Indirect and Invisible Regulations Set in Stone: A Driving Force behind the Rise of Private Health Insurance in Sweden

• Author: John Lapidus
• DOI: 10.1177/0002716220964426
• Published date: 01 September 2020
• Date: 01 September 2020

964426ANN
THE ANNALS OF THE AMERICAN ACADEMYIndirect and Invisible Regulations
research-article2020
The Swedish welfare model is gradually losing its for-
mer characteristics. Notable is the extensive privatiza-
tion of provision and the emerging privatization of
funding, primarily through new and half-private ser-
vices in health care, education, and elderly care. The
clearest example of this trend is the rise of private
health insurance, which is now signed by every tenth
person of working age. This article points out different
types of regulations that have provoked the rise of pri-
Indirect and vate health insurance, and discusses types of regula-
tions that could potentially slow privatization. Further,
Invisible
this article analyzes three official welfare investigation
reports. These reports avoid the decisive regulations
they are supposed to discuss, and sometimes go against
Regulations Set directives to do so. I argue that regulations for private
health insurance have occurred without much debate,
in Stone: A
while every potential regulation against private health
insurance is very much disputed by industry interests
and many of the political parties.
Driving Force Keywords: private health insurance; privatization;
behind the Rise
regulation; Swedish welfare model; hid-
den welfare state
of Private
Health
From the early 1990s onward, Sweden has
privatized large parts of its welfare provi-
Insurance in sion. But the government has also privatized
welfare funding to a certain extent, mainly
Sweden
through new services in health care, education,
and elderly care. The clearest example of this is
the rapid rise of private health insurance, which
today is taken up by 680,000 Swedish citizens.
There are different types of private health
insurance in different countries, mainly substi-
By
tutive, complementary, and supplementary
JOHN LAPIDuS
(Thompson and Mossialos 2009). The Swedish
version is the supplementary one; that is, the
John Lapidus is a research fellow in the Department of
Economy and Society at University of Gothenburg. His
research interests include comparative welfare states.
He is the author of The Quest for a Divided Welfare
State: Sweden in the Era of Privatization (Palgrave
Macmillan 2019).
Correspondence: john.lapidus@econhist.gu.se
DOI: 10.1177/0002716220964426
ANNALS, AAPSS, 691, September 2020 243

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THE ANNALS OF THE AMERICAN ACADEMY
insurance covers services that are already part of the public commitment but the
policyholder is guaranteed quick access to these services. The policyholders, with
quick access, often go to the same clinic as the publicly funded patients. This is
so because most private clinics have agreements both with the private insurance
companies and with the public county councils (Lapidus 2019a).
The difference between the two queues—one publicly funded and the other
privately funded—to the same private provider is significant. The publicly
funded patients come under the public health guarantee, which stipulates a maxi-
mum wait of 3 days before seeing a general practitioner, then a maximum wait of
90 days before seeing a specialist and a maximum of 90 days before starting treat-
ment (Vårdanalys 2017). Private policyholders, on the other hand, are guaranteed
a maximum of between 10 to 15 days for the whole process. If the insurance
companies fail to live up to the time guarantees, the policyholder is reimbursed
for every day that passes.
The rapid rise of private health insurance represents a parallel health care
(Ethical Committee of the Swedish Society of Medicine 2020) in conflict with the
Swedish Healthcare Act, which states that health care shall be given due to needs
and on equal terms for all citizens. If a growing proportion of the population
steps out of the universal and common-to-all-citizens public health system, then,
by definition, it is no longer a universal and common-to-all-citizens public health
system (Lapidus 2019). Further, the support for a universal health system is
reduced when more and more people start to seek private solutions (e.g.,
Busemeyer and Iversen 2020), something that has consequences for the willing-
ness to pay taxes and for the general trust in the system (e.g. Rothstein 1998).
This article demonstrates how privatization of provision was a prerequisite for
the rapid rise of private health insurance. I examine the regulatory steps that ena-
bled the rapid rise of private health insurance, as well as the steps that would be
needed to slow it down. The article also reviews some official investigations on this
topic, finding that they avoided discussion of decisive regulations at all costs and
rather focused on less controversial and less important aspects of welfare reform.
A Regulatory Perspective on the Rise of Private Health
Insurance in Sweden
One of the most distinctive features of the Swedish welfare model was the public
monopolies providing publicly funded welfare services (Cox 2004; Premfors
1991; Pontusson 1987). The public sector had a special status in the sense that
public delivery was not allowed to be challenged by private interests (Blomqvist
2004). This so-called Social Democratic welfare model (Esping-Andersen 1990)
was built on compromises with the employers who, in times of rapid economic
growth, affirmed many aspects of the general welfare policy (Andersson 2000).
Eventually, however, the employers’ willingness to compromise came to an
end (Boréus 1994; Blyth 2001) and instead they turned against many elements of
the Swedish welfare model, not least the publicly provided welfare services. The

