Universal Health Coverage for the informal sector

Indonesia introduced its National Social Health Insurance in January 2014, as a final phase in the transition to universal health coverage. The scheme relies on mandatory contributions for formal sector workers and subsidised premiums targeted to the poor. However, many informal sector households are not eligible for subsidies and are expected to self-enroll. About 60 percent of Indonesian households earn an income in the informal sector, of which roughly half will not be eligible for the subsidies and are expected to self-enrol.

To date, this program design has been ineffective in reaching the informal sector and achieving universal coverage. After one year, almost half the population had not enrolled. This is in line with international experiences, which find that it is extremely difficult to convince informal sector households to enrol voluntarily into health insurance without providing strong incentives. Yet, rigorous empirical evidence on the barriers to insurance uptake is scarce.

This study had four key objectives:

  • Assess National Social Health Insurance enrolment among the many informal sector households that are not eligible for subsidised fees and that cannot be enrolled through formal sector payroll contributions.
  • Identify barriers to self-enrolment for these informal sector households.
  • Assess how quality and availability of health care supply affects insurance uptake.
  • Provide policy recommendations for mandating the informal sector to participate in the National Social Health Insurance.

In this study we assessed the determinants of insurance uptake among informal sector households. Using nationally representative household survey data, we related enrolment into the National Social Health Insurance with local health care supply, households characteristics and sector of employment.

Analysis was done on the national socio-economic household survey (Susenas) data 2014. This data includes information on insurance uptake as well as a variety of socioeconomic characteristics. This data was merged to the village census (Podes), which includes information on local health care supply.

To identify barriers to insurance uptake, the research applied a multivariate regression approach.


The study confirmed that the practice of voluntary enrolment for the informal sector is not sufficient to achieve universal coverage. In particular, statistical analysis found three specific barriers to insurance uptake:

  • Insurance literacy: insurance uptake is strongly associated with proxy variables for insurance and financial literacy, and level of education.
  • Adverse selection: insurance uptake is strongly associated with health status.
  • Public health care supply: insurance uptake is strongly associated with proxy variables for quality and supply of health care.

These results are robust with regard to controlling for other household, village and regional characteristics, variations in the statistical model and choice of (sub-)sample.

The results suggest that distance to health care facilities and lacking insurance literacy are key barriers to insurance enrollment. We also found clear evidence of adverse selection, in that enrollment is concentrated among households that have an immediate need for health care. Such adverse selection undermines risk sharing, which is crucial for the viability and sustainability of the insurance scheme.


We drew three main policy conclusions from these findings. First, the insurance program needs to address critical design flaws to reduce adverse selection, by introducing longer waiting periods for enrolling. Second, additional incentives to enroll need to be introduced if universal coverage is to be achieved. These can take the form of premium subsidies and campaigns to improve financial literacy.

Alternatively, linkages to other social protection programs or innovative mechanisms to enforce informal sector enrollment can be explored. Finally, national and local governments need to increase investment in health care quality and supply, as these are crucial to the success of a national health insurance scheme.

Other outputs

  • Journal Publication: Agustina, Rina., Dartanto, Teguh., Sitompul, Ratna., et al. ‘Universal health coverage in Indonesia: concept, progress and challenges’ in The Lancet Review, Vol. 393, Issue 10166 (5 january 2019), pp. 75-102. https://doi.org/10.1016/S0140-6736(18)31647-7


  • Dr Robert Sparrow
    Fellow, Arndt-Corden Department of Economics
    Australian National University
  • Dr Teguh Dartanto
    Director of Undergraduate Program in Economics
    Universitas Indonesia