 22, 2026, on the CSS Blog.
