Perception of Health Insurance Participation in Nigeria

Nigeria’s National Health Insurance Scheme (NHIS), established in 1999 but operational since 2005, has been faced with numerous challenges including the failure to mandate enrollment for the entire population and the consequent lack of adoption at the state government level.

Thus, only about 5 million Nigerians, representing 3% of the population, have insurance coverage through the NHIS and these are mostly members of the formal sector, particularly federal civil servants. To that end, in 2014, the NHIS decentralized the implementation of the country’s social health insurance program to the states in the quest to accelerate progress towards universal health coverage (UHC). 

In 2015, Lagos state was the first of the 36 states and Federal Capital Territory to pass the State-Based Health Insurance Scheme (SHIS) into law. The Lagos State Health Scheme (LSHS) was designed as a mandatory health insurance program to enroll all Lagos state residents and reduce the financial burden of obtaining care while improving access to quality care.

Public and private healthcare providers are crucial to the rollout and success of this insurance program. Their ability to cooperate and participate in insurance importantly determines the extent and quality of care that population members would access. However, there is little understanding in Nigeria and in many other low- and middle-income countries (LMICs) on how to effectively engage providers, what type of providers join or choose not to join an insurance program, and why they do so. 

Prior to the passage of the LSHS, Lagos state rolled out three community-based health insurance (CBHI) schemes, which altogether enrolled close to 40,000 community members. A program assessment done in 2010 reported some positive outcomes relating to quality of maternal and neonatal services and patient satisfaction. However, the assessment also noted a high turnover rate among participating members and healthcare providers. In addition to the CBHI, Lagos state also has residents registered with the NHIS and private health insurance plans through Health Maintenance Organizations (HMOs). 

For the NHIS enrollees in Lagos, actual numbers are unknown, although they are few, mostly formal sector workers in the federal civil service, and many registered patients have increasingly complained about the poor quality of care received. In the commercial market, the number of Lagos residents with private health insurance is also unknown, though it is accessible primarily to the wealthy and for some employees largely through employer benefits. In a nationwide poll, about 2% of Nigerians have private health insurance, many of which live in Lagos. 

HMOs are a major part of health insurance in Nigeria. For the NHIS, they serve as an intermediary between the providers and the insurance scheme. HMOs receive payments from the NHIS and are supposed to disburse funds to providers based on the volume of insured patients in the health facility: capitation for primary care and fee-for-service (FFS) for quantities of secondary level care services provided to an insured patient. For private insurance, the HMOs collect premiums from individuals, companies or groups and negotiate with facilities to provide services to the individuals at an agreed service rate. According to the NHIS online directory, there are about 60 HMOs accredited nationwide by the NHIS. 

On the provider side, there have been complaints in the public media suggesting widespread dissatisfaction about the low tariffs, delayed payments, increased administrative burden and the losses incurred from participating in government and private insurance plans. Some, as a result, have discontinued participation or have not been motivated to participate in any insurance program. For example, a study in 2014, examined the uptake of NHIS among 180 private healthcare providers in Lagos state and found that only 61% of the respondents accepted NHIS patients. In addition, half of the respondents were dissatisfied with the operations of the scheme citing reasons such as inability to reimburse payment for services and subsequent losses that were incurred.

Theoretical framework

The two-sided economic theory by Sloan and colleagues can be used in the analysis of health insurance markets and provider response to insurance. This theory suggests two markets in which providers sell their services. The first is the private market where providers are the price setters, determining the amount to charge for services offered to each patient paying out of pocket or via private insurance. The other is the public market, where providers are price takers, accepting the fee offered by a public program like the Lagos State Health Scheme without charging additional fees to the patients.

Providers can act as imperfect agents of patients, desire to maximize profit, and thus, prefer to serve patients in a market where they can generate more income. This suggests that the extent of provider participation in any program would be determined by their assessment of the benefits and costs of participating in the program. Studies done in countries like the United States have identified several factors that may influence a provider’s assessment of the benefits and costs of participating in an insurance program. For this paper, each factor has been categorized under one of four characteristics: insurance program characteristics, beneficiary characteristics, health facility characteristics and the market characteristics. 

Under the insurance program characteristics, the reimbursement fee, amount of paperwork, speed of processing payment, inappropriate claims reductions and denials can influence provider participation. For example, studies have shown that providers respond better to insurance programs that have high reimbursement fees, lower amount of paperwork, short processing time for reimbursements and lower probability of reducing and denying claims.

Under the beneficiary characteristics, the difficulty of patients defined by health need or risk level of beneficiaries, ability of patients to understand insurance benefit packages and income level of patients may influence provider participation in an insurance program. Providers may prefer to have low-risk patients since they tend to utilize less care compared to high-risk patients. In addition, patients who understand the insurance benefit package are less likely to have a poor attitude towards their providers, have unrealistic expectations of the care they receive and are likely to be more compliant with their treatments and medications. 

Furthermore, providers may prefer patients with high income who can pay out of pocket and recover any insurance benefits later. This payment process eliminates any administrative burden on the provider in filing and collecting insurance claims. 

The characteristics of a health facility may also influence provider participation in an insurance program. For example, providers who offer care as specialists may be less likely to participate in an insurance program because of their advanced training and need to command higher fees compared to providers who are generalists and offer care at the primary level. In addition, the location of the health facility may influence provider participation. Health facilities located in a low-income area, rural area, areas with few health facilities and a low concentration of beneficiaries may be more likely to participate in an insurance program. 

Furthermore, the size of the health facility may influence provider participation. Health facilities with a high number of beds and high volume of patients capable of paying out-of-pocket may not be incentivized to participate in a government insurance program. Similarly, health facilities which accept and have a high volume of privately insured patients may not be willing to participate in a government insurance program. 

Finally, the characteristics of the market that affect the productivity of a provider such as the ease for providers to access capital and labor in the market, and the associated costs of accreditation, recruiting and training of staff, may influence provider participation in an insurance program. For example, the easier it is for a provider to access capital, the more likely it can improve its infrastructure, recruit and train staff needed, achieve accreditation, and increase revenue from additional insured patients. It is more likely in the end that it would participate in an insurance program.


Shobiye, H. O., Dada, I., Ndili, N., Zamba, E., Feeley, F., & de Wit, T. R. (2021). Determinants and perception of health insurance participation among healthcare providers in Nigeria: A mixed-methods study. PloS one, 16(8), e0255206.

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