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Health Insurance: Health insurance worth N10 trillion a year > Dr. Olawunmi Adekola > August, 2015

Dr Olawumi Adekola, manages the South-West regional office of HMOs. He holds degrees in medicine, MBBS and MPH, and a certificate in insurance practice, with more than 15years experience in the health care industry, seven of which are in health insurance and management. He raises the business potentials of the healthcare insurance scheme in an interview with Timothy Adaka, Business Eye Associate Editor.

dr olawunmi

Health insurance, HI, is financing medical expenses through the contributions or taxes paid into a common fund. This fund is used to pay for all or a part of health services provided for beneficiaries of the contributions as specified in an insurance policy. Health insurance makes it possible to substitute a small but certain cost, premium, for a large but uncertain loss, claims, with the contributed funds for the medical needs, risks, of a large number of people involved in the scheme.

The HI business regulatory body was established by the National Health Insurance law, NHIS, Act 35 of 1999. The NHIS regulates the social health insurance, SHI, programmes and the small but thriving private health insurance, PHI, industry. NHIS registered health insurance companies, hospitals and banks are called Health Maintenance Organizations, HMOs.

The scheme in Nigeria has partially achieved its objectives to
Ensure that every Nigerian has access to good health care services. Protect families from the financial hardship of huge medical bills. Limit rise in the cost of health care services. Ensure equitable distribution of health care costs among different income groups. Maintain high standards of health care delivery services. Ensure efficiency in health care services. Improve and harness private sector participation in the provision of health care services
Ensure equitable distribution of health facilities within the federation. Ensure appropriate patronage of all levels of health care. Ensure the availability of funds to the health sector for improved services.

These achievements so far are with federal government workers registered under the scheme.

Market value and penetration in Nigeria

Health care funding in Nigeria is both public, by the three tiers of government, and private by households, firms and donors. Private sector funding is three times of the public sector spending. National health accounts estimates for 2003-2005 showed a total health expenditure of 6%of GDP with the dominant out-of-pocket payments accounting for between 66% and 74%. This trend imposes a burden on those least able to pay. Health insurance as a proportion of total health expenditure grew from 1.79% in 1998 to 4.96% in 2002.



Going by the 2002-2005 data, health insurance industry in Nigeria was a paltry 0.3% of GDP and despite the growth since 2005, health insurance is projected to be worth less than 1% of GDP or about N1trillion. With a target of at least 10% of GDP spending on health care and the aim to channel health bills through health insurance, the industry has a potential N10trillion per year. This potential is viewed from the fact that total enrollment for the scheme is about 5million people or three percent of the country’s population.

To improve the coverage government must increase health spending, health insurance should be mandatory for employers, private partnership should be encouraged and community based health insurance model should be encouraged for underserved citizens.

Health insurance business has about five percent profit margin and it is basically volume driven. Health maintenance organisations are not tapping the vast opportunities because there is lack of investment, there is paucity of marketing skills and there seem to be lack of trust due to weak governance.

Benefits and types of health insurance

Private Health Insurance is expensive and mostly patronized by the organized private sector. The NHIS formal sector social health insurance covers federal government workers and is affordable. Employees pay five percent of their basic salaries. The community based health insurance that is very affordable for those in the informal sector but hardly lucrative for the HMOs.

Low penetration of health insurance in Nigeria

Weak governance, the lack of political will, poor regulation and lack of trust, is the major reason why most HMOs are not vigorous to penetrate the market. Other reasons are poor marketing and management skills, excessive emphasis on quick profit and high poverty rates within the communities.

Why companies change HMOs frequently

Poor quality assurance by the HMOs and the hospitals is responsible for this. Sadly, the health insurance industry in Nigeria is ‘homogeneous’- most plans are similar or identical and most HMOs use the same set of hospital on their network.


All stakeholders are beneficiaries despite all the shortcomings. Health insurance seem to improve the health care seeking behaviors of the insured and prevent people being driven to poverty due to health care expenses, firms are able to budget appropriately for staff health care, hospitals are able to plan and budget properly and government is able to achieve improved access to healthcare. However, government still needs to work toward universal health coverage.

Experience as a user

I use private health insurance. It has been helpful and gives peace of mind.





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