Open access peer-reviewed chapter - ONLINE FIRST

National Health Insurance, the Informal Sector, and Elements of a New Social Contract in the 2019 UHC Act of the Philippines

Written By

Maria Cristina G. Bautista

Submitted: February 2nd, 2022 Reviewed: February 15th, 2022 Published: May 10th, 2022

DOI: 10.5772/intechopen.103720

Health Insurance Edited by Aida Isabel Tavares

From the Edited Volume

Health Insurance [Working Title]

Prof. Aida Isabel Tavares

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This chapter explores the governance issues in the implementation of insurance coverage for the informal labour sector in the context of universal health coverage (UHC). The COVID-19 pandemic highlights the vulnerabilities of the informal sector that remain overlooked by employer health insurance and are not targeted by the government’s cash transfer programmes for the poor. While universal health coverage may, on paper, assure every one of the basic minimum health care packages, issues of capturing subsidies for and availing of similar no user charges for the poor may be a Gordian knot before universal coverage is achieved. The chapter interrogates this issue as follows—firstly, we present key health financing features of the Philippine efforts to cover the informal sector in the national health insurance programme; and secondly, based on a concept approach, we analyse the elements of a social contract that may enhance or break down relationships in informal sector health insurance—with the market, bureaucratic and networks in health systems. Implications are drawn on the design of institutional arrangements to capture subsidies, contributions, and provider payments as part of a post-pandemic new normal of greater health security through the financing of health in the context of a social contract.


  • informal sector
  • health insurance
  • Philippines
  • universal health coverage
  • new social contract

1. Introduction

This chapter examines health insurance systems from the perspective of how health insurance access can be expanded in environments characterised by high levels of informality in employment, relative unaffordability of premiums, low benefit or service levels, revealed preference for private health care, and high inefficiencies in the management of social health insurance funds. This type of environment is prototypical not only for the Philippines but for other low to middle-income countries. Informal labour markets present a challenge to health insurance systems as there is no employer to co-share premium payments, nor are they adequately covered in government subsidies extended for those considered poor through the means test. It is this gap that is often cited as ‘the missing middle’ in social health insurance systems’ [1].

Assessments of health coverage for the informal sector examine demand and supply-side issues peculiar to the sector, such as willingness to pay and ability to pay, premium levels, and collection structures, including cost-sharing modalities and fund sustainability. This chapter takes on the perspective of understanding the institutional context, the nature of coordination arrangements required to ‘fit’ the informal sectors’ conditions into social health insurance schemes or in reverse, structure systems to cater to social insurance schemes for the more unorganised groups.

Health insurance systems have two inherent features—information asymmetries and adverse selection. Yet social health insurance schemes often bypass these concerns in the development of schemes to cover the informal sector. Information asymmetry fosters moral hazard, whereby insurance status signals the choices on diagnostics or treatment and quality of services recommended by providers, described in standard textbooks [2]. Moral hazard happens when the insured takes more risks, such as unhealthy or incautious consumption behaviour (smoking, driving under the drugs, or alcohol influence) as a result of the risks being insured. Adverse selection is created when risk pools may be more attractive to sicklier individuals. Private health insurance is known to select lower-risk individuals. These features create the knowledge gaps to coordinate transactions and behaviour in the informal sector, thus limiting health insurance coverage. The promise of social health insurance or universal health coverage (UHC) is premised on greater financial protection in the face of health risks, a larger population coverage to spread risks, and wider sets of services or benefits covered. These pillars of UHC form its mandate, affecting interactions among stakeholders and thus creating operating pressures for programme implementation.

The Philippines launched its universal health care Act in 2020, following the approval of a fresh-minted law, Republic Act 11223 in February 2019. Implementation was set for January 2020, when the COVID-19 pandemic struck. This twin setback provides an opportunity for reflection on an institutional design that is more inclusive, efficient, equitable for greater health security.


2. Features of informal employment in the Philippines and the health insurance programme by PhilHealth for the informal sector

This section covers the estimates of the informal economy for the country, its features in terms of demographics, and some context.

