Health insurance for the informally employed Lessons from developing countries

1. Health insurance for the informally employedLessons from developing countries Speaker: Ricardo Bitran Consultant, World Bank Institute

2. Research objective • In light of current drive to achieve universal health coverage (UHC): Review developing country experience with health insurance coverage extension for informal sector workers (ISWs). Identify challenges, draw policy lessons, and propose an agenda for further research. 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.

3. 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).

4. Informal employment represents a high share of non-agricultural employment in developing countries; and it has been on the rise in most developing and transition countries

5. Individual’s perspective: The decision to enroll in health insurance Accessibility to quality & prompt 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 Enroll in health insurance Out-of-pocket payments for health care $ Premium Accessibility to quality & prompt health care Informal sector individual and family Remain uninsured Out-of-pocket payments for health care

6. Government’s perspective: The decision to cover informal sector with health insurance • Financial costs • Enrolment • Health services Government’s decision to enroll informal sector in health insurance depends on: • Expected net costs • Costs of enrollment • Costs of health services • Expected net social benefits in terms of improved • Equity • Health status • Financial protection • Citizen’s satisfaction Enroll informal sector in health insurance • Social benefits • More equity • Better health • More financial protection • Satisfaction • Financial costs • Enrolment • Health services Government Keep informal sector uninsured • Social benefits • More equity • Better health • More financial protection • Satisfaction

7. 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 Benefits package Benefits package Adverse selection Services Services Services Premium High administrative collection costs Low enrollment The poor and vulnerable The non-poor formal sector The non-poor informal sector Health-related incentives to mis-represent income and qualify as poor Health-related incentives to exit formal sector and become informal

8. Country and region cases

9. 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.

10. 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) Urban Resident Basic Medical Insurance (URBMI) Urban Employee Basic Medical Insurance (UEBMI) Benefits Contributions Rural residents Formal sector urban workers Formal sector urban workers Children, students, elderly people without previous employment, informal sector workers, and migrants (in some cities)

11. High enrollment China Different premiums Government subsidization Different benefits

12. Brazil • 1988: 40% of population in informal sector • 1988: Shift from Social Health Insurance to National Health System.

13. 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 Benefits Contributions Poor (21%) Subsidized regime ISW (48%) Semi-Contributory Regime Formal sector workers (27%) Contributory Regime

14. 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 Benefits Contributions Poor (21%) Subsidized regime ISWs (48%) Semi-Contributory Regime Formal sector workers (27%) Contributory Regime

15. Chile • ISWs = 1/3 of labor force. • Chile’s relies on SHI and has reached UHC with two-tiered health system: Large public insurer Fonasa covers 80% of Chileans. 5 private insurers known as Isapres cover another 17%. 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.

16. Chile • SHI system with all having the right to same minimum benefits package with standardized coverage for 80 priority diseases. National Health Fund (Fonasa) Isapres Additional guaranteed contractual benefits Vouchers for private sector care Additional non-guaranteed benefits Additional non-guaranteed benefits AUGE benefits package AUGE benefits package AUGE benefits package Benefits Contributions Poor (26%) ISW & FSW (47%) Formal sector workers (27%) Fonasa Subsidized regime Fonasa Contributory Regime Isapre Contributory Regime

17. 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.

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 • 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

20. 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

21. 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: Some groups, including the poor, minority ethnic groups, and households living in disadvantaged areas are not required to make any contribution to SHI. 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).

22. 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. Source: Tram Van Tien (2012) Social Health Insurance in Vietnam: WBI Flagship Course.

23. 2.5% of VAT Ghana National Treasury National Treasury Government annual budgetary allocations 2.5% of VAT 2.5% of SSNIT contributions National Health Insurance Authority (NHIA) Contributions Donors and other contributors Donors and other contributors Surplus Fund managed by NHIC Accruals from surplus fund’s investments Social Security and National Insurance Trust (SSNIT) National Health Insurance Scheme (NHIS) Premium Payments Only a small fraction of ISWs have joined NHIS Providers Public (MOH) health care providers Private health care providers SSNIT contributions Health care services Beneficiaries Exempt individuals (Adults > 70 years; children < 18 years; pensioners; the indigent; pregnant women) ISWs Formal sector workers and their dependents affiliated with SSNIT

24. 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: 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.

