Making Social Health Insurance and Micro-Savings Programs Work for the Informal Sector in the Philippines

In the Angelo King Institute annual report of Monitoring the Philippine Economy, the Philippines maintained its growth momentum in 2014, besting other Asian economies. Given this backdrop, it is interesting to find out whether various sectors have benefited from this growth, particularly the informal sector which includes bulk of the poor who are self-employed and are mostly engaged in the services sector. The intention of this study is aimed to determine the effect of social protection, particularly social health insurance program (known as PhilHealth Insurance) and the micro-savings scheme (known as AlkanSSSya) on informal sector especially those who are poor and self-employed. By the end of 2014, total benefit payment for all sectors amounted to PhP78.2 billion (PhP19.2 billion for the informal sector). Since the government spends so much on PhilHealth, especially with its expansion of the indigent program, there is a need to investigate the effectiveness of the program especially on the poor. Utilizing data from the Community Based Monitoring Survey (CBMS) collected in 2015 from selected provinces in the Philippines, the propensity score matching method showed that those who availed of PhilHealth Insurance (both individual paying and sponsored member) have a higher total income and income in cash compared to those who did not avail (PhP288 and PhP595 respectively). PhilHealth Insurance beneficiaries are also more likely to have higher total sales from entrepreneurial activities in the informal sector (PhP69) than non-beneficiaries. On the other hand, AlkanSSSya beneficiaries also had higher annual income, higher total sales from entrepreneurial activities, and higher expenditure than non-beneficiaries (PhP986, PhP18, and PhP304 respectively). The results support the claim that social protection is indeed effective in improving the income of the poor, especially those who are dependent on the informal sector. Expanding the coverage of the programs for the informal sector, thus, will aid in increasing social inclusion and in reducing poverty levels. Keyword: social protection, informal sector, Philhealth insurance, AlkanSSSya, Community Based Monitoring Survey JEL codes: C31, O15, O17 108 M.I. P. Conchada & M.M. Tiongco Institute 2014). Given this, it is interesting to find out whether various sectors have benefited from this growth, particularly the informal sector, which includes bulk of the poor who are self-employed and are mostly engaged in the services sector.1 Despite the performance of the economy, unemployment still remains one of the major concerns. By the end of 2014, unemployment rate was recorded at 6.8% (down to 5.5% by the end of 2016), which implies that there is still a large number of Filipinos who are unemployed given our population (PSA, 2014; 2016a). Moreover, the Philippine Statistics Authority (2016a) reported that of the 2.4 million (5.5%), 62.8% were males while 37.2% were females, 31.2% were high school graduates, and 48.4% belonged to the age group 15 to 24 years old. Given fewer stable job opportunities in the country, Filipinos are seeing entrepreneurship as an alternative to earn income. As of 2012, there were 940,886 registered micro, small, and medium enterprises (MSMEs) in the Philippines (99.6% of the total establishments), majority of which are in the retail and wholesale industry. Despite this impressive number, there is a huge number of businesses, mostly belonging to selfemployed Filipinos, that are not registered and are part of what is called the informal sector. There are many barriers as to why many of them are not registered and one of the reasons is the high opportunity cost of having to register their business especially for micro establishments such as sari-sari stores, food stalls, and other small scale businesses. More often than not, these businesses belonging to the informal sector are exposed to different types of shocks, both internal and external, such as sickness in the family and natural disasters. Their vulnerability to shocks hinders the business from realizing its full potential and, thus, resources are wasted. To protect the informal sector from shocks, the government invested in social protection. The definition of social protection in the Philippines was formalized in 2007 and covers four components, namely: social insurance, social welfare, social safety nets, and labor market interventions http://www.ilo. org/wcmsp5/ groups/public/---dgreports/---dcomm/documents/ publication/wcms_243961. pdf. On the other hand, the National Economic Development Authority has a