Health Insurance AViable Approach to Financing Health Care in Nigeria? Written by IbukuR-Olowo Ogunbekun MBBS MPH MA Pnvate InlflatlYes for Pnmary Healthcare Project :r":: -:'!'~! Research &- Tramlng Institute 1616 N Fort Hyer Drive' II th Floor Arlington VA 22209 nBS document was produced bv the Pnvate InItIatives for Pnmary Healthcare Project under Coop­ erative Agreement No HRN 5974-A-00-2053 00 wIth the US Agencv for International Develop ment Global Bureau Office of Health and NutntlOn July 1996 ••••••••••••••••••••• • TAil E OF (0 N TEN T S • • • • • Amnyms Ack nowledae mea II EImtlYt Summary IntrodlCtllB 11 NatIOnal Hultb Imram Schmt (NHIS) 12 PrIVate Health Imrlou n Informal Prepayment Schemes ('ntry Wemea Ammon of Nigeria (COWAN) n OPtions for Improma Accen II (are 41 (ODelmon 48 NGtes 49 Blbillgraphy 51 Abut 11I1111m! 54 - 3- ACRONYMS CBD Community-Based Dlstnbutors COWAN Country Women AssociatIOn ofNlgena FMOH Federal MInistry of Health FMOHSS Federal Mmlstry of Health and Social Services FFS Fee-For-Servlce GPI Gross PremIUm Income HDF Health Development Fund IGJ Industnal and General Insurance Company lSI InternatIOnal Standard Insurers HSS Health Savmgs Scheme N Naira NGO Non-Governmental OrganizatIOn NHIC NatIOnal Health Insurance CouncIl NHIS NatIOnal Health Insurance Scheme NHF NatIOnal Housmg Fund NIC NewlIne Insurance Company NPF NatIOnal ProVIdent Fund PPFN Planned Parenthood Federation ofNlgena PrHI Pnvate Health Insurance RIHFPP Rural Integrated Health and FamIly Plannmg Program SHIB State Health Insurance Board SIC Shelter Insurance Company SMOH State Mmlstry of Health VHP Voluntary Health (Insurance) Plan .... .... .....".= -= -= -.... = a A(HNOWlEDGMENTS I express profound gratitude to all who assisted In the collectIOn of maten­ als for this paper especially, the officials of the Insurance and reinsurance compantes surveyed, the Federal Ministry of Health and SOCial Services, COW AN, executive committees of health sector professIOnal aSSOCiatIOns, and Gusle Associates Ltd SpecIal thanks also to ElIzabeth Olubusl, T T Mirilla, Bolade Lasakl, Nlke Ogunbekun, Margaret Bodede, Uche Ekenna and the reviewers of the first draft of the paper for the support and useful comments provided All errors remain the responsIbility of the author 100 ............ --=-= II EXECUTIVE SUMMARY Proposals for reformmg health care financing In Nlgena have been under consideratIOn for more than ten years The need for reforms arose from government's Inablhty to continue financing the bulk of expenditures on health care as economic recesSIOn had substantIally reduced the mflow of revenues since the early 1980s, 90 percent of which was denved from the sale of crude 011 In 1992, the Federal Ministry of Health and Social Ser­ vices (FMOHSS) opted for a NatIOnal Health Insurance Scheme (NHIS) to be Implemented In phases In four of the thirty states of the federatIOn, beginning With workers m formal employment Employers m these selected states With ten or more workers, Will compul­ sonly msure their employees under the scheme The NHIS will be admin­ Istered by a parastatal that would be superVised by the FMOHSS It IS envisaged that the NHIS Will cover SIX mllhon people m the first phase (about 7 percent of the populatIOn), progressmg eventually to those 10 the Informal sector and the rural populace The decree estabhshmg the NHIS IS yet to be signed Into law but the scheme has already faced tremendous oppoSItIon from vanous Interest groups notably the labor UnIons, pnvate sector employers and key profeSSIOnal assocIatIOns 10 the health sector In the NHIS each contnbutor (along With hIs dependants) Will register WIth only one provider and shall be entitled to comprehenSIve health care benefits, subject to a 'waltmg penod' of five months Benefits Include personal preventive services ambulatory and m-patlent care maternity and family plannmg services diagnostic services drugs limited dental and optical services as welJ as prostheses A fee of NO 50 (about US$O 03) per prescnptlon shall be paid by the patient Hospitalization m a pnvate facil­ .... Ity shall attract a 10 percent co-payment hospitalizatIOn m a public facIl­ =- Ity will not Involve cost-shar1Og In order to encourage the preferential use of pubhc services -~ The scheme Will be admmlstered at the state level by the State Health In­ - surance Board (SHIB) to which payroll contnbutlons In each state shall be D forwarded At the federal level, overall responsibility for the scheme will rest with the National Health Insurance Council (NHIC) The SHIB will enter mto contractual arrangements with primary prOViders which can be either public or private facilities The latter can then contract With 'sub­ providers of variOUS services covered by the scheme (e g m-patlent phar­ maceutical, laboratory and x-ray services) The bulk of the reimbursements to health care prOViders Will be capItation payments remItted quarterly by the SHIB and based on the number of persons registered WIth the prOVider at the end of that period The rates are to be reViewed annually and must be accepted by the prOVIder as payment m full for serVIces delivered Payment for hospItalization beyond twenty­ one days and for treatment receIved m tertiary care centers, are to be borne directly by the SHIB Primary prOViders WIll be allowed to stock drugs and dispense directly to patients However, thiS service could be sub-con­ tracted to pharmaCies If so desired, m wllIch case, the latter's bills Will be settled by the primary prOVIder ThiS provlslO has been rejected by phar­ maCIsts who remam strongly opposed to the NHIS ReservatIOns have been expressed regardmg the publIc sector's capacity to manage such an adminIstratively cumbersome scheme, gIven the poor performance of most publIc enterprises such as the National Housmg Fund (NHF) and NatIOnal PrOVident Fund (NPF) It IS further argued that for a country which has hmlted techmcal capacity m the areas of health man­ agement and financmg, attemptmg to cover SIX millIon people from the outset would appear a somewhat ambitIOUS undertakmg that could further Jeopardize the chances of success In the absence ofmeanmgful competi­ tIOn from other plans It IS feared that a monopsonistic health plan lIke the NHIS could become so large as to encourage mIs-management of pooled ....co funds whtle bemg msensltlve to the needs of the consumer Such a devel­ .... opment would stIfle growth, and mvarIably, the abtllty to extend coverage ""'" to those m the mformal sector and rural areas wlthm a reasonable period of time ......... 0:::: ....co """ Private Health Insurance (PrHI), on the other hand IS Just developmg m -0:::: the Nigerian market Currentlv there are four wholly private companIes marketmg health Insurance plans m the country -- three of these are based co ::z:::.... m Lagos and one m Enugu The compames offer primarily group plans D and cover employees 10 the highly commercIal and mdustnal regIOns of the south The pool admlmstered by each company IS very small, the larg­ est bemg less than 18,000 (benefic lanes mcluslve) It IS estimated that only about 003 percent of the total population was covered by private health msurance as at July 1995 Growth of private health msurance has been hmlted by a mYriad of factors, mcludmg the lack ofpubhc confidence 10 the msurance mdustry, !tmlted techmcal capacity for underwntmg this class of risk, poor knowledge of the natIOn's private medical care market, high prevalence of fraud on ex­ Istmg schemes, and the absence ofremsurance backup In some mstances, claims have grown much faster than premlUm mcomes, threatenmg the Viability of pnvate health msurance schemes This IS largely the result of fee-for-service (FFS) payment arrangements (with no fee schedules) and the absence of effective cost-sharing formulae Mechanisms for mOnltor- 109 the quahty of care rendered by providers are weak and the market IS not expected to witness slgmficant growth In the foreseeable future Informal prepavment arrangements 10 the country are under-reported As such, the potentials and lImitatIOns of this finanCing optIOn are not well understood One such scheme IS managed by the Country Women Asso­ ciatIOn ofNlgena (COWAN) a rural cooperative umon which has oper­ ated a credlt-hnked Health Development Fund (HDF) smce 1989 The HDF IS a component of COW AN s Rural Integrated Health and Famtly Plannmg Program which IS Implemented usmg a network of 370 commu­ mty-based distributors of family planning commodities Each registered group With a membership offive to ten persons contnbutes monthly fixed amounts to the Credit Scheme (comprIsmg the Dally Savmgs' and Trust Fund) as well as the HDF In 1995 the monthly rates of contributIOn per group stood at N I 200 (US$14) for the Dally Savmgs fund N20 ($0 24) for the Trust Fund and N 10 ($0 12) for the HDF These contributIOns entitle members to credit faCilities for agricultural and commerCIal activI­ ties, as well as loans for covering the cost of catastrophic' Illnesses (usu­ -..... ally Involvmg hospltahzatlOn) =- - D The total contributIOn to the HDF IS very low, loan disbursements aver­ aged around 87 percent of contributIOns between 1992 and 1994 Average value of loans per beneficiary was less than N4 000 and full repayment was achIeved m almost all the cases wlthm twelve months, supportmg the view that the poor are credit-worthy An mterest rate of t\\O percent per month IS charged on loans after a grace penod of three months The lmkage of a credit scheme with prepayment for health care makes thIs an attractive model