Regulate, don’t retail: Nigeria’s Health Insurance Law is blocking very market it needs

By Destiny Eseaga

In July, the National Health Insurance Authority announced that 22.03 million Nigerians now hold health insurance, a thirty-five per cent rise in a year. It was reported as progress, and on its own terms, it is. But place the figure beside its denominator, and the picture inverts. Nigeria has roughly 240 million people.

Twenty-seven years after this country first legislated for national health insurance, and four years after the National Assembly made cover compulsory for every resident, fewer than one Nigerian in ten is insured. Seven in ten still pay at the point of illness, from their own pocket, at the moment they can least afford it.

Now set that against the fiscal reality. The 2026 federal budget allocates ₦2.51 trillion to health. It is a nominal record, and it is still only about 5.2 per cent of federal spending, a third of what the Abuja Declaration asked of us a quarter of a century ago.

The direct budget line for the national insurance function is under ₦1 billion. Anyone who believes the Nigerian state is going to insure 218 million uninsured people from that base has not done the arithmetic.

I have spent much of my working life helping governments assemble the financing machinery of universal health coverage, and I have watched countries with weaker economies and thinner tax bases than ours pass fifty, seventy and ninety per cent coverage within a decade. So let me say plainly what the sector says privately.

Nigeria’s constraint is not diagnosis, and it is not principally money. It is a structural defect written into the National Health Insurance Authority Act, 2022, and faithfully copied into the state laws that followed.

We have built a market in which the referee also plays: it sells the product it supervises, licenses the opposing team, sets the ticket price, collects a levy from its rivals, fines them, and then hears the appeal against its own fine. No market so constructed has ever scaled. Ours will not either.

The clause that undoes the Act
Section 3 gives the Authority a sweeping mandate to promote, integrate and regulate all health insurance schemes operating in Nigeria, and section 3(s) repeats the point for the avoidance of doubt.

This is the language of a regulator, and it is the right language. Section 5 echoes it, empowering the Governing Council to regulate and supervise the schemes and to approve, license, discipline, fine and de-license health maintenance organisations.

Then comes section 13(3): the Authority “shall establish a scheme for the coverage of employees of Ministries, Departments, Agencies in the Federal Civil Service and other relevant groups.” Section 13(4) adds that the Authority shall write that scheme’s operational guidelines itself, subject only to its own Council.

In eleven lines of statute, the regulator becomes a carrier. It now sells to the largest single employer group in the country, under rules it writes for itself, while writing and enforcing different rules for everyone it competes against.

The states have copied the flaw and deepened it. State Social Health Insurance Agencies operate schemes, hold the pooled funds, contract the providers, and, under most state laws, also license, supervise and discipline the very HMOs and third-party administrators they compete with and subcontract to.

Section 32(1) of the federal Act then hands those agencies a captive market by law: every qualifying employer must register and pay into the State Social Health Scheme Fund.
Section 14(3) permits a Nigerian to buy private cover only if he is simultaneously paying into the state scheme, and section 14(4) strips him of any claim to subsidised cover if he does.

The citizen is compelled to buy from the incumbent and penalised for buying from anyone else. That is not a mandate. It is a state monopoly with a mandate attached.

The anatomy of the conflict

This is not an abstract governance concern. The conflict bites in at least nine concrete places, every one of them on the face of the statute.

The regulator is financed by its competitors. Section 42(2) funds the Authority partly from administrative charges levied on private health insurance plans and from fees, fines and commissions it charges, and section 34(1)(d) obliges HMOs to pay it administrative charges.

A supervisor whose budget rises when it fines the firms competing with its own scheme carries an incentive no compliance manual can neutralise.

Solvency rules apply to one side only. Section 15(4) to (8) requires every private scheme to lodge a security deposit in an amount the Authority prescribes, maintained for the life of the business, and section 15(6) allows the Authority to raise that amount at will.

There is no ceiling and no appeal. No equivalent capital, reserving or actuarial solvency requirement is imposed on the Authority’s own scheme or on the state agencies. The regulator can raise its rivals’ cost of capital by fiat while holding none itself.
Licence fees are waived for the incumbent.

Section 17 empowers the Authority to charge licensing fees, “except in the case of a Government health insurance scheme or Authority.” The rule-maker exempts itself, in writing, from the fee it charges everyone else.
So is tax. Section 46 exempts the Authority from tax on investment income and disapplies company and trust taxation to it entirely.

The competitor sets the prices. Sections 3(t), 3(u), and 3(aa) give the Authority power over the format of provider contracts, over the capitation and other payments due from HMOs to providers, and over the three-yearly tariff review. In any other industry, we would call this a competitor fixing its rivals’ input costs.

The competitor approves the products. Section 34(2) provides that any private plan marketed by an HMO is subject to the Authority’s approval. A carrier reviews and may refuse the design and pricing of the plans that would compete with its own.