2.1 The size and magnitude of informal employment

Using a proxy indicator1 based on its labour force surveys, in the absence of a direct survey, the Philippine’s Department of Labour and Employment (DOLE) representative to the Global Knowledge Sharing forum shared the statistics on the informal economy. Figure 1 shows that from 2008 to 2017, there was an average of 21.1 million workers in the informal economy (estimated by the number of self-employed without paid employees, unpaid family workers, and wage and salary workers in precarious employment). This comprised 56% of the total employment; while workers in the formal economy (estimated by the employer in own family farm or business, and the wage and salary workers with the permanent job or business) were 44% of total employment or an average of 16.1 million workers. The figures include the agricultural sector. This figure of 56% of total employment as informal is relatively lower than the 68.2% regional average, with agriculture and China included, for the Asia and Pacific [4].

Figure 1.

Size of informal employment. Source: Department of Labour and Employment (2018). Size of the Informal Economy in the Philippines [3].

Out of the 21.2 million workers in the informal economy in the Philippines, in the 10-year average, the self-employed accounted for 10.8 million (51%), followed by wage and salary workers in precarious employment with 6.5 million (31%), and unpaid family workers with a total of 3.8 million (18%). In 2017, there were 17.62 million workers in formal employment and 22.68 million in informal employment. In the 10 years, informal employment grew by 16.5%.

Informality in employment is expected to increase due to the restrictions on movement and outright lockdown of workplaces and cities due to the pandemic. The Asian Development Bank reported that by January 2021, 1.7 million wage and salary jobs were lost and the informal sector numbers rose to 435 thousand. This was just one year from the start of the pandemic in 2020 [5]. Further surges in infections and movement restrictions as part of pandemic control are likely to see rising numbers of people getting off formal work in favour of more flexible arrangements. While informal work numbers indicated that there are estimated to be comprising the second quintile of families in the distribution of income, working arrangements particularly in the sharing economy sector, such as Uber, Grab drivers and online sellers will see the expansion of the informal sector towards the middle quintiles.

2.2 PhilHealth: the national health insurance corporation and its informal sector programme

The country’s national health insurance program was instituted in 1995, with health funds carved out from the social security system for employed workers who paid in monthly contributions towards health, work accident, life insurance, and pensions since 1969. The Philippine Health Insurance Corporation (PhilHealth) absorbed and managed health insurance funds and progressively overtook other health insurance schemes, such as those for overseas Filipino workers for their families left behind, those covered by charitable agencies, and its name is synonymous with the national health insurance programme.

In the late 80s to 90s, Medicare, the health insurance programme attached to the private social security system (SSS), was involved in working with organised groups, mostly community groups, some on rotating savings schemes, who were enjoined to include health insurance coverage as a benefit to members. Technical assistance and material support for operating systems were provided by the Medicare programme, through the German aid programme (GTZ) called SHINE. When the Indigent Programme got into good momentum, many of the groups were incorporated in the LGU sponsorship, others closed.

PhilHealth instituted a voluntary contribution scheme in early 2012 targeting informal employment workers belonging to cooperatives or those organised through non-government organisations (NGOs) through the organised groups programme. The institution made various efforts to gather these groups, providing incentives to the savings associations, cooperative banks, or non-government organisations to collect funds from members, advance or loan members their premium payments in 2017. When group collectors were no longer willing to collect, organised member groups thus reverted to individually paying membership. It was reported in 2014 that dropout rates or regular non-payment of premiums were two-thirds of the membership in the individual economy scheme (as the informal sector programme has been renamed) [6].

PhilHealth has other member categories, aside from those in formal employment. The ‘sponsored member’ group is the largest, comprising 50% of membership in 2015. Sponsored members are those who enjoy full state or other state agencies’ subsidies for premiums. The biggest group of sponsored members belongs to the beneficiaries of the government’s conditional cash transfer (CCT) programme. In this cash transfer programme, a means test is utilised to target the deserving beneficiaries who are considered poor through 24 sets of proxy variables of income and well-being variables. Other sponsored members, including retirees and pensioners (aged over 60), are considered lifetime members and non-paying. Under the new UHC Act, sponsored members are fully protected by the no-balance-billing policy. This policy mandates that as long as there are public hospital wards available, these members cannot be charged with other expenses exceeding their PhilHealth benefits.

