Cantonal Differences in Health Care Premium Subsidies in Switzerland

We study health care premium subsidies in the Swiss cantons in order to understand the reasons behind the substantial cross-cantonal variation in households' premium load, i.e., the share of disposable income that is spent on premiums after the subsidy. Cantons' financial situation is of particular interest in this regard, because the premium subsidies aim at reducing the premium load for lower income groups in order to ensure universal access to health care at affordable costs. Thus, variation in premium load is meant to reflect underlying differences between cantons in health care and overall living costs, or different preferences of the electorate with regards to social policy, but not budgetary considerations of cantons. We develop a premium subsidy calculation model based on cantonal regulations and apply it to households in the Swiss Household Panel to assess the effect of cantonal budget tightness on households' premium load from 2004-2012. Our analysis is based on panel regression methods and a difference-in- differences model in order to take into account unobserved heterogeneity and simultaneity concerns. The results indicate that there is a significant and negative relationship between the budget of a canton and the premium load of households