Extending Coverage to the Informal Sector: JLN Countries Exchange Lessons and Challenges with Indonesia

By Annette Ozaltin

Cross-posted from the Joint Learning Network

Six of Indonesia’s government ministries participated in a high level forum on September 30 - October 2, 2013 that seems to have broken a logjam on how to attain health coverage for households dependent on informal sector workers. The High Level Forum on Expanding Coverage to the Informal Sector, supported by the JLN, AusAID, GIZ, WHO and the World Bank, resulted in an agreement to implement pilots that will evaluate options in extending coverage to this population group. Supported by the JLN, representatives from peer countries that have grappled with similar issues participated as well, contributing to the knowledge and experience base for Indonesia’s policymakers and implementers.

In response to a direct request from the Indonesia Ministry of Health, the JLN Expanding Coverage Technical Initiative collaborated with the Ministry of Health, Ministry of Planning, and other development partners to convene 117 stakeholders for the High Level Forum in Yogyakarta, Indonesia. Key policymakers and implementers from the Ministries of Health, Planning, Finance, Home Affairs, Manpower and Transmigration, and People’s Welfare assembled for the first time to work on the issue of extending coverage to non-poor persons in the informal sector. 1 Representatives from social security and health insurance schemes, providers, universities, and local government also attended to discuss issues associated with identifying, enrolling, and financing coverage for this population. Members of informal sector associations (e.g., taxi drivers, street cart hawkers) were also present to share their first-hand experiences with and perceptions of health insurance.

Like many countries on the path towards universal health coverage (UHC), Indonesia is facing the “missing middle” problem: enrollment in health social security is high among low- and high-income groups but the informal sector often remains uncovered. As a first step in pursuing their UHC goal, many countries cover the poor through government-financed health insurance and cover formal sector workers predominantly under employer-based insurance schemes. The missing middle is often overlooked because of the relative difficulties in defining, targeting, and enrolling this population, and in financing their coverage in what is considered an efficient and equitable way.

The Government of Indonesia has initiated a social security reform process with the aim of attaining UHC by the end of 2019. 2 An estimated 32.5 million (61%) of paid informal workers 3 will not have insurance coverage in 2014 (not to mention their dependents), which is a significant gap in coverage that the country will need to close to achieve UHC and provide financial protection to this vulnerable sector. 4 The High Level Forum was an important step in determining how to address this coverage gap.

The JLN Expanding Coverage Technical Initiative provided inputs into the agenda of the High Level Forum and organized a panel with experts representing India, the Philippines, Rwanda, South Korea, Thailand and Vietnam, during which they shared the experience of their country on covering this hard-to-reach population. In addition to the other panelists, experts from the JLN member countries of India, the Philippines and Vietnam communicated lessons on enabling political and policy environments, financing mechanisms, and administrative procedures (e.g., targeting, revenue collection, and information and socialization).

Many hot topics were discussed over the course of the three day event, including:

  • Defining the informal sector. Participants recommended revisiting the definition of the informal sector to better describe the diversity of this population group and then clarify the definition across stakeholder groups.

  • Determining the boundary between the poor and near poor. The fluidity of the boundary between the poor and near poor was discussed, with recommendations for further review on how to distinguish those who should be fully versus partially subsidized.

  • Targeting and revenue collection. Mechanisms for targeting and collecting contributions from informal workers were identified as difficult and costly. Involving intermediary groups (e.g., charity foundations, professional associations, religious organizations) in premium collection was identified as a promising practice in Indonesia.

  • Evaluating different contribution mechanisms. Flexible payment options were discussed as important to accommodate the diverse and often remote population of informal workers. Different options for payment frequency and collection modality (e.g., branchless banking, mobile payments, village outreach, intermediary groups) have been successfully used by some subnational schemes in Indonesia and were recommended for further exploration.

  • Financing coverage through partial subsidies. Four different pathways were considered to fund the expansion of coverage to non-poor informal workers and their dependents, including unsubsidized contributions, full subsidization, subsidization for specific services only, or a mixed model. Based on key contextual factors in Indonesia, including the starting point of the health system, current coverage arrangements, and fiscal capacity, participants seemed to coalesce around a mixed model as having the greatest potential, whereby coverage is financed through both government subsidies and direct contributions from informal workers.

  • Carving out a role for local government. Given Indonesia’s decentralized structure, participants spoke of the importance of engaging local governments in both reaching informal workers and contributing to their premiums. Strong cooperation and harmonization of efforts between national and subnational levels was emphasized.

  • Building trust in the supply side. Supply-side investment was discussed as essential to ensure access to and availability of quality care. A commitment to strengthening the supply side was called for to ensure that informal workers see a return on their investment – their perceived value of health insurance benefits should be more than the cost of their premium.

  • Designing educational and social marketing campaigns. Participants discussed the importance of information and socialization efforts to raise awareness about the benefits of and options for coverage. Disseminating information through mass media and social media and conducting outreach through health workers or cadres of local scheme employees were recommended for consideration.

Through bringing together a diverse set of stakeholders, a major step forward resulted: the various ministries and institutions agreed to implement pilots to evaluate different approaches to extending coverage to the informal sector non-poor. Participants provided inputs on the objectives and design of the pilots, recommending testing different contribution amounts and payment mechanisms, exploring the role of intermediaries and local government, and evaluating different information and socialization techniques. Support for the pilots will be provided by AusAID and GIZ and details on their design will be solidified in the months ahead.

As Indonesia grapples with near-term health reform challenges such as regulation on employer premium contributions and consolidation of hundreds of insurance schemes, it is encouraging that the Government of Indonesia remains focused on their longer-term objective of covering this oft overlooked population group. The results from the pilots will provide information to fill the current data gaps regarding successful financing mechanisms and enrollment strategies and will build political consensus and facilitate decision making on eventual scale-up of promising pilot features.

Several publications on extending coverage to the informal sector are forthcoming, including a brief from the High Level Forum describing key challenges and promising approaches to covering the informal sector, country case studies describing different paths to reach this population, and a paper synthesizing the global evidence and documenting distinct approaches to closing the coverage gap.

Questions for Discussion:

  • Based on your country’s experience reaching informal sector workers, what is your advice to the Government of Indonesia?

  • Has your country engaged in pilots focused on the informal sector and the “missing middle?” What were the results?

References and Notes

  1. Health insurance for poor persons in the informal sector is generally covered by the government insurance scheme for the poor. 

  2. Road Map towards National Health Security, 2012 – 2019 (Peta Jalan Menuju Jaminan Kesehatan Nasional 2012-2019). 

  3. The informal sector is comprised of 73.2 million informal workers, of which 53.2 million are paid informal workers and 20 million are unpaid informal workers. Health insurance for unpaid informal workers is generally covered by the government insurance scheme for the poor. 

  4. Kementerian PPN/Bappenas, AusAID, GIZ. Policy brief: Expansion of Social Health Protection for Informal Workers in Indonesia - Main Challenges and Recommendations. September 2013. 

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