einstitute.worldbank.org
Health insurance for the informally
employed
Lessons from developing countries
Speaker: Ricardo Bitran
Consultant, World Bank Institute
Research objective
•
In light of current drive to achieve universal health
coverage (UHC):
o
Review developing country experience with health
insurance coverage extension for informal sector workers
(ISWs).
o
Identify challenges, draw policy lessons, and propose an
agenda for further research.
o
For more details see Bitran, Ricardo. 2014. Universal
Health Coverage and the Challenge of Informal
Employment: Lessons from Developing Countries. In HNP
Discussion Paper. Washington, DC: The World Bank.
2
Methods
• Review of published literature.
• Review of grey literature.
• Written interviews of key health policy
informants from a sample of countries in
Latin America (Chile, Colombia,
Dominican Republic, Mexico, Peru), Asia
(Cambodia, Vietnam), and Sub-Saharan
Africa (Ghana, South Africa).
3
Informal employment represents a high share of nonagricultural employment in developing countries; and it
has been on the rise in most developing and transition
countries
4
Individual’s perspective: The decision to enroll
in health insurance
Enroll in health
insurance
$ Premium
Informal sector
individual and
family
Remain
uninsured
Accessibility
to quality &
prompt health
care
Out-of-pocket
payments for
health care
Accessibility
to quality &
prompt health
care
Out-of-pocket
payments for
health care
An individual’s decision to
enroll in health insurance
depends on many
variables, including:
•
•
•
•
•
•
•
•
•
Age
Gender
Current health status
Expected health status
Income
Education
Premium amount
Access to quality health
care if insured vs. uninsured
Out-of-pocket spending
(OOPS) when ill if insured
vs. uninsured
5
Government’s perspective: The decision to
cover informal sector with health insurance
Enroll informal
sector in health
insurance
Government
Keep informal
sector
uninsured
•
•
Financial costs
Enrolment
Health services
•
•
•
•
Social benefits
More equity
Better health
More financial
protection
Satisfaction
•
•
Financial costs
Enrolment
Health services
•
•
•
•
Social benefits
More equity
Better health
More financial
protection
Satisfaction
Government’s
decision to enroll
informal sector in
health insurance
depends on:
•
Expected net costs
o
o
•
Costs of enrollment
Costs of health
services
Expected net social
benefits in terms of
improved
o
o
o
o
Equity
Health status
Financial
protection
Citizen’s
satisfaction
6
Conceptual framework: a problem of incentives
in a segmented health system
What should be the
premium / How should
it be financed?
What should be the
benefits package for the
informal sector?
Benefits package
selection
 Low
enrollment
The poor and
vulnerable
Premium
 High
administrative
collection costs
The non-poor informal
sector
 Health-related incentives to misrepresent income and qualify as poor
Services
Services
 Adverse
Services
Benefits package
Benefits package
The non-poor formal
sector
 Health-related incentives to exit
formal sector and become informal
7
COUNTRY AND REGION CASES
8
Community Based Health
Insurance (CBHI)
• In Africa and Asia, CBHI has advanced
objectives of improved financial protection and
accessibility.
•
•
•
Yet Scaling up of CBHI has been slow and
population coverage remains low, excepting
Rwanda and Ghana.
Enrolment mostly voluntary, leading to adverse
selection.
CBHI not an effective solution to the problem.
9
China
•
•
•
•
Three separate health insurance schemes.
Improved accessibility
Some improvements in health status.
Not yet improvement in financial protection
New Rural Cooperative
Medical Scheme
(NRCMS)
Benefits
Urban Resident Basic
Medical Insurance
(URBMI)
Urban Employee Basic
Medical Insurance
(UEBMI)
Formal sector urban workers
Formal sector urban workers
Contributions
Rural residents
Children, students, elderly people
without previous employment,
informal sector workers, and
migrants (in some cities)
10
High enrollment
China
Different premiums
Government subsidization
Different benefits
Target population
Year
Risk-pooling unit
Enrollment,(%)
Total premium per person (¥)
UEBMIa
URBMIb
Formal sector urban
workers
2008
2010
City
City
80.7
92.4
1,443
1,559
Informal urban workers,
children, elderly, etc.
