Enforcing compulsory health insurance in Nigeria

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Section 3 (b) of the National Health Insurance Authority Act (NHIA Act) under the functions of the Authority, provides for the NHIA to ensure mandatory health insurance for every Nigerian and the country’s legal residents. No doubt, a basic feature of compulsory health insurance is that the rights of each individual (or each family member insured through them) are exercised by registering for insurance and paying the corresponding contribution or premium.

However, the implementation of a mandatory insurance scheme depends on several factors and among them are regulation, management, and program design which are very crucial. Sometimes a well-designed insurance scheme cannot attract an adequate number of people toward the scheme. Therefore, for the National Health Insurance Authority Act to be effectively implemented, the operational guidelines should be quickly developed. The guideline should provide key directives on mandatory enrollment and coverage of all citizens under any of the prepaid health schemes. The possession of a health insurance identity card or certificate by citizens should be considered as necessary requirements to derive certain benefits from the government. Health facilities should be properly equipped and they should be manned by trained medical personnel who would respect the rights of patients. The equipping of facilities with professional treatments of citizens would serve as an incentive for Nigerians to key into the scheme.

All countries that are recognized to have made substantial progress toward Universal Health Coverage— where the entire population is able to use publicly guaranteed services with high degrees of financial protection — rely predominantly on compulsory funding sources. It has been observed in many countries that where the government spends more on health, people have less need to pay out-of-pocket at the time of use. It is also well known that high levels of out-of-pocket payment are associated with higher risk of catastrophic and impoverishing health payments, and that the need to pay at the point of use exacerbates inequalities in service use.

Similarly, relatively few countries rely on voluntary prepayment to provide significant resources for their health systems. Among high-income countries other than the USA, voluntary health insurance plays a negligible role with the exceptions being where it provides an explicitly complementary function (covering patient cost sharing in the statutory system, as in France and Slovenia) or where it offers supplemental benefits beyond those in the main compulsory system (such as covering private “amenity beds” in hospitals in Ireland and Germany).

The minimal role for voluntary prepayment is not an accident; it reflects both theory and experience with regard to the shortcomings of voluntary approaches. All forms of voluntary health insurance suffer from adverse selection. Individuals who know they have worse health status are more likely to enroll, and so over time this makes health insurance more expensive than the average actuarial cost of a premium across the entire population. Insurers respond by raising premiums, driving more people out of the market. Ultimately, those who need the coverage most are least able to afford it. This runs counter to the objective of pooling, which is to maximize the redistributive capacity of prepaid funds from the healthy to the sick.

Writing in the aftermath of the failed effort in the USA to pass legislation to create universal insurance coverage in the mid-1990s, Victor Fuchs wrote that: “No nation achieves universal coverage without subsidization and compulsion. Both elements are essential. Subsidies without compulsion will not work; indeed, they could make matters worse since the healthy flee from the subsidized common pool, only to return when they expect to use a great deal of care. Compulsion without subsidies would be a cruel hoax for the millions of poor and sick who cannot afford health insurance.”

This phenomenon has been observed around the world, independent of a country’s level of income, or whether the ownership of the insurance is commercial, not-for-profit, “community,” government, or where, for example, people outside of formal employment are allowed to voluntarily prepay into a national social health insurance (SHI) scheme. It is simply the nature of a voluntary health insurance market.

The lesson is both simple and clear: moving toward compulsion and subsidization in health financing is a guiding principle for health financing policy oriented toward universal health coverage in Nigeria. It is also the fundamental reason why many fiscally constrained low and middle income countries face such difficulties in making progress.

The current fiscal challenges, however, should not lead the country or analysts to believe in magic, however, such as expecting that because a voluntary health insurance programme is owned by a not-for-profit entity such as a local community, it will achieve high rates of coverage. Both theory and evidence are consistent with this reality. Thus, moving towards universal health coverage in Nigeria must include strategies to increase the share of total health spending coming from compulsory (i.e., taxes, whether direct or indirect) sources.

Okeke writes from Centre for Social Justice (CSJ), Abuja, Nigeria.

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