Universal Health Coverage and the Challenge of Informal Employment: Lessons from Developing Countries

The aim of the report is to review existing approaches and available policy options to improve access to health care services and financial protection against health shocks for informal-sector workers (ISWs). Along with their families, ISWs represent the majority of the population in many developing countries. The report reviews the definition and measurement of the informal sector and the literature on efforts toward its health insurance coverage. It also examines several country cases based on published and unpublished reports and on structured interviews of expert informants. Developing country efforts to expand health coverage are characterized by a common enrollment and financing pattern, starting with formal-sector workers and following with government-subsidized enrollment of the poor. Thus, ISWs are typically left behind and have been referred to as "the missing middle." They find themselves financially unprotected against health shocks and with limited access to quality and timely health care. ISWs are generally reluctant to enroll in insurance schemes, including social health insurance (SHI), community insurance, and other arrangements. Further, initiatives to enroll them in self-financed contributory schemes have generally resulted in adverse selection, as those with high anticipated health needs are more willing to pay and enroll than others. Successful initiatives to cover this population group are the ones where government has abandoned its expectations to derive relatively substantial revenue from it. Offering this group a benefits package that is relatively smaller than that of formal workers and charging them a premium that is only a fraction of that charged to formal workers is a strategy used by some countries to limit the need for public subsidies. While there is evidence that greater insurance coverage has improved access to health services for ISWs and their dependents, in several countries it has not yet improved financial protection for this target group. A broad set of reforms will be required to strengthen the supply side to ensure that additional public financing translates into improved coverage for ISWs.