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INDIRECT AND INVISIBLE REguLATIONS
245
offensive coincided with the international wave of neo liberalism (Harvey 2005)
affecting also the European Social Democracy, which saw a significant shift in
political and economic thinking (Kitschelt 1994; Ryner 2002), often referred to
as the Third Way (giddens 1998).
One of the results was that Sweden, from the early 1990s, started to privatize
large parts of the provision of welfare services in sectors that were still supposed
to be publicly funded. This kind of decoupling of public funding and state deliv-
ery is found to be one of two main strategies of the so-called regulatory welfare
state (RWS; Benish, Haber, and Eliahou 2017), which is a polymorphic approach
focusing on “the dialectic relations between the regulatory state and the welfare
state as manifestations of the ever-expanding and diversifying dimensions of the
administrative state” (Levi-Faur 2014, 600).
What are the consequences of regulatory arrangements such as privatization
of provision in a welfare model like the Swedish one? Regulation as such does not
say anything about distribution and redistribution (Levi-Faur 2014), but this
specific regulatory arrangement was a prerequisite for the rapid rise of private
health insurance. It is an axiom: policyholders cannot use their insurance at pub-
licly run caregivers, and the rapid rise of private health insurance is therefore
dependent on the creation of a nationwide net of private providers at all levels of
health care (Lapidus 2019a; Norén 2008; Dahlgren 1994).
The rapid rise of private health insurance forms part of the hidden welfare
state (Howard 1999), which is one of three examples used to “demonstrate the
regulatory perspective on the welfare state” in a seminal article on the regulatory
welfare state (Levi-Faur 2014, 610). The hidden welfare state mainly refers to
welfare services that are not directly tax-funded, but which have indirect ele-
ments of public funding through various types of tax breaks. In some countries,
it implies large sums in lost tax revenue. One example is the united States, where
public health care spending is approaching northern European levels (Adema,
Fron, and Ladaique 2014) when adding the hidden welfare to the “visible wel-
fare” (Medicare and Medicaid), producing a sum that has been called the divided
welfare state (Hacker 2002; Lapidus 2019a).
The hidden welfare state brings new types of inequality and new types of wel-
fare relations. First, it is a sort of reverse means-testing, where the less well-off
are informally and sometimes formally excluded from the multitude of tax
breaks. Second, welfare relations shift from citizen-state to employee-employer.
The employers normally appreciate the goodwill obtained from being the ones
who, instead of the state but at the expense of the state, can offer welfare services
(Hacker 2002; Mettler 2011; Lapidus 2019a).
The emergence of a hidden welfare state requires a number of new regulations
and creates its own form of RWS. All states are regulatory to some degree (Levi-
Faur 2014), but one thing that characterizes the hidden welfare state is that many
of its regulations tend to be indirect or hidden and subterranean (Hacker 2004).
Since large segments of the population continue to prefer the traditional Swedish
welfare model (Svallfors 2011), the “advocates of change” (Pierson 1996) are
dependent on invisible and indirect regulatory changes. Further, because of a
general skepticism toward privatization among the population, politicians feel

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THE ANNALS OF THE AMERICAN ACADEMY
obligated to refer to the traditional Swedish welfare model even when their policy
recommendations are the exact opposite of that model (Cox 2004).
The gradual regulatory changes, however, reduce...