Transfer Payment Systems and Financial Distress: Insights from Health Insurance Premium Subsidies

Christian Schmid, Nicolas Schreiner and Alois Stutzer

No 13767, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: How should payment systems of means-tested benefits be designed to improve the financial situation of needy recipients most effectively? We study this question in the context of mandatory health insurance in Switzerland, where recipients initially received either a cash transfer or subsidized insurance premiums (a form of in-kind transfer). A federal reform in 2014 forced cantons (i.e. states) to universally switch to in-kind provision. We exploit this setting based on a difference-in-differences design, analyzing rich individual-level accounting data and applying a machine learning approach to identify cash recipients prior to the reform. We find that switching from cash to in-kind transfers reduces the likelihood of late premiums payments by about 20% and of government debt collection for long-term missed payments by approximately 16%. There is no evidence for a negative spillover effect on the timely payment of the non-subsidized coinsurance bills for health services after the regime change.

Keywords: debt collection; health insurance; transfers; cash subsidies; in-kind transfers; financial distress (search for similar items in EconPapers)
JEL-codes: D14 G52 H24 I13 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2020-10
New Economics Papers: this item is included in nep-big, nep-hea and nep-ias
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Published - revised version published in: Journal of the European Economic Association, 2022, 20 (5), 1829-1858

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