In 2015, sponsored members comprised 50% of PhilHealth membership, followed by 30% from the formal sector, 9.5% from the retirees or lifetime members. The balance, or around 10%, was from the informal and self-employed members. This share has gone up to 18% according to a 2020 study [7].

The idea of public-organised groups’ partnerships in funds collection has been pioneering [6]. The problems related to the informal sector programme of PhilHealth can be traced to the following—(1) relatively unaffordable premiums for its target informal sector groups; (2) lack of systems to verify membership with contributions and thus smoothen authorisations at the time of use; (3) low level of benefits and substantial out-of-pocket expenses; (4) learning by doing approach that lacked consultation and evidence-based studies which led to policy confusion for implementors; and (5) a complex financial management system which made funds tracking unwieldy. PhilHealth experienced fund deficits arising from its expansion of coverage to other sponsored members, diversification to non-hospital-based benefits, and other fund management issues. The fund which reported a surplus for much of its existence [8] suffered deficits when subsidies overtook member payments as the dominant revenue source [9]. Media reported on anomalies involving the PhilHealth Board’s authorisation of across-the-board payroll bonuses to employees. This was eventually ruled by the highest court to be illegal and without proper authorisation [10].

This assessment can apply to the whole PhilHealth programme; notwithstanding strides taken in continuing efforts to increase coverage and improve equity [11]. Benefits have been bolstered as well with the inclusion of other outpatient benefits, including costly procedures, such as dialysis and cataract operations, and catastrophic care packages, such as Z benefits [12]. These gains were obtained at the cost of financial weakening and other administrative setbacks, which caused delays in payment to providers and heightened the lack of trust and other credibility issues with stakeholders [13].


3. Conceptual underpinnings and related literature

In the light of the new UHC Act and the attention directed to the health sector due to the pandemic, a primordial question is raised. What is the appropriate governance structure framing a pluralistic health system often found in many low and middle-income countries (LMIC), such as the Philippines? From an economic organisation perspective, Williamson ([14], p. 673) viewed operationalising the concept of governance from ‘the lens of a contract (rather than the neoclassical lens of choice)’. This perspective views the unit of analysis concerning the organisation problem not in terms of the individual but of the transaction. According to the early (mid-twentieth century) institutional economist, J. Commons, a contract ‘must contain the three principles of conflict, mutuality and order’ ([14], p. 673). This section extends the analysis of the organisation of national health insurance as a social contract problem, examining the nature of transactions in health care, the practice of rules, regulations, source(s) of organisational stability, and the relations with stakeholders fostered.

Commons’ view of the contract contextualised in economic organisation lens as conflict-mutuality-order is similar to the impetus for the classical social contract. The work of early political philosophers, however, emanated from the perspective of individualsagreeing to a code of conduct, with the state’s role as arbiter and enforcer. Loewe, Zintl, and Houdret [15] went on to define a social contract as ‘the entirety of explicit and implicit agreements between relevant societal groupsand the sovereign (the government and any other actor in power), defining their rights and obligations toward each other’ (p. 3). Bautista, in 2020, explored the notion of a social contract in health care developed from the economic and socio-legal lenses [13]. It was quite convenient to examine the current state of the organisation,PhilHealth, as being in the ‘state of nature’ or anarchy in the classical social contract or Hobbesian sense.

In relation to the organisation of an inclusive national health insurance scheme in a pluralistic health system, one may say that it is a source of conflict. It is, thus, also a source of measuring power relations among societal groups or the political economy view. Bloom, Standing, and Lloyd [16] covered the political economy perspective and examined the issue of power emanating from knowledge gaps in different health care social contracts. From an economic perspective, the conflict that arises from the access and exercise of the state’s power over the public-private purse in health financing involves transaction costs. Transaction cost refers to the cost of bargaining, contracting, and monitoring [17]. Avoiding or minimising transaction costs underpins arguments, at both theory and policy levels, on the types of arrangements or governance systems to bring out societal or organizational outcomes. Mutuality lies in the consensus on the goals of efficiency, equity, and quality of care. Will the order established following the pandemic and the launch of the new UHC Act be one of breakdown or continuity?