set of policies and programs that seek to reduce proverty and vulnerability to risks and to enhance social status and rights of the marginalized. One of the initiatives on social protection was the passage of the National Health Insurance Act of 1995 (2004), which aims to provide equitable access to quality health care to everyone (http://www.ilo.org/wcmsp5/ groups/public/---dgreports/---dcomm/documents/ publication/wcms_243961.pdf). Through the Act, the National Health Insurance Program (or Philhealth Insurance) is administered by the Philippine Health Insurance Corporation (PHIC), which is government owned and is an attached agency of the Department of Health. The PHIC was mandated to provide all Filipino citizens health insurance to cover financing of their health needs, from preventive primary to hospital care including catastrophic conditions, and achieve universal health care or universal coverage by 2016. As of the December 2014, there were a total of 2,023,696 members of Philheath Insurance from the informal sector, which was only 9% of the total number of informal sector (PHIC, 2014). Membership has increased by 62,586 by the end of December 2015, but in terms of proportion, growth has not affected the 9% share from the informal sector (PHIC, 2015a). It is thus important to increase the coverage of the informal sector since they are more vulnerable to economic and catastrophic shocks such as disasters and calamities. According to the International Labor Organization, social protection is crucial as the country faces socioeconomic factors that affect the population (http:// www.ilo.org/wcmsp5/groups/public/---dgreports/--dcomm/documents/publication/wcms_243961. pdf). For one, the Philippines has the most unequal income distribution among East Asian middle-income countries. Second, general and youth unemployment are high (7.1% and 16.6% respectively). Furthermore, the rapid population growth at the rate of 1.9% places pressure on the labor market. Third, aside from unemployment, a high percentage of the employed are considered vulnerable (38.4%). Fourth, a strong service sector is prevalent, which requires more manpower. Lastly, the exposure of the country to natural disasters such as typhoons makes its people more vulnerable (http://www.ilo.org/wcmsp5/groups/ public/---dgreports/---dcomm/documents/publication/ wcms_243961.pdf). It is the intention of this study to determine the effect of social protection, particularly PhilHealth Insurance and the AlkanSSSya,2 on informal sector, especially those who are poor and self-employed.3 By the end of 2014, total benefit payment for all sectors Making Social Health Insurance and Micro-Savings Programs Work 109 amounted to PhP78.2 billion (PhP19.2 billion for the informal sector). Since the government spends so much on the PhilHealth Insurance progam, especially with its expansion of the indigent program, there is a need to investigate the effectiveness of the program especially on the poor. This study will focus on answering the research question: “Are people in the informal sector better-off availing PhilHealth Insurance and the AlkanSSSya program? ” Specifically, the research aims to address the following objectives: 1. Provide an overview of the coverage of the Philhealth Insurance and the AlkanSSSya programs in the informal sector; 2. Identify barriers to access Philhealth Insurance and the AlkanSSSya program by the informal sector; and 3. Determine whether PhilHealth Insurance and AlkanSSSya members who are part of informal sector experienced an improvement in their income. Review of Related Literature Poverty in the Philippines In an effort to address poverty through the MDGs on human capital development through education, health, and women empowerment, various programs have been implemented. However, progress has been slow in reducing poverty. Table 1 shows that poverty incidence in the Philippines has not improved that much since 2003. Moreover, the magnitude of poor families has increased from 3.8 million families in 2006 to 4.2 million in 2012 (National Statistical Coordination Board, 2012). The poverty incidence among Filipino families in 2012 was the highest in the Autonomous Region in Muslim Mindanao (ARMM), Eastern Visayas (region 8), and Soccsksargen (region 12) with 48.7%, 37.4%, and 37.1% respectively. In the ARMM, Lanao del Sur had the most severe incidence of poverty among families with 67.3%. This was followed by Maguindanao with 54.5% of the total number of families are considered poor. Table 1. First Semester Poverty Incidence Among Families (%) Major Island Group 1991 First Semester Poverty Incidence among Families (%) 2003 2006 2009 2012 2015 Increase/Decrease