The impact of premium subsidies on health plan choices in Switzerland: Who responds to the incentives set by in-kind as opposed to cash transfers?

Abstract

Mandatory health insurance in Switzerland operates on a community-based premium scheme. This can lead to a high financial burden on lower income individuals. Until 2014, premium subsidies were paid as cash transfer or in-kind transfer, providing different incentives to individuals for choosing their health plans. Using a difference-in-differences strategy, the impact of in-kind subsidy transfers on deductible choice and the choice of a cost-saving health plan was evaluated to understand effect heterogeneity based on individual background characteristics. The results indicate that eligible individuals from in-kind transfer cantons in general are incentivized to choose a low deductible plan compared to eligible individuals from cash transfer cantons. This effect is found strongest among female, middle-aged and healthy individuals who have most flexibility in adjusting their health plan choices in response to the financial incentives. Additionally, eligible individuals are less likely to choose a cost-saving health plan compared to a cash transfer canton.