From a conceptual point of view, a governance lens covers three alternative arrangements—markets, hierarchies, and networks (MHN). Hence, a transaction cost analysis can present the problem as an organisational and design issue. This framework has seen the wide application since the beginning of the new public management reforms in the 80s. It has informed changing managerial practice in health care in countries, particularly health systems similarly organised as the English National Health Service [18].

3.1 Market

This section investigates the nature of exchange or interactions in the health system. The starting point is considering interactions in health care or insurance as a transaction of exchange. The discussion on the features of health insurance, at the beginning of the chapter and from microeconomic theory, highlights the argument that health care and health insurance are unlike other commodities traded in the market. The nature of transactions in health insurance is such that premiums, or the price of insurance, and pay-outs, or claims, in the form of benefit services, are not equivalent to the price and quantity nexus in the normal demand (and supply) for goods [2]. Presently, under pandemic conditions, for instance, there is more certainty to the need for health insurance. However, insurance cover for a ‘sure thing’, given prevalence and transmissibility, will not be available, or when available will be quite costly. With uncertainty in the amount and timing of incomes, an inherent feature of informal work, health insurance may be unaffordable. If it is unaffordable, then there is a lack of effective demand (and supply is not interested in lower prices).

Willingness to pay for health insurance is between 1.18–1.39% of GDP per capita for a year’s contribution from the 16 studies included in a systematic review [19]. The lack of a general understanding of the benefits of health insurance has been the point of entry for randomised controlled trials involving the informal sector in Vietnam, China, and Philippines [20, 21, 22]. Observations were made on whether those who were provided with more information on health insurance, its benefits, and how to access them in the country would behave differently from those that did not receive such information. Other tweaks to the field experiments included having transport vouchers and/or having some handholding navigators who directed and even accompanied study respondents to the insurance offices. Evidence gathered from these studies indicated small improvements in demand, but severe income constraints and the lack of affordability prevailed. Other reasons cited were related to the perception of poor quality of services covered and complicated enrolment procedures.

3.2 Hierarchy

In the original tenets of Coase [23], market transactions have zero transaction cost, and the decision to be in the hierarchical ordering, that is, establish the firm, is a way to counter increasing transaction costs [24]. Public policy applications highlight the costs to the hierarchical arrangements, that is, government institutions. The costs of government intervention can be assessed and compared to outcomes that would have risen had they been left to the market. The government’s exercise of influence, if not control, on the behaviour of various agents, is a source of conflict. Balancing competing interests has its costs and benefits. In standard economics language, a Pareto solution reconciles everyone’s interests, with the winners compensating the losers. In the health system, a social contract solution holds when institutions come to an agreement or reconcile their interests for the common good, to achieve desired outcomes.

The government’s role in the health sector, given the inherent failures in the market, is seen as being provider, funder, and regulator. Standard textbooks view regulations as correcting for market failures, particularly in sectors with high externalities, non-competitive markets, and with deep information asymmetries [25]. National health service types of systems, such as in the UK and Canada, started as largely state provision and funding. The late 80s to 90s saw their evolution into quasi-market organisations separating state provision from state funding. The provision remains with the state, but some institutions are governed by boards and can compete for state funds and across other state bodies [26, 27].

How the government succeeds in its role can determine its ability to manage conflict and establish order. From an economic organisation perspective, government mirrors vertical integration or the hierarchical structure. In a pluralistic economy, where the private sector is extensively involved, the government’s ability to be a balancing force is affected by the extent to which providers and other groups influence the regulatory process. Government reaches to other agents to secure its goal of assuring and protecting the health of citizens. The capability of the government to enter into commitments, usually through contracts with other sectors, has a consequence for transaction costs in the interaction. Schuhmann and Bautista explored the nature of contracting envisioned in the new Philippine UHC Act [28]. Government regulators deal with its ‘regulatory hands’ through command and control, delegation to the professions to practice self-regulation, contracting, and/or through the use of incentives to elicit desired behaviour.