The Authority judges its own cause. Section 47(1) directs that disputes “shall first be referred to the Authority for mediation and conciliation,” and section 47(2) expressly names the Authority and its agents among the possible parties. The Act contemplates the Authority mediating a quarrel to which it is itself a party.

The board cannot cure it. Section 4(1)(d) places the Director-General on the Governing Council, and section 40(4) makes him a voting member and the Secretary. That Council regulates the schemes competing with the one he runs.

Section 8 requires a member with an interest in a particular contract to declare it and stand aside, which is a sound remedy for an episodic conflict and useless against a permanent one. You cannot recuse a man from his own job description.

And politics has a lever. Section 12 lets the Minister give the Council directives on policy, and section 11(7) hands the Minister the Council’s entire powers whenever the Council is dissolved and awaiting reconstitution.

Add section 49, which lets the Authority sanction insurance companies, brokers and banks already supervised by NAICOM and the Central Bank and section 41, which plants an NHIA office in every state besides the state agency it supervises and the result is not a regulated market. It is a state carrier wearing a badge.

Nigeria settled this question long ago; everywhere else
What makes this so difficult to defend is that we resolved this argument correctly in every other regulated sector.

The National Insurance Commission licenses, supervises and disciplines insurers, and underwrites not a single policy. The Central Bank regulates deposit-taking and divested the banks it once owned precisely so that it could supervise without conflict.

The National Communications Commission regulates telecommunications, and the operator and regulator were priced apart on the day the sector went from fewer than half a million lines to a mass market serving the poor.

Most tellingly, the Petroleum Industry Act of 2021 separated NNPC, now a commercial company, from the upstream and midstream regulators, on the express reasoning that a state operator cannot credibly regulate its rivals.

The National Assembly passed that Act in August 2021. It passed the NHIA Act nine months later and fused what it had just spent a decade separating.

The pension sector is the closest parallel, because it is the same insurance logic applied to a different risk. The National Pension Commission regulates; it administers not one retirement savings account. Licensed private operators compete for members under symmetric rules, and the regulator has no horse in the race.

The outcome is not perfect, and pension coverage still reaches only about twelve per cent of the labour force, a shortfall that should keep us modest about easy comparisons.

But the industry has drawn real private capital, built genuine institutional depth, and accumulated roughly ₦31.5 trillion in assets across some 11.3 million contributors.

No investor has ever declined to enter Nigerian pensions because the regulator might be running a rival fund. In health insurance, that is now the first line on every investment committee’s risk register.

The market Nigeria actually needs
Here is the heart of the matter, and it is not ideological. Enrolling 218 million uninsured Nigerians, the overwhelming majority of them in informal work, is not fundamentally a policy problem.

It is a distribution problem. It requires tens of thousands of agents, cooperatives, market and artisan associations, microfinance banks, mobile-money networks, pharmacies, faith-based organisations and digital platforms, each with a commercial reason to get up in the morning and sign somebody up.

No civil-service agency on a fixed headcount and an annual appropriation has ever built a distribution network of that density, anywhere in the world. Private carriers do it because their revenue depends on it.

Risk-bearing needs capital, and capital is the second reason. A country spending 5.2 per cent of its federal budget on health cannot underwrite a mass market from the treasury.
Private balance sheets can, and Nigeria already has the beginnings of an industry ready to deploy them, with established carriers operating provider networks that run into the thousands of facilities.

What that industry lacks is not competence or appetite. It is the assurance that the authority licensing it is not also its competitor.
The third reason is innovation. Mobile enrolment, telemedicine, drug benefit management, parametric micro-products for traders and farmers, premium collection in daily and weekly increments matched to informal cash flows: none of this emerges from a monopoly. It emerges from firms trying to win customers from each other.

The fourth reason is sustainability, and it is the one policymakers most consistently underestimate. When a state agency both prices and sells the product, the premium becomes a political number rather than an actuarial one. It is set below cost because raising it is unpopular.

The scheme then falls into arrears with hospitals; hospitals quietly turn enrollees away or demand cash at the counter; enrollees conclude the card is worthless and stop paying; and coverage stalls.

I have watched that doom loop run its course in more than one country, and the wreckage takes a decade to clear. Nigeria is early in that cycle, not immune to it.

Three jobs for the government, and only three
A private-sector-driven system does not mean an absent state. It means a state doing three things properly instead of four things badly.

First, regulate. One neutral supervisor, licensing every carrier on identical terms, setting capital and reserving standards, certifying actuaries, defining the mandatory minimum benefit package, policing market conduct and claims payment, and protecting enrollees.

That is a serious, technical, full-time job, and it is the job the NHIA Act was right to create and wrong to compromise.

Second, strengthen the system. An insurance card is worthless without a functioning clinic behind it. Primary health care infrastructure, the health workforce, quality accreditation, provider empanelment, and a national health information exchange are public goods that no carrier will finance alone.

It is worth saying that this is precisely where the Authority’s recent work has been strongest, with more than seven thousand facilities assessed under a structured quality framework and tens of thousands of frontline workers trained. That is the right use of public capacity.

