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The Nigerian health insurance industry

Health insurance is a social security mechanism that guarantees the provision of needed health services to persons on the payment of some amount at regular intervals. It is designed to pay the costs associated with health care by paying the bills and therefore to protect people against high cost of health care by making payment in advance of falling ill. The scheme therefore protects people from financial hardships occasioned by large or unexpected medical bills.

The Federal Government's objective for the National Healthcare Industry is to achieve the global standard of Universal health coverage (access to needed, good quality health services for everyone, without the risk of financial hardship as a result of having to pay for access to these services”) for all citizens through various policies and advocacy. This has received tremendous attention and political will since the return to democratic rule 19 years ago as evidenced by the 1999 National Health Insurance Scheme (NHIS) Act.

There has also been continental advocacy on Health Insurance by the World Health Organizations’ African regional office which led to the Abuja declaration in 2001 on health financing, the Addis Ababa declaration in 2006 on community health and the 2008 Ouagadougou declaration on Primary Healthcare and Health systems in Africa all of which included Nigeria.

99% of Federal Civil servants are currently enrolled in the National Health Insurance Scheme (NHIS) in addition to 2 million private sector employees inclusive of dependents.

The wordings of the Act 35 which caters for the National Health Insurance Scheme requires Federal Government employees and Private sector businesses of 10 employees or more, and their dependents to register under the scheme. Of note is that a greater majority of public service employees work for the various State and Local governments. A potential 20–30% coverage can be achieved if State and Local Government staff are covered which is a great leap from the current 3.5%.

Following the passage of Act 35 of the Nigerian constitution, it became mandatory for public and private organizations with 10 employees or more to participate in the National Health Insurance scheme. Registration is carried out by Health Maintenance Organizations (HMO) and Life Insurance companies which are NHIS approved.

These HMO’s and Life Insurance companies carry out the following duties:

2. Collect contributions from voluntary contributors.

3. Receive/collect contributions from eligible employers and employees.

4. To ensure that contributions that are made are kept in the scheme’s accredited banks.

5. They ensure that processing of claims is done effectively.

6. Delivering monthly returns to the scheme on capitation and fee-for service payment to healthcare facilities.

Under this program, a beneficiary is entitled to;

§ Out-patient care

§ Pharmaceutical care

§ Diagnosis tests

§ Maternity care for up to four (4) live births

§ Preventive care

According to the records of the NHIS, over 6 million Nigerians in the public sector are currently accessing the program. They are mostly workers in the Federal public service and the States of Bauchi and Cross River which have implemented State Health Insurance.

The contributions paid cover health care benefits for the employee, a spouse and four biological children below the age of 18 years. More dependents or a child above the age of 18 years would be covered on the payment of additional contributions from the principal beneficiary.

There are currently 76 Health Maintenance Organizations with 600 branches and 14 Life Insurance Companies accredited to carry out the business of Health Insurance in Nigeria.

They work in collaboration with a network of over 1,200 Healthcare provider’s nationwide providing care to enrollees which currently number 3.5% of the total National population.

Drivers for Health Insurance

1. Nigeria’s low total healthcare expenditure which is insufficient to fund healthcare services.

3.7%

71.7%

US$117.5

2. Technological advances and social networks have made health insurance policies easily available for purchase online through the use of mobile and information technology. There is also a 12 year old data set on health insurance patterns which can be enabled into strategy via transformation of big data analysis into actionable transformation of the industry.

3. The economic growth of the country and demand for healthcare by vulnerable groups has spurred various policy framework on health financing. The focus of health financing is to achieve Universal Health Coverage primarily financed through health insurance.

5. There is a current paradigm shift to proactive rather than reactive approach to healthcare due to the high literacy rates in urban areas and among the growing middle class. This has created awareness and demand for health insurance to cover expenses incurred.

Pros (Strengths)

§ Strong regulatory oversight for the Insurance companies by the NHIS

§ Growth and adaptation of technology

§ Progressive legislation

§ High potential for growth

§ Growing middle class

§ High level of awareness within the corporate sector

Cons (Weaknesses)

§ Large informal sector

§ Non-inclusion of State and Local Governments

§ Low capitation value

§ Poor cash flow to Healthcare providers and low pricing of services

§ Increasing burden of non-communicable diseases

§ Low capitalization of the industry

§ Optional enrollment policy

§ Inadequate legal framework

From the inception of the National Health Insurance Scheme Act (Act 35 of 1999) by the military government of General Abdulsalami Abubakar, the scheme has received attention from both the executive and legislative arms of government. The scheme became active in 2005 with President Olusegun Obasanjo and his family as the first enrollees. Two states (Bauchi and Cross River) attempted enrolling their employees, but nine states (Abia, Enugu, Gombe, Imo, Jigawa, Kaduna, Lagos, Ondo, and Oyo) have indicated interest. Other states including Lagos, Kwara, Ogun, and Akwa Ibom are implementing state-led community-based health insurance programs to reach the informal sector with varying levels of coverage and inherent sustainability challenges.

There have been proposals for review of the NHIS act by the 6th and 8th National Assembly with the aim of achieving Universal Health Coverage without any outcome presently.

There is an ongoing legislative amendment of the National Health Insurance Scheme to repeal the Act and enact the National Health Insurance Commission Bill to enhance access and actualize Universal Health Coverage for Nigerians. Also, the 2014 National Health bill was enacted to fill the funding gap of the NHIS act on provision of emergency services through the Basic Health Care Provision Fund, which will be largely supported by a Federal Government Annual Grant of not less than one percent of its Consolidated Revenue Fund [CRF] (National Health Bill, 2014)

Health insurance and its adoption has been greatly influenced by education, income, sex, marital status, employment, access to healthcare information and family size. The high growth population and increased burden of Non communicable diseases which require lifetime medical care has had a great influence on the demand for medical care and health insurance.

There has also been public distrust for the National Health Insurance Scheme due to past initiatives that have failed. Labor unions have advocated for government to bear total cost of health insurance. This is likely due to high poverty levels (World Bank estimate 33.1%) and the present burden of out-of-pocket expenditure on healthcare which stands at 71.7% of Total Healthcare Expenditure. This has a great impact on household income, hence the resistance the scheme.

Nigeria has a grossly underserved healthcare service industry with 28 doctors and 130 nursing staff per 100,000 Nigerians. This in addition to approximately 1,200 healthcare facilities catering to enrollees of the National Health insurance scheme. This falls below the benchmarks set by the World Health organization with an aim of achieving Universal health coverage.

There is currently a low capital market penetration by the healthcare industry value chain. There are currently no traditional HMO companies listed on the Nigerian stock exchange. This presents an opportunity of accessing non-government public funding that can be effective in expanding the capital base for health insurance in the country. There is also the opportunity to refine quality of service and strengthen the risk management profile of the health insurance providers through mergers and acquisitions to ensure proper national coverage as opposed to the current urban skew of concentration of HMO’s.

Conclusion

The Nigerian Health Insurance industry which is still a developing sector is an avenue to sustainable financing for Healthcare services. This has been adopted in developed and developing economies globally over the last two centuries with remarkable results. The market currently caters to less than 5% of the total population which includes a majority of Public service employees. The demand for insurance is in direct relation to the demand for Healthcare services which is in a growth phase due to increased awareness, modernization and the paradigm shift towards proactive rather than reactive healthcare. This has a great potential for growth and would offer incentive for the general wellbeing of the populace. It also has the potential transferring the cost of Healthcare expenditure from Government to the Insurance industry.

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