Introduction
Healthcare financing in Nigeria continues to be dominated by out-of-pocket spending and weak insurance coverage, resulting in high rates of financial hardship and poor health outcomes. To address these systemic failures, this article proposes a state-led, trust-managed model that repositions the government as financier and regulator while empowering private-sector non-profit health trusts to manage service delivery. This model focuses on mandatory insurance coverage, targeted subsidies, and a decentralised network of trust-managed primary and secondary health care centres.
Key components of the model
1. Enabling laws for mandatory insurance
Each state passes legislation mandating health insurance for all residents. This law establishes a State Health Insurance Authority (SHIA) responsible for regulating providers, managing subsidies, and enforcing enrollment, with penalties for non-compliance.
2. Targeted ring-fenced state subsidy for a defined segment
States identify a target population—e.g., 50 percent of residents—for full premium subsidies. For a state with 6 million people, this means 3 million indigent and vulnerable citizens will receive ₦20,000 per annum per person in state-financed premiums, totalling ₦60 billion annually. This amount (based on the state’s capacity) should be ring-fenced by law, with provisions for increments adjusted yearly against inflation rates.
The state could do 20-50 percent, depending on the level of indigency in the population, or pay slightly lower (N15,000 as against N20,000) for a limited range of pre-defined service packages. The key goal here is to ensure the sustainability of care provision under a viable market structure.
This becomes the core health expenditure line for the state government, ensuring that financing is tied directly to citizens and demand, rather than facilities.
Note that the choice of 20,000 enrollees per PHC is based on an estimation of a minimum enrolment size required to sustain the economics of a PHC. The state can also decide to provide special incentives in rural locations where individuals are much more sparsely populated. Hence, the premium need not be uniform across the state.
3. Transfer of state facilities to health trusts
All Primary and Secondary Health Care Centres are transferred to Private Health Trusts (PHTs) on leasehold management. These trusts must be non-profit entities registered as incorporated trusts with strong governance and accountability frameworks.
Each Trust is assigned an average of 20,000 fully subsidised enrollees, receiving ₦400 million annually (20,000 x ₦20,000). However, trusts are permitted and encouraged to enrol more individuals and families from the private and informal sectors at standard market rates, expanding their financing base and impact.
Each trust must be registered with the professional health association and work in collaboration with key unions to secure cooperation.
Each trust would be required to have a reinsurance mechanism to ensure risk pooling.
Trusts can receive cash and in-kind donations from donors and other private corporate social responsibility initiatives.
4. Facility use and rental agreements
Trusts operate from existing state-owned facilities under lease terms, paying asset-use rent to the state. This ensures sustainability of infrastructure and introduces a revenue stream to the public treasury.
5. Service scope: Primary and secondary care
Each Trust manages an integrated network of facilities that deliver both primary and secondary care services. This reduces referral delays, strengthens care continuity, and maximises resource use within local health economies.
To serve a 6 million-person population, where a state is subsidising 50 percent of enrollees, a minimum of 150 fully functional primary and secondary care centres are required, each managed by a trust responsible for at least 20,000 state-sponsored enrollees.
Additional enrollees from private payers or employer groups expand the service load.
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6. Performance-based regulation
The State Health Insurance Authority (SHIA) enforces performance benchmarks tied to clinical outcomes, enrollee satisfaction, claims management, and infrastructure maintenance. Underperforming trusts can lose their management contracts and be replaced through a competitive selection process.
The SHIA will, in partnership with a private provider, establish a shared health IT backbone for claims, identity, and analytics.
To ensure transparency, the SHIA should develop a Trust Governance Code and publicly list the licensed trusts with performance ratings on an annual basis.
7. Centralised bulk purchase platform
Trusts form a Medical Bulk Purchase Platform (MBPP)—a joint procurement platform for medicines and medical equipment. By aggregating demand, the MBPP reduced unit costs, combats drug price inflation, and ensured a consistent supply of quality products.
8. Human resource standards
Trusts are required to maintain minimum staffing ratios, for example:
● 1 doctor per 2000 enrollees (this is currently above the national average of 1:3500)
● 1 nurse per 1000 enrollees
● At least 1 specialist per facility
Wage structures are state-set but pre-agreed with the Trusts, ensuring competitiveness and sustainability.
9. Graduated co-pay system
Fully subsidised enrollees pay higher co-pays (e.g., 30%) for services and drugs, while private enrollees pay lower copays (e.g., 10–15%). This creates incentives for subsidised users to transition to standard market packages over time, easing the long-term fiscal burden.
10. Health Infrastructure Investment Fund (HIIF)
The state establishes a low-interest, long-tenure Health Infrastructure Investment Fund to finance capital investments by Trusts. This fund supports the upgrade of facilities, equipment procurement, and digital health solutions—lowering entry barriers for quality service providers.
Limitations and assumptions
The effectiveness of this proposal relies on several key assumptions and is subject to specific limitations.
Key assumptions
● Fiscal capacity: It assumes that state governments can sustainably commit between ₦60 billion annually to finance premiums for their populations.
● Health workforce availability: The model presumes the availability of sufficient doctors and nurses to meet minimum ratios.
● Minimum economic scale: The viability of each trust is predicated on enrolling at least 20,000 per centre—an assumption that may not hold in low-density or rural LGAs.
● Legislative stability: The model depends on political continuity and legislative safeguards to maintain subsidy levels, enforce mandatory insurance, and protect trust contracts.
● Market participation: It assumes that the informal and private sectors will enrol voluntarily in sufficient numbers to complement public subsidies.
Limitations
● Transition risks: The administrative, legal, and labour restructuring required to shift public hospitals to trusts could face resistance and delays.
Conclusion
This proposed model redefines the role of state governments in health care—from providers to strategic buyers, regulators, and enablers. By funding the poor, enabling trust-based non-profit service delivery, and ensuring accountability and financing innovation, states can achieve Universal Health Coverage (UHC) without donor dependence.
Drawing lessons from models in Japan, Germany, and Kwara State’s CBHI pilot, this framework localises global best practices into an actionable, scalable blueprint. It positions Nigeria’s federating units as champions of health system transformation—building resilient, responsive, and financially sustainable health ecosystems from the state level outward.
Nelson Okwonna is the CEO of Octoville Development Company, an impact advisory and venture studio company with a thriving healthcare practice.