25. References • 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. • Becker, K. F (2004). The Informal Economy. (SIDA, Ed.) (pp. 1-76). • Beckman, T (2012). Kenya_NHIF_Presentation, 1-36. • Bertranou, F (2007). Informal Economy, Independent Workers and Social Security Coverage in Argentina, 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 mercadolaboralcolombiano, 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.

26. References • CESDEM, & Inc, M. I (2008). RepúblicaDominicanaEncuestaDemográfica y de Salud 2007 [FR205], 1-584. • 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 • del Trabajo del Perú, M (2012). EL EMPLEO AUTÓNOMO EN EL PERÚ: ALGUNAS PROPUESTAS DE POLÍTICA. Boletin, 1-3. • DHS, M (2011). Cambodia Demographic and Health Survey 2010, 1-392. • Dror, D (2001). Reinsurance of health insurance for the informal sector, 1-7. • Dror, D (2002). ReaseguroSeguroEnfermedad Sector No Estructurado. WHO, 1-7. • Dror, D., & Jacquier, C (2001). Micro-Insurance: Extending Health Insurance to the Excluded. Asian Development Bank, 1-28. • eddean. (2004). Omslag.pmd, 1-76. • EMP/TRENDS, I. (2011). Global Employment Trends 2011, 1-107. • Europe, W. R. O. F (2010). Implementing health financing reform : Lessons from countries in transition, 1-425. • Fonasa. (2013). Solicitar la afiliación a Fonasa, 1-3. • Gasparini, L., & Tornarolli, L (2007). Labor Informality in Latin America and the Caribbean: Patterns and Trends from Household Survey Microdata, 1-43. • Gertler, P (2003). On the Road to Social Health Insurance: The Asian Experience. World Development, 26, 717-732. • 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.

27. References • Gonzalez, E (2008). Social Protection in the Philippines, 1-5. • Gosh, R (2011). Health Insecurities of Workers in Informal Employment, 1-17. • Gumber, A., & Kulkarni, V (2000). Health Insurance for Informal Sector: Case Study of Gujarat, 1-7. • 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. • Hsiao, W., & Shaw, P (2007). Social Health Insurance for Developing Nations. WBI Development Studies, 1-184. • Hussmanns, R (2005). Measuring the informal economy: From employment in the informal sector to informal employment, 1-42. • ICLS, 1 (2003). Resolution concerning statistics of employment in the informal sector. Fifteenth International Conference of Labour Statisticians, 1-14. • IIJ-UNAM. (2006). La incorporaciónobligatoria de l sector informal a los esquemas de la seguridad social básica, 1-39. • International Labour Office (2011). Statistical Update on Employment in the Informal Economy (pp. 1-13). • 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. • 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). • Losby, J., Else, J., Kingslow, M., Edgcomb, E., & Malm, E (2003). Informal Economy Literature Review (pp. 1-58). • Management, A (2007). ReformaPrevisional: ¿Quépasa con los Independientes?, 1-20. • Perticara, M., & Celhay, P (2010). Informalidad y PolíticasPúblicas en Chile, 1-33.

28. References • Peru, B (2011). El problema de la informalidad.ppt. BBVA Perú, 1-20. • PhilHealth, GTZ, ILO, WHO, & Bank, W (2007). Synthesis Report. Conference on Extending Social Health Insurance to Informal Economy Workers, 1-41. • Rappler. (2013). Government health insurance for vendors Philippines, 1-2. • Secretary, R. &amp (2002). Extending Health Insurance to Poor:, 1-49. • 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 • 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. • Tien, T (2013). SHI in Vietnam - case study, 1-35. • Vanek, J (2012). Role and importance of informal economy: The Report prepared by the ILO for the 90th session of the International LabourConf, 1-628. • Wagstaff, A (2007). Social Health Insurance Reexamined, 1-27. • Wagstaff, A (2013). Universal Health Care and Informal Labor Markets-Thailand. Policy Research Working Paper, 6116, 1-38. • Wagstaff, A., Lindelow, M., Wang, S., & Zhang, S (2009). Reforming China’s Rural Health System - ISBN: 9780821379820, 1-276.