There is mixed evidence on the role of incentives in improving health service performance [29]. The use of incentives is attempt to counter the limitations of the regulatory approach in the light of ‘influence activities’ [30] or regulatory capture, leading to corruption and inefficient public services. Low powered incentives, such as low salaries, can impede actions towards creating greater efficiencies. It is in the compatibility of incentives with the goals set out that the directions of policy reforms and the preferences of the legislature and the bureaucracy can be discerned. Eijkenaar, et al systematic review of systematic reviews on the effects of pay-for-performance in health care did not find convincing evidence of cost-effectiveness and instead found persistent inequalities and some unintended consequences for unincentivized care [31].

Salazar [32] found shortcomings in financial reporting practices by PhilHealth, along with declining financial health from 2015. From 2006 to 2015, premiums exceeded benefit claims. Until 2013, premiums from paying members were the most important source of revenues. Average contributions from the informal sector payors were below premiums due, because of the overstatement in the members list and lack of tracking for delinquency in payments or inactive members. The category of non-paying members, those that received government subsidies widely instituted through the ‘sin tax’ law, grew by 37% in 2015. The study noted that 53% of benefit claims were made by non-paying members’ benefits. Benefit claims from the informal economy were three times their premium contributions. The new UHC Act full implementation is expected to expand subsidies. Citing a study by Gertler and Solon [33] 86% of increases in funding to PhilHealth went to payments for health care providers as profits or higher salaries. Cross-subsidisation was maintained, with formal workers subsidizing benefits of other sectors on some periods, while subsidised members by government pro-poor programmes showed some volatility between negative and positive net contributions. The informal economy members were consistently at the receiving end of cross-subsidies. The medium-long term prospects of PhilHealth’s net worth were not optimistic. In the midst of the fight against the pandemic, with the various anomalies in fund utilisation and employees’ behaviour, the President of the country announced that he would make a request to Congress to abolish PhilHealth [34]. This remains an empty threat, however, as Presidential elections are scheduled for May 2022.

3.3 Networks

Referring to a ‘broad set of collaborative approaches that are useful for bringing stakeholders together’ [35], network arrangements can be considered a looser organisational form. Whether it can be viewed as a third-best alternative, when ‘market fails’ or ‘regulations fail’ is a normative question. A convenient view would be to see it as running along the same continuum—straddling the range of market and hierarchy, a hybrid of elements from both, plus other features. This is possibly an appropriate perspective for the subject of interest—the informal labour sector. This issue means balancing interests in informal sector’s access to social health financing and health service benefits. To bring the interests of disadvantaged groups in the bargaining processes for the health care system’s allocation calls for mediating institutions. The experience with financing cooperatives has not sustained membership for the individual economy programme. A leading cooperative planned to set up its own facility. The increased funding in the Z benefit programme (for catastrophic cases) and the coverage of some chronic disease maintenance costs, including dialysis, has seen private sector investments in stand-alone clinics. Patient groups have also been increasingly engaged in the discussion.

A review of widespread adaptation of networks in the British health service showed its growth among primary care, and other settings, and a reduction in the role of acute hospitals. The buzzword is ‘collaboration’ as opposed to ‘competition’ in market arrangements. It is also recognised in the participation of voluntary and private sectors in outsourced work ‘commissioned’ by the public sector. Performance tracking is a central activity. The latter’s role has moved out from direct provision to one of purchaser or funder [36, 37].