2008
2010
City
City
63.8
92.9
131
138
120 (200 in
80
2011)
60
(100 in
40
2011)
Government subsidy per person (¥)
0
0
Central government contribution (¥)
0
0
Individual contribution
Employer contribution†
2–3% of
2–3% of
salary
salary
6–8% of
6–8% of
salary (about salary (about
¥1,483–
¥1,483–
1,977)
1,977)
NRCMSc
Rural residents
2008
2010
County
County
90.0
96.6
96
157
120 (200 in
80
2011)
60
(100 in
80
2011)
0
0
0
0
Benefit design
Inpatient reimbursement rate (%)
Counties or cities covering general
outpatient care (%)
Counties or cities covering
outpatient care for major and
chronic disease (%)
Total reimbursement ceiling
67.0
68.2
43.8
47.9
37.8
43.9
Savings
accounts
Savings
accounts
12.5
57.5
29.1
78.8
Savings
accounts
Savings
accounts
61.6
82.7
63.0
89.4
n.a.
6 times
average
wage
n.a.
6 times
disposable
income
n.a.
6 times
farmers’
income
11
Brazil
• 1988: 40% of population in informal
sector
• 1988: Shift from Social Health
Insurance to National Health
System.
12
Dominican Republic
• ISWs = 57% of labor force.
• Family Health Insurance Law 87-01 (2001), created three
regimes with coverage for entire family:
• Contributory Regime (CR) for formal sector workers
• Contributory Subsidized Regime (CSR) for ISW
• Subsidized Regime (SR) for the poor.
• 3 regimes with same benefits, but only CR with public
providers.
• CSR scheme not yet implemented.
Same benefit package
Same benefit package
Same benefit package
Poor (21%)
ISW (48%)
Formal sector workers (27%)
Subsidized regime
Semi-Contributory Regime
Contributory Regime
Benefits
Contributions
13
Dominican Republic
•
•
•
•
•
•
About 10% of salary for health (employee 30%, employer 70%) with cap.
ISWs contribute % of minimum wage; gov. to subsidize employer’s % as in
CR.
Beneficiary identification system in place to identify the poor who join the SR.
Many of the poor ISW already covered by the SR (21% of pop.); CR covers
27% of pop.;  48% of pop. already covered by Family Health Insurance.
Obstacle in implementing CSR for ISW: difficulties in collection of
contributions.
Proposed solution:
–
–
–
End CSR
All poor ISW in SR
End of gov. premium subsidies for high income ISWs, who would then belong to the CR.
Same benefit package
Same benefit package
Same benefit package
Poor (21%)
ISWs (48%)
Formal sector workers (27%)
Subsidized regime
Semi-Contributory Regime
Contributory Regime
Benefits
Contributions
14
Chile
•
•
•
•
ISWs = 1/3 of labor force.
Chile’s relies on SHI and has reached UHC with twotiered health system:
o Large public insurer Fonasa covers 80% of
Chileans.
o 5 private insurers known as Isapres cover
another 17%.
o Remaining population covered by Armed Forces
or other systems.
Enrolment in SHI: contribution of 7% of his/her salary
or income to either Fonasa or an Isapre.
The indigent can get coverage from Fonasa (but not
from Isapres) without making any contribution.
15
Chile
•
SHI system with all having the right to same minimum benefits package with
standardized coverage for 80 priority diseases.
National Health Fund (Fonasa)
Vouchers for private sector care
Additional nonguaranteed benefits
Additional non-guaranteed benefits
AUGE benefits
package
AUGE benefits package
Benefits
Isapres
Additional
guaranteed
contractual benefits
AUGE benefits
package
Contributions
Poor (26%)
ISW & FSW (47%)
Fonasa
Subsidized
regime
Fonasa Contributory Regime
Formal sector workers (27%)
Isapre Contributory
Regime
16
Chile
•
•
•
•
•
•
2010: 36% of Fonasa beneficiaries classified as indigent.
Fraud reduction by Fonasa:  10% of its indigent affiliates were
ISWs under-reporting income.
To join Fonasa, independent workers to demonstrate
contributions to pension fund in 6 of last 12 months.
