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1.1       Background of Study

Healthcare delivery is highly segregated in less developed countries, as well as in many developed economies. In these segregated health economics, a large proportion of health seekers are uninsured and purchase their healthcare from a subsidized public sector, while a smaller proportion purchase their healthcare from a highly developed private sector, where purchases are often, at least partially covered by a third-party insurance contract. For those who are uninsured, efforts to obtain healthcare will create out of pocket expenditures, and these expenditures affect their ability to purchase other items. Uninsured health seekers may need to draw down their savings, sell assets or substitute away from other household goods.

Despite potential out-of- pocket expenditures, many consumers remain uninsured. One possible explanation for the lack of insurance coverage observed in many countries is that information asymmetries result in insurance market failure, while another possible explanation is that insurance is unaffordable given current conditions. Regardless of the reason for low health insurance coverage the initial recourse for uninsured health-seekers is the public sector, placing pressure on service delivery, which, in turn, leads other uninsured health seekers to by pass the public sector for better quality private sector care, despite the higher costs. In response to these pressures, governments have been pushing to increase insurance coverage.


Government and health officials have employed, or are contemplating the employment of numerous policies, such as compulsory insurance for public sector employees and subsidized voluntary insurance cover for the informal sector. These policies are generally meant to ensure formal sector employees, although the inclusion of informal sector employees in these schemes is likely to be an important feature in less developed countries (LDCs), given the size of the informal sector (Nigeria for an example).

However, the primary benefit of compulsory insurance is the inclusion of all consumers within the same pool, resulting in cross-subsidization. By treating everyone equally, compulsory insurance reduces the pay-off associated with assortative matching, and, thus, alleviates adverse selection, while simultaneously reducing the cost of insurance for high-risk consumers although there is often no direct fee for service, especially in poorer developing countries, consumers are subject to opportunity costs related to transport and queuing.

1.2       Statement of Problem

In Nigeria today, old age is not synonymous with disease. The changing lifestyles, high level of competition and environmental pollution have resulted in various health related problems. One of the major concerns facing families in Nigeria thus relates to health care. Health care it is not only expensive but is also time consuming and physically demanding for family care givers. Nigeria is faced with continued severe economic and social crises; many households in Nigeria can no longer afford the basic necessities of life for their members. The ability of households to cope with adverse economic conditions has been stained. Difficult


trade-offs continue to be made in an attempt to keep households afloat. Nutritional intake and other health-enhancing inputs into the household health production function, such as leisure and sports, have either been reduced or eliminated altogether from the household schedule.

These social upheavals have led to breakdowns in the health of individuals, households and communities. Due to economic barriers many households can hardly afford medical care. The report of illness is delayed until the illness becomes severe because cost of medical care has to be weighed against other pressing household needs such as food and education. Under such conditions, children are usually the most vulnerable group, given their physical weakness .The devastating effect of poor health harms the productivity of individuals, as a healthy population is a prerequisite for a successful development.

The health insurance scheme is a safety net, but the scheme covers those in the federal government pay-roll, organized private sector (ops), and few state government employees. However, the formal sector employees is less than 5% of the total population of the country while 95% of the population are in the informal sector of the economy which statistically means that Nigeria is uninsured health wise. Also, there have been a lot of complaints from those that are covered by the scheme (formal sector) stating poor service delivery on the part of health care providers.

Recent debates have revolved around extending health insurance coverage to a wide range of the population which the law (Act) establishing the National Health Insurance scheme provided for (self employed Urban dwellers and Rural


community insurance scheme). Though the scheme will place competing demands on the family budgets but the importance of quality and accessible healthcare cannot be over emphasized.

In addition, the general state of the nation’s health care services is poor, hence there is excessive dependence and pressure on government provided health facilities. There is also dwindling funding of healthcare in the face of rising cost and poor integration of private facilities in the nation’s healthcare delivery system. These problems constitute a serious hindrance to healthcare services in Nigeria.

1.3       Objectives of the Study

The primary purpose of this study is to avail healthcare policy-makers, planners and other healthcare providers in Nigeria of some health insurance demand parameter estimates that are necessary for effective policy-making. The specific objectives of the study are:

1.                 To identify the factors that determine enrollment benefits in the process of the demand for healthcare services.

2.                 To identify the factors that will determine the demand for or purchase of health insurance cover by the informal sector in Nigeria.

1.4       Research Hypotheses

The two hypotheses put forward for testing in the study are as follows as arranged in null.

1.                 Timely service, communication, human approach, medical check-up, access friendly, product variety, service extension, immediate attention,


formalities and adequate facility are not the major determinants of the enrollment benefits of the health insurance scheme.

2.                 Cost, income, security, tax rebate, economies, plan features, savings, awareness, premium and household size are not the major factors that influence the purchase of health insurance cover.

1.5       Significance of the Study

Of all the risks facing households, health risks pose the greatest threat to lives and livelihood. Health problems thrust expenditure on households at a time when there is a resultant fall in income due to the health problem. Moreover, the uncertainty of the timing of illness and unpredictability of its costs make financial provision for illness difficult because households medical insurance coverage separates time of payment from time of use of medical service thus putting medical treatment within the reach of the insured household.

The study intends to avail healthcare policy-makers and planners of medical insurance demand parameter estimate that are necessary to maximize benefits and increase health insurance coverage and effective policy making.


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