Third, pay the premiums for those the market cannot reach. The government has two legitimate pools of its own. As an employer, it should buy cover for its workers at the federal, state and local level, exactly as any other employer must under section 14.
And as a guarantor of last resort, it should provide cover for the vulnerable and the indigent through the Vulnerable Group Fund and the Basic Health Care Provision Fund. But note the verb: pay for, not operate.

Government should be the purchaser and financier of these two pools, buying administration and risk-bearing from licensed carriers selected competitively.

The state writes the cheque and sets the standard. It does not need to run the call centre, and it certainly does not need to license its own competitors.

The equity objection, and the technical answer

The objection I hear most often from officials is that private carriers will cherry-pick the healthy and abandon the poor. It is a serious objection, and it deserves a serious answer rather than a slogan, because a badly designed private market will do exactly that.

The answer is well established, and Nigeria should legislate it. Make the mandatory benefit package subject to guaranteed issue, so no licensed carrier may refuse an applicant or price the statutory package on individual health status.

Make the subsidy portable, so that a vulnerable person’s premium, financed from the Vulnerable Group Fund, follows them to whichever licensed carrier they choose rather than tying them to a state monopoly.

And establish a risk-equalisation fund, so that carriers enrolling older, poorer or sicker members are compensated from those enrolling younger and healthier ones.

Under that architecture, competition works on service quality and efficiency instead of on risk selection, and the carrier with the best rural network has a commercial reason to want the poorest enrollees.

This is not a theory. The Netherlands runs competing private insurers under exactly this combination of guaranteed issue, community rating and risk equalisation, with a separate authority supervising them.

Chile operates a public fund alongside private carriers, with a Superintendence of Health above both, holding each to the same explicit guarantees and selling nothing. The Philippines moved supervision of health maintenance organisations out of the Department of Health and into the Insurance Commission in 2015, reasoning that HMOs and insurers do the same thing and should face the same specialist supervisor.

Germany supervises its sickness funds through a federal office that operates no fund. Rwanda moved community-based insurance out of the health ministry into its social security board and now covers more than nine in ten citizens.

The systems differ enormously in ideology. They agree on one point: the hand that writes the rules must not take the premium.

What the National Assembly should do
None of this diminishes what the 2022 Act got right, and it got much right. Mandatory cover was correct.

The Vulnerable Group Fund was correct. Stripping HMOs of fund-holding, after years of documented abuse, was correct and overdue.

The current management has raised capitation sharply, lifted fee-for-service reimbursement, and resolved the large majority of enrollee complaints within time.

These are real achievements by serious people. The argument here is not against the Authority; it is that no leadership, however capable, can outrun a defective statute, and that today’s reforms will not survive a less scrupulous successor unless the structure itself changes.

An amendment bill should do eight things. Repeal sections 13(3) and (4), and convert the federal public-employee scheme into a sponsored pool whose administration and risk-bearing are bought competitively from licensed carriers, leaving the Authority a pure regulator on the NAICOM and PenCom model.

Require every state, through a model law developed with the Nigeria Governors’ Forum, to strip its agency of all regulatory powers and confine it to financing and purchasing cover for state employees and the vulnerable.

Open the mandate so that any NHIA-licensed carrier may satisfy a citizen’s obligation under section 14, and repeal the forced double-payment in section 14(3) and the subsidy forfeiture in section 14(4).

Impose symmetric prudential standards on every carrier, public schemes emphatically included, with the section 15 security deposit fixed by published regulation rather than discretion.

Fund the regulator from appropriation and a transparent levy applied identically to all carriers, and direct every fine to the Vulnerable Group Fund rather than to the regulator’s own budget.

Replace the section 47 self-mediation regime with an independent Health Insurance Tribunal and a statutory Ombudsman, before whom the Authority may be sued as an ordinary party.

Legislate guaranteed issue, portable subsidies and a risk-equalisation fund as the price of market entry.

And restructure the Council so that no executive who operates a scheme votes on its regulation, while confining ministerial directives under section 12 to policy proper, expressly excluding licensing, tariff and enforcement decisions.

The window is now

Nigeria is not short of health financing expertise, and it is certainly not short of law. It is short of the single institutional discipline that every country reaching universal health coverage has eventually accepted: that the body writing the rules must have nothing to gain from how they are applied, and that a government which cannot afford to insure everybody must instead build the market that can.

We accepted the first half of that proposition for banking, insurance, pensions, telecommunications, power and petroleum.
Health is the one sector where we wrote the opposite into statute, and it is the sector where the cost of being wrong is counted not in naira but in funerals.

Twenty-two million covered and 218 million exposed is not a plateau we should be willing to defend in 2030.

Let the state regulate, build the hospitals, and pay for its workers and its poor. Let a properly supervised private market do the thing markets are actually good at, which is finding customers. Separate the referee from the player, and Nigerian health insurance will finally have a reason to grow.

Eseaga, Communication Marketing Expert, based in Lagos