2018 on: all dependent and independent workers legally
obligated to contribute to the pension system, and other social
security benefits; total contribution to SHI to represent 21% of
worker’s declared income.
Isapre beneficiaries seeking care from public hospital are
electronically identified and either denied care or the hospital bills
the respective Isapre.
Individuals w/o coverage seldom denied care in public hospitals;
encouraged to join Fonasa.
17
Colombia
•
•
•
•
•
•
•
Country has SHI
1994: 2 regimes, contributory regime (CR) & subsidized regime (SR).
Initially 2 different benefits packages, smaller for SR, larger for CR.
Original plan: 2 benefit packages would become equal in 2000.
Targeting system for the poor through means test.
Significant evasion and elusion of contributions.
Reluctance of ISWs to enroll.
Larger benefit package
Smaller benefit package
Benefits
Contributions
Poor
Subsidized regime
ISW & FSWs
Contributory Regime
18
Colombia
•
•
•
•
•
•
•
Country has SHI.
1994: 2 regimes, contributory regime (CR) & subsidized regime (SR).
Initially 2 different benefits packages, smaller for SR, larger for CR.
Original plan: 2 benefit packages would become equal in 2000.
Targeting system for the poor through means test.
Significant evasion and elusion of contributions.
Reluctance of ISWs to enroll.
Larger benefit package
Smaller benefit package
Benefits
Contributions
Poor
Subsidized regime
ISW & FSWs
Contributory Regime
19
Colombia
• Recently, to reduce evasion and elusion, health payroll
contribution was linked to pension payroll contribution.
• But current president declared that both benefit packages
will become equal.
Larger benefit package
Smaller benefit package
Benefits
Contributions
Poor
Subsidized regime
ISW & FSWs
Contributory Regime
20
Vietnam
•
•
•
•
•
Informality very high in Vietnam: 75% of 46 million workers are ISW.
Health Insurance Law of 2008 mandates enrolment for all citizens with
SHI, Vietnam Social Security.
The 2008 Law envisioned that farmers would have SHI coverage by
2012 and remaining groups of the informal sector by 2014.
To promote enrolment in SHI:
o Some groups, including the poor, minority ethnic groups, and
households living in disadvantaged areas are not required to make
any contribution to SHI.
o Government subsidizes 70% of a flat premium for the near poor
and 30% for medium income farmers. High income farmers are
required to contribute the full premium.
While SHI beneficiaries can use both public and private providers,
public providers are dominant in Vietnam (e.g., 95% of all hospital
beds are public).
21
Vietnam
•
•
•
•
ISWs and formal sector workers with SHI coverage have the
same benefit package and official level of copayment (20% of
health care cost). Copayment for the poor is only 5%
There is no ceiling for copayments by SHI beneficiaries
By 2012, about 60% of ISWs were covered by SHI.
Problems:
•
•
•
Low quality of public primary health care network discourages
enrolment in SHI by some ISWs.
The 70% premium seems to constitute a financial barrier for
enrolment for the near poor.
SHI confers limited financial protection because of a lack of
ceiling for copayments and also because public providers
demand high informal payments.
22
Source: Tram Van Tien (2012) Social Health Insurance in Vietnam: WBI Flagship Course.
2.5% of VAT
National Treasury
Ghana
Government
annual
budgetary
allocations
Contributions
Donors and other
contributors
Accruals from
surplus fund’s
investments
2.5%
of
VAT
2.5% of SSNIT
contributions
National Health
Insurance Authority
(NHIA)
Surplus Fund managed
by NHIC
National Health
Insurance Scheme
(NHIS)
Premium
Only a small fraction
of ISWs have joined
NHIS
Social Security and
National Insurance
Trust (SSNIT)
Payments
Public (MOH) health
care providers
Private health care
providers
SSNIT
contributions
Providers
Health care services
ISWs
Exempt individuals
(Adults > 70 years; children
< 18 years; pensioners; the
indigent; pregnant women)
Formal sector workers and
their dependents affiliated
with SSNIT
Beneficiaries
23
Conclusions
•
•
•
•
•
•
•
•
•
No country has come up with effective ways of covering ISW while at the
same time collecting contributions from them.