From an LMIC perspective, collaboration takes place when the government reaches out to non-governmental organisations (NGOs) as well as the private sector to perform its traditional functions. The use of cooperative banks and other financial institutions to collect premium payments from the informal sector is one form. But it is not extensive enough to be called a network, rather public-private partnership has been used to describe it (Joint Learning Network). Examples remain few in the Philippines, surprisingly since it has one of the most vibrant NGO sectors actively engaging in the public sphere. There are no accounts of the private health clinic being contracted by the government to deliver primary care in geographically isolated areas where primary care needs abound. There are private clinics contracted to provide overseas employment medical checks, but for the most part, private and public health sectors in the Philippines are co-existing in parallel, if not in competition. Massive public sector investments in government health facilities have seen expanding capacities, in beds, laboratories, and services; while recent private sector developments have seen growing corporatisation and subsidiarity.

Aside from income and basic demographic characteristics affecting demand for social health insurance from among the informal sector, trust in these institutions, from registering enrolment, collecting premiums, providing the medical services, including the attitudes of doctors and staff were found to determine willingness to pay and utilisation of services [38]. This was confirmed in a 2020 systematic review study by Miti et al. [39]. Willingness to pay for health insurance and pension scheme among informal economy sectors were strongly associated with income and trust. Experience of illness, attitude, and presence of doctors as well as distanced all played a role. The credibility of institutions to the people and trust are key to insurance products [40] and the lack thereof undermines it.


4. Social contract design elements to governance in the new UHC act

We explored insights into the relational arrangements to find an appropriate conceptual ‘fit’ for the tenets of governance under a social contract. The ‘state of nature’ in the current market and hierarchical provisioning is failing and heightens the need for alternative governance mechanisms. Will the new UHC Act establish order and be the disruption the Philippine health system needs? Universal health coverage in general and the Philippine UHC Act, in particular, represents a new agreement drawn by citizens’ representatives and the government. This section discusses governance issues that impinge on UHC implementation and the operational trajectories affecting those in the informal economy. The intention of the section is not so much as a technical discussion, but to pinpoint directions for a re-thinking that needs to take place alongside post-pandemic reflections on the new normal.

4.1 Governance imperatives

At the centre of governance, analysis is transaction cost minimisation. The new settlement or social contract on universal health coverage poses the following boundary issues.

4.1.1 Primary institutions

The law divides the fiscal resources and responsibilities into two key agencies—the Department of Health (DOH) for population health and the PhilHealth for personal health. Local government units (LGUs), the owners of public health facilities, were given roles and tasks but hardly any authority and funding allocations. They received their own mandate through Executive Order 135 known as the Mandanas ‘law’ [41]. This order simply affirms the additional funding as part of their internal revenue allocation (from national taxes). Amounts will vary depending on the scale and scope of health services that are under them. The funding source for this is from the new tax sources recently introduced. The additional funds, however, are not earmarked for health. This constitutes one of the peculiarities of Philippine politics, ‘giving a little for everyone’. LGUs will now confront the question whether paying premiums to PhilHealth for coverage of its ‘nonpaying’ constituents present a better deal for its resources as opposed to providing free services in their ‘owned’ facilities. The added resources strengthen the position of local units in bargaining with the health funders and bargaining costs incurred should be factored as part of transaction costs to the implementation of the new UHC Act.

4.1.2 Selective purchaser

The current dominant purchaser of health services is the Philippine Health Insurance Corporation. Managed as a quasi-government body or a government corporation, it has enjoyed some autonomy in its operations, with the Secretary of Health serving as Board Chairperson. The new UHC Act has provisions for reforms on board qualifications and membership, currently filled by government finance and health institutions, as well as private and labour sectors. PhilHealth’s financial position has been under threat, and with providers faced with persistent payment delays (a case study was presented in ref. [13]), non-participation in the new UHC is also a threat by private providers [42]. Internally, implementation glitches and court cases against its officers and among themselves have dented the credibility of the institution. The President’s threat of abolishing PhilHealth reverberates (as documented in [34]). The scale might be an issue, with the institution being a case of ‘too big to fail’. Insights from the health insurance system in Thailand may point on the way forward, where the institutions are managed across three separate groups—civil servants, private employees, and the rest of the population [43]. Cross-subsidisation is valued for social solidarity purposes. However, in the Philippine case, scale economies are not realisable given human, technological, and systemic incapacities demonstrated by the organisation. The system before 1995 was tripartite as in Thailand when the Philippine population was 68.18 million and not 110.8 million as of 2021.

