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

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 receive 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 eight years of 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 persistently reduces the likelihood of late premium payments by about 20 issn = 1542-4766, doi = 10.1093/jeea/jvac011, eprint = https://academic.oup.com/jeea/article-pdf/20/5/1829/46393201/jvac011.pdf