Large amounts of public subsidies are required to enroll/cover ISWs.
A solution seems to be the adoption of smaller benefits package for ISWs
than for FSWs:
o
o
Otherwise incentives to become informal arise;
Also, government cannot subsidize a large benefit package for so many people.
Benefit package for the poor often smaller than for ISWs to prevent ISWs
from attempting to pass as poor.
Strong beneficiary identification systems required.
Mechanisms to keep the non-poor from getting free health care in public
facilities must be developed.
Methods for linking health contributions to other social contributions seem to
be effective in reducing evasion and elusion.
Covering ISWs with meaningful benefit package will take decades and vast
amounts of public subsidies.
Do not expect to collect much in the form of ISWs contributions to health.
24
References
1.
2.
3.
4.
5.
6.
7.
8.
A, A. and others (2012). Impact of national health insurance for the poor and the informal sector in low- and
middle-income countries: a systematic review, 1-110.
Administrator. (2004). IE.DelhiGroup7_2004_.doc, 1-17.
Ahmed, M (2011). Bringing the Informal Sector into the Fold. IMF Direct, 1-2.
Arhin-Tenkorang, D (2002). Health Insurance for the Informal Sector in Africa, 1-61.
Author, N (2003). Design of incentives for community based health insurance, oecd, 1-27.
Author, N (2007). Chapter 1: The Informal Sector: What Is It, Why Do We Care, and How DoWe Measure
It?, 1-22.
Banzon, E (2010, February 24). Philippines Case study:PhilHealthCoverage Experiences. New Delhi.
Bargain, O., & Kwenda, P (2008). The Informal Sector Wage Gap: New Evidence Using Quantile
Estimations on Panel Data, 1-28.
9. Becker, K. F (2004). The Informal Economy. (SIDA, Ed.) (pp. 1-76).
10. Beckman, T (2012). Kenya_NHIF_Presentation, 1-36.
11. Bertranou, F (2007). Informal Economy, Independent Workers and Social Security Coverage in Argentina,
12.
13.
14.
15.
Chile and Uruguay, 1-19.
Bitran, R (2005). Health Insurance Issues in East Asia. World Bank, 1-43.
Bosch, M., & Campos-Vázquez, R. M (2010). The trade-offs of social assistance programs in the labor
market: the case of the “Seguro Popular” program in Mexico. Centro de Estudios Económicos, 1-45.
Camacho, A (2013). Camacho 2011 Distorsiones del mercado laboral colombiano, 1-2.
Camacho, A., Conover, E., & Hoyos, A (2009). Effects of Colombia's Social Protection System on Workers
Choice Between Formal and Informal Employment. Documentos CEDE, 1-36.
25
References
16.CESDEM, & Inc, M. I (2008). República Dominicana Encuesta Demográfica y de Salud 2007 [FR205], 1584.
17.Charmes, J (2012). The Informal Economy Worldwide: Trends and Characteristics. Margin: The Journal of
Applied Economic Research, 6(2), 103-132. doi:10.1177/097380101200600202
18.del Trabajo del Perú, M (2012). EL EMPLEO AUTÓNOMO EN EL PERÚ: ALGUNAS PROPUESTAS DE
POLÍTICA. Boletin, 1-3.
19.DHS, M (2011). Cambodia Demographic and Health Survey 2010, 1-392.
20.Dror, D (2001). Reinsurance of health insurance for the informal sector, 1-7.
21.Dror, D (2002). Reaseguro Seguro Enfermedad Sector No Estructurado. WHO, 1-7.
22.Dror, D., & Jacquier, C (2001). Micro-Insurance: Extending Health Insurance to the Excluded. Asian
Development Bank, 1-28.
23.eddean. (2004). Omslag.pmd, 1-76.
24.EMP/TRENDS, I. (2011). Global Employment Trends 2011, 1-107.
25.Europe, W. R. O. F (2010). Implementing health financing reform : Lessons from countries in transition, 1425.
26.Fonasa. (2013). Solicitar la afiliación a Fonasa, 1-3.