Failure to design and manage an information system accounts in large part for this failure, relying instead on manual authorisations and adjudication of claims. The system requirements are substantial and the treatment of information system costs as part of capital investment will bypass the 12% cap on administrative costs. However, government infrastructure projects in health care are known for being slow and cumbersome [44], requiring an inter-agency investment committee, among other concerns.

4.1.3 Provider and provider networks

Under the new UHC, every citizen will choose a General Practitioner (GP) for primary care, who will, in turn, be networked to diagnostic services and a tertiary hospital either at provincial or city levels. This introduces a novel element to the health system. Under the current system, anyone seeking care may go to any facility, doctor, or specialist so long as one is able to pay. Being tied to a GP entails availability or the supply of GPs in the first place. There is a viable public rural health system and stations spread across the archipelago. In more isolated and poorer areas, arrangements will need to be made for the outreach of public medical facilities or contracted private providers. In the towns and cities, private facilities will have to be willing to participate in the provider network to receive patients on referral. Participation will be on the application and submission of documentary requirements, including cost structure and subscription to the information system to be followed. This imposes costs to the private sector, as well as to local governments, the de-facto facility owners. Information technology (for example, telemedicine), including medical outreach, costs can be factored in for remote settings. Incentives are discussed in the UHC Act in the context of the private sector and LGU cooperation.

These governance options can inform whether the social contract embedded in the new UHC Act will minimise transaction costs and maximise benefits and health protection for the larger and more vulnerable groups. Mediating institutions and groups may be necessary to reach and navigate citizen engagement. The ability to contract would strengthen implementation efficiencies. When monitoring and delivery systems are not fully in place, leakages abound, responsibilities overlap, and absorptive capacities of both recipients and implementers are compromised. Implementation issues, gaps, and program weaknesses highlight the need for a more responsive approach when it comes to universal coverage of health insurance, particularly to the informal sector.

4.2 Other practicalities

Table 1 summarises the key concerns related to the health insurance coverage of the informal sector. This is not the place to be detailed as technical elements can be further studied. The table though captures the key elements of contributory schemes and how it relates to informal economy issues. It subsequently identifies strategic design and operating elements and how it can work out with UHC as the ‘sweet spot’ for the implementation of overall social protection programmes for the non-poor. The last column highlights what the system would be like if the schemes (social security, and health insurance) were to shift to and be under one platform of universal coverage.

Issues with the structure of health insurance schemesInformal economy issuesKey operating or design elementsUniversal coverage
Low coverage of the informal economyGeographic location – reach and access to health facilitiesMembership, enrolment become moot issues as new UHC mandates coverage for allReaching the population with information drives on rights and responsibilities and services
Intermittent contributions; drop-outsNot too poor for pro-poor subsidies paid by the government from national taxes; no employer counterpartGraduated subsidies from local government (LG) as part of business registration and renewals;
Bundled with other contributions, for example, pension, accident insurance
No direct contributions from informal sector earning below a certain level
(determined locally; with LG performance in the coverage of IFS tracked)
Utilisation of Health Care as part of benefitsHigh cost of care due to users’ charges;
Delayed care due to cost concerns
Health insecurity due to nature of work
Member education
Annual basic medical check-ups
Assurance of adequacy in the supply of staff and medicines needed when on acute care for no balance billing arrangement
Inclusion in the No balance billing (NBB)arrangement
Health technology assessment
PortabilityMobile populationNavigation and Information technology solutionsInformation systems
Use of Human Navigators
Health passbook

Table 1.

Elements of schemes for the informal economy, design elements, and universal coverage.

