Health-care financing options for informal sector operators
In low-income countries, with a large informal sector, traditional health insurance models may struggle to achieve sufficient risk pooling to accommodate many informal sector workers making it difficult to establish stable insurance pools. (Photo: Pexels)

THE informal sector plays an outsized but unappreciated role in our economic development.

According to the Statistical Institute of Jamaica, as of July 2020 approximately 12.3 per cent of the employed labour force in Jamaica was engaged in the formal sector, while around 50.7 per cent were employed in the informal sector. The remaining portion consists of self-employed individuals without paid employees and unpaid family workers. The informal sector in Jamaica includes various types of employment, such as creative arts, music and entertainment, street vending, informal manufacturing, agriculture, self-employed contractors, and domestic work, among others. These workers often face challenges in accessing social protection, including health-care coverage and other benefits provided with employment in the formal sector.

Many times, individuals in the informal sector lack access to traditional health-care financing options, thereby limiting their choices when an unpredictable health-care crisis occurs. For many, the lack of access to traditional health insurance and unpredictable and irregular income streams impairs their ability to access needed health care, especially when the level of care needed is unavailable within the public health-care system.

It is necessary, therefore, to have alternative health-care financing options for this large pool of workers to ensure more reliable access to appropriate health care. Because of lack of risk pooling and limited financial protection, traditional health insurance may leave many informal sector individuals with significant out-of-pocket expenses, deductibles, or co-payments, which can be unaffordable for low-income individuals. This limitation undermines the financial protection that insurance is intended to provide and ultimately undermine health equity.

The traditional health insurance model may not be the most suitable option for our informal sector workers due to several reasons:

1) Affordability: Traditional health insurance premiums can be costly and exceptionally so for individuals outside of a group or risk pool. Informal sector workers are often not within a formal group and tend to have unpredictable or low incomes. Paying regular insurance premiums may impose a significant financial burden on them, making it difficult to afford and sustain coverage.

2) Absence of mandatory health insurance coverage laws or provisions to protect the poor.

Insurance companies have no legal mandates to provide mandatory low-cost coverage for the poor and less financially secure. In the more established economies, governments step in to fill the void to expand access to patients. The Affordable Care Act (ACA) in the USA, also known as Obamacare, introduced certain regulations and provisions, including subsidies and tax credits to lower-income families and individuals, aimed at expanding access to affordable health insurance. Additionally, certain government programmes like Medicaid, Medicare, and the Children's Health Insurance Program (CHIP) provide affordable or free health insurance to eligible individuals and families with limited income. Such options do not exist in Jamaica currently.

3) Irregular Income and Unpredictable Healthcare Expenses: Informal sector workers typically experience irregular income streams and face unpredictable health-care expenses. Traditional health insurance plans often require regular premium payments, which may not align with the income patterns of informal sector workers. Additionally, these plans may have deductibles, co-payments, or coverage limitations that can be challenging for workers with unpredictable income and health-care needs.

4) Limited Coverage for Informal Sector Needs: Traditional health insurance models often focus on formal sector employments or affinity groups both of which more likely do not include informal sector workers. Furthermore, informal sector workers may have unique occupational health services that may not be covered in traditional plans.

5) Lack of Risk Pooling: In low-income countries with a large informal sector, traditional health insurance models may struggle to achieve sufficient risk pooling to accommodate many informal sector workers making it difficult to establish stable insurance pools.

6) Lack of Inclusive Provider Networks: Traditional insurance models often have limited networks of health-care providers. In low-income countries, where health-care infrastructure and provider capacity can be limited, insurance networks may not adequately cover essential services or specialists, further restricting access to care.

7) Administrative Challenges: Informal sector workers may face difficulties in navigating the cumbersome administrative processes associated with traditional health insurance. Filling out forms, submitting claims, and meeting documentation requirements can be burdensome, particularly for those with limited literacy or access to administrative resources.

8) Fragmented Health Care Access: Informal sector workers often face challenges in accessing health-care services due to factors such as geographic location, limited provider networks, or other socio-economic barriers.

Considering these challenges, alternative health-care financing models may be more suitable for informal sector workers. These models can be designed to accommodate the irregular income patterns, specific health-care needs, and administrative capacities of informal sector workers, providing them with more accessible and affordable health-care coverage. It's important to tailor the health-care financing approach to the unique circumstances and requirements of the informal sector.

Addressing the limitations of traditional health insurance requires innovative approaches to health-care financing and delivery that are contextually appropriate for Jamaica. It may involve exploring alternative models, such as community-based health financing, social health protection programmes, or public-private partnerships to overcome these challenges and ensure equitable and inclusive access to quality health-care services in Jamaica.

In future columns we will explore specific alternative health-care financing mechanisms that may be more suitable for the large pool of informal sector workers in Jamaica to ensure a more inclusive and equitable health-care environment.

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