27.Gasparini, L., & Tornarolli, L (2007). Labor Informality in Latin America and the Caribbean: Patterns and
Trends from Household Survey Microdata, 1-43.
28.Gertler, P (2003). On the Road to Social Health Insurance: The Asian Experience. World Development, 26,
717-732.
29.Giedion, U., & Bitran, R (2003, December 9). Health Insurance for Informal Sector Workers. (W. Bank,
Ed.)Protecting the Vulnerable: The Design and Implementation of Effective Safety Nets. Washington.
26
References
30.Gonzalez, E (2008). Social Protection in the Philippines, 1-5.
31.Gosh, R (2011). Health Insecurities of Workers in Informal Employment, 1-17.
32.Gumber, A., & Kulkarni, V (2000). Health Insurance for Informal Sector: Case Study of Gujarat, 1-7.
33.Hatt, L., Thornton, R., Magnoni, B., & Islam, M (2010). Extending Social Insurance fo Informal Sector
Workers in Nicaragua Via Microfinance Institutions: Results from a Randomized Evaluation. USAID PSP-One
Project, 1-80.
34.Hsiao, W., & Shaw, P (2007). Social Health Insurance for Developing Nations. WBI Development Studies,
1-184.
35.Hussmanns, R (2005). Measuring the informal economy: From employment in the informal sector to informal
employment, 1-42.
36.ICLS, 1 (2003). Resolution concerning statistics of employment in the informal sector. Fifteenth International
Conference of Labour Statisticians, 1-14.
37.IIJ-UNAM. (2006). La incorporación obligatoria de l sector informal a los esquemas de la seguridad social
básica, 1-39.
38.International Labour Office (2011). Statistical Update on Employment in the Informal Economy (pp. 1-13).
39.International Labour Office (2012). ILO 2012 Statistical Update on Employment Informal Sector, 1-28.
Jeong, H (2010). Expanding insurance coverage to informal sector population:, 1-15.
40.Kwon, S (2002). Achieving health insurance for all: Lessons from the Republic of Korea. ESS Extension of
Social Security (Social Security Policy and Development Branch. pp. 1-29).
41.Losby, J., Else, J., Kingslow, M., Edgcomb, E., & Malm, E (2003). Informal Economy Literature Review (pp.
1-58).
42.Management, A (2007). Reforma Previsional: ¿Qué pasa con los Independientes?, 1-20.
43.Perticara, M., & Celhay, P (2010). Informalidad y Políticas Públicas en Chile, 1-33.
27
References
44.Peru, B (2011). El problema de la informalidad.ppt. BBVA Perú, 1-20.
45.PhilHealth, GTZ, ILO, WHO, & Bank, W (2007). Synthesis Report. Conference on Extending Social Health
Insurance to Informal Economy Workers, 1-41.
46.Rappler. (2013). Government health insurance for vendors Philippines, 1-2.
47.Secretary, R. &amp (2002). Extending Health Insurance to Poor:, 1-49.
48.Tangcharoensathien, D. V., Tangcharoensathien, V., Patcharanarumol, W., MPH, P. I., Aljunid, P. S. M.,
Mukti, P. A. G., MPH, K. A., et al (2011). Health-financing reforms in southeast Asia: challenges in achieving
universal coverage. The Lancet, 377(9768), 863-873. doi:10.1016/S0140-6736(10)61890-9
49.Thornton, R., Field, E., Hyatt, L., Islam, M., & Solís, F (2010). Social Security Health Insurance for the
Informal Sector in Nicaragua: A Randomized Evaluation, 1-42.
50.Tien, T (2013). SHI in Vietnam - case study, 1-35.
51.Vanek, J (2012). Role and importance of informal economy: The Report prepared by the ILO for the 90th
session of the International Labour Conf, 1-628.
52.Wagstaff, A (2007). Social Health Insurance Reexamined, 1-27.
53.Wagstaff, A (2013). Universal Health Care and Informal Labor Markets-Thailand. Policy Research Working
Paper, 6116, 1-38.
54.Wagstaff, A., Lindelow, M., Wang, S., & Zhang, S (2009). Reforming China’s Rural Health System - ISBN:
9780821379820, 1-276.
28