There are high transaction costs involved in getting and maintaining participation of the informal sector. However, the new UHC Act considers everyone as a member. Even as their incomes and timing of receipt of incomes are not low enough to qualify them for national subsidies, transaction costs will be high trying to collect individually or tying individuals to a group. Localising subsidies from local tax sources will bundle business registration with other businesses in the local city or municipality office, the usual point of entry for local business. This will encourage the informal economy to gain a foothold into formality with the enticement of free health insurance. Insuring the informal sector, based on the population discussed in section 2, and using the 10 year average and current PhilHealth premiums of P2,400, will amount to an estimated PhP51 billion (US$1 billion). This amount is approximately 5.1% of the annual health budget of the government. These subsidies will tie the funding of the informal economy health insurance coverage with the gains and benefits of coverage, not only as revenues (to fund local health facilities) but also as social capital, enhancing the credibility of local institutions [45].

Since local governments also ‘own’ the facilities, it is within their jurisdiction to provide free care for those in need, especially those that are not in the means-tested poor, of which many in the informal economy may fall under. No balance billing should be for all in the locally owned facilities and some capped charges, if outside the catchment area. Assurance of annual health checks will promote health maintenance and health security. The health technology assessment bureau, newly established under the UHC Act will recommend what the basic health service package will be.

Portability is key to universal health coverage. A Thailand study showed the popular use of non-designated facilities by low-income members [46]. Among mobile populations, working across provincial and city boundaries, where designated facilities may be accessed, local budget systems must be interconnected. Navigators or guides will be needed at facility levels. The Philippines’ use of navigators has been singled out for promoting equity among the sponsored members [47]. Additionally, information systems that interconnect provider and patient information with the health insurance office and a health passbook, physical record on members’ hands where utilisation and coverage in terms of fees are recorded, has been the glue to Taiwan’s health insurance system, which began around the same time as PhilHealth in the mid-90s. Taiwavn achieved universal health coverage within the decade of its founding.


5. Conclusion

The study explored the issues related to the planning and inclusion of the informal labour sector into national health insurance schemes. While universal health coverage (UHC) may have raised this as a non-issue, with its coverage ‘for all’, resources flowing to the same structures for implementation will encounter the same problem of high transaction costs. A re-framing analysis that pushed the issue of transaction costs into the discussion showed that hierarchical or government structures wielding tight command and control are not informal sector—friendly. Informal sector participants may not fall within the strict proxy variable means tests for the poor. Thus, their non-inclusion in the no-balance-billing thrust of the UHC still creates high user charges which minimise the benefits of health insurance against any contribution on premiums they make.

The ability of the system to provide universal financial protection will still depend on subsidies managed through mediating institutions, including facilities, that need to be brought in as part of the new social contract. There will be widespread subsidies as the impetus for the universal health care Act itself is the anticipated fiscal space provided by the passing of new tax laws that included a tax on the sugar content of beverages. The pandemic has seen increased fiscal flows to the health sector; but more importantly, it surfaced the inefficiencies and corruption of the implementing agencies. The protection required in the new social contract is safeguarding the health insurance funds and the balancing of current expenditures and future funds sustainability. The rights and responsibilities implicitly pressed on citizens, providers, implementers by the new Act are directed towards ensuring the social insurance funds are protected. This is only possible if payments are made in terms of ability to pay, pay-outs designed based on needs, incomes drawn from the fund (by providers and other vendors) are fair, and systems and safeguards are in place for greater accountability. Universal health coverage is possible with better governance and undertaken in the spirit of a new social contract.



The article used parts of an unpublished report by the author submitted to the International Labour Organisation Regional Office in Bangkok, as part of a consultant’s report on the project Stocktaking Study on Social Protection for the Informal Economy in 2018. Permission to recognise their copyright has been obtained and much appreciated.


Conflict of interest

No conflict of interest is declared by the author.


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  • Since 2008, there has been no direct survey of the informal economy. During this 2008 Informal Sector Survey (ISS) 29.8 million workers were considered in informal employment or 75% of Filipino workers (WB 2010). Under proxy indicators, there were only 19.4 million informally employed workers considered in 2008, indicating an underestimation of the number of informal workers by nearly 10 million.

Written By

Maria Cristina G. Bautista

Submitted: February 2nd, 2022 Reviewed: February 15th, 2022 Published: May 10th, 2022