Transitioning from voluntary to mandatory health insurance in Nigeria: Excerpts from a fireside chat with Chris Atim

The need for effective and efficiently utilized health insurance coverage cannot be overemphasized, especially considering the global trend of economic downturn. Good insurance coverage promotes health, provides financial security against overwhelming health care costs and lessens the risk of incurred medical debt. It is an integral instrument for the attainment of universal health coverage (UHC).

Despite these benefits, enrollment in Nigeria’s National Health Insurance Scheme (NHIS) coverage is still abysmally low — with less than 10% of the country’s population enrolled — even two decades after its start.

While 80% of Nigerians still pay out of pocket to access health care, 57% of them are willing to pay on a monthly or annual basis to be enrolled in a viable health care plan that would protect their household from catastrophic health care expenditures. This data suggest the current health insurance mechanism is not very efficient, and there is an urgent need to devise a deliberate approach toward enrollment, communication and strengthening the health insurance scheme in Nigeria.

To reduce the barriers that have hindered increasing enrollment, Results for Development (R4D) kicked off its collaborative technical assistance to the National Health Insurance Authority (NHIA) in 2018, which later evolved into developing the first-ever 10-year strategic plan for NHIA in 2019. One component of that strategic plan — in which R4D is offering support alongside the NHIA and World Health Organization — is a series of events with health economists like Joseph Kutzin, Cheryl Cashin and Chris Atim.

In this installment, Chris Atim presented on the topic “Transitioning From Voluntary to Mandatory Health Insurance in Nigeria,” which was organized in collaboration with the WHO and Nigeria’s Federal Ministry of Health and Social Welfare.

This chat deepened discussions about the benefits — and the potential — of mandatory health insurance. The conversation followed the new NHIA statutory act of 2022, which stipulates that health insurance is mandatory in Nigeria and gives the NHIA a mandate to create a system for some 83 million vulnerable people. The fireside chat was an avenue to share lessons and ways of implementing mandatory health insurance from other countries in Africa.

Below is a summary of that conversation, which has been edited for clarity and length.

Why Nigeria’s voluntary system has not worked

Nigeria, like many other Sub-Saharan African countries, uses a voluntary system of health insurance as a means of attaining UHC. Unfortunately, this system is plagued by myriad challenges that render it ineffective and under-patronized.

One major challenge is that individuals and households are at liberty to enroll in this system or to drop out of the health care schemes. While this provides a sense of freedom and choice, several empirical studies have shown that individuals will often not enroll even if it is in their own best interest to do so.

Additionally, the health insurance system does not adequately reach the country’s rural dwellers, which make up about 47% of the country’s population. For the rural dwellers who are aware of the voluntary system’s existence, they are often discouraged by the cost of premiums or other administrative processes. These challenges have been similarly seen in Ghana.

Introducing the mandatory health insurance system

The NHIA Act of 2022 gave Nigeria’s Health Insurance Authority a mandate to provide insurance to all Nigerians and residents of the country through a mandatory health insurance scheme.

The scheme offers many advantages compared to the voluntary scheme, and it establishes “automatic coverage for everyone, regardless of their financial capacity of socio-economic conditions.”

While the mandatory system has proven beneficial for reaching the goal of universal coverage in countries such as South Korea, Chile and Taiwan, it must be framed to meet Nigeria’s specific needs in order to be successful.

What are the considerations for the implementation of this system?

To implement a mandatory insurance scheme, there are certain country-specific features that need to be taken into consideration.

1. Size of the informal and formal economies: The informal economy in Nigeria accounts for 65% of Nigeria’s economy, whereas the formal sector accounts for only 35%. One major advantage of the formal economy compared to the informal sector is its organization and structure. Enterprises in the formal economy have established means of obtaining remittance and contributions of professional associations, labor unions and cooperative bodies, unlike those in the informal sector. While the large size of the informal sector may present challenges to successful implementation of mandatory health insurance in countries like Nigeria, evidence from countries like Rwanda and Switzerland suggests that large formal sectors positively impact enrollment in a mandatory health care scheme, in part because businesses’ economic and production activities are typically under the supervision of the government, meaning their remittances and contributions can be easily tracked.
2. Emphasis on enrollment: While health insurance often has two distinct goals — improving coverage and improving access to health care services — there can sometimes be too much emphasis on enrollment. For example, while countries like Cote d’Ivoire have put in measures to achieve a high enrollment rate for its mandatory health insurance scheme, this has not necessarily translated into access to health care. This is often due to the refusal to pay premiums. We are hopeful that Nigeria would approach premiums differently, building a benefits package that would cover both primary and secondary care services thereby making them affordable and more accessible for the poorest. The lower the premium, the higher the subscription from the rich subsidizing for the poor with no need for families abroad pooling funds to pay for their poor ill relatives.
3. Role of the government: Making the insurance scheme a plain-agency role is a good step for framing. Countries like South Korea, Chile, Taiwan and Singapore have successfully implemented mandatory insurance schemes by making them a major role of the government with little or no interference from the private sector. The NHIA Act of 2022 states that funding for an aspect of the informal sector known as “the vulnerable” shall be derived from five major sources: the Basic Health Care Provision Fund, the Health Insurance Levy, government special intervention allocation, NHIA investments and voluntary contributions (e.g. donations, grants, gifts, etc.). This establishment has proven to be a stepping stone toward the country’s attainment of UHC in regarding to health care financing; however, it is important for the insurance scheme to be primarily managed and coordinated by the NHIA and not multiple agencies.

Recommendations to the Federal Government of Nigeria on the implementation of mandatory health insurance

To transform the peoples’ mindset on mandatory health insurance and how they can participate, this write-up has outlined the benefits and the need for contextualization to achieve set objectives and provide a lasting solution to the challenges witnessed by the current health insurance scheme in Nigeria.

A mandatory scheme would be more likely to succeed taking these ideas into account:

• Premium payment to cover the formal sector and tax-based finance systems should be applied to cover the informal sector: This reinforces the point that it is the government’s responsibility, which should be backed by international organizations like the World Bank and World Health Organization. Tax-based systems are considered the most progressive as well as the most efficient means for tracking the informal sector, as they allow the highest potential of strategic purchasing to be achieved with maximum equity. Regardless, further conversations need to be held on the type of tax reform to adopt for this purpose with leading visibility from the legislators.
• A phased implementation beginning with poor and vulnerable populations: Since there is no sufficient tax base to immediately cover everyone, implementation of mandatory health insurance scheme could be done in a phased and progressive manner, starting with poor and vulnerable populations. Additionally, a minimum benefits healthcare package (targeting basic health like primary health care, prevention and promotion interventions) should be set up for everyone so other population groups are not excluded. Long-term measures for extension of the insurance scheme should also be set up as the economy expands in size, i.e., mandatory insurance should be progressively extended to the initially exempted population classification as the economy grows.
• Automatic coverage of everyone regulated by the state with little or no oversight by the private sector: Mandatory health insurance can solely be the responsibility of the state and be readily available for everyone except they willingly opt out. Doing this will entail the government improving its capacity to understand the resources available and how this can be phased to progressively cover every citizen over time.

In conclusion, the achievement of universal health coverage is very dependent on the government actions required to extend access to health care and set minimum standards. A very important tool to achieve this is the establishment of a mandatory health insurance system that fulfills set objectives for the country’s populace.