Govt’s health insurance program in financial crisis with Rs 18 billion in dues

Kathmandu / April 6: The country is all set to mark the ninth anniversary of its national health insurance program on Monday, April 7. Launched in 2016, the program has expanded access to healthcare services across the country—but now faces a severe financial crisis, with unpaid hospital claims amounting to Rs 18 billion.

Although Nepal initially introduced its health insurance scheme on August 21, 1968, in honor of the then Queen Indra Rajya Laxmi Shah’s 41st birthday, the program was later discontinued. The government reintroduced the insurance program in 2015, and it officially began on April 7, 2016.

Over the past nine years, the program has improved healthcare accessibility, but poor financial management now threatens its sustainability. The Health Insurance Board (HIB), which oversees the program, has not been able to clear mounting dues to hospitals, mainly due to delays in government funding.

Under the scheme, a family of up to five members pays Rs 3,500 annually and is eligible for treatment worth up to Rs 100,000 at participating hospitals. These hospitals treat patients without charging them directly and submit claims to the Board for reimbursement. Currently, 485 hospitals are enrolled in the program.

However, the Board has not settled Rs 18 billion in dues—Rs 2 billion of which dates back to the previous fiscal year. Hospitals now submit claims worth Rs 2 billion each month. In the Nepali month of Falgun (mid-February to mid-March), the government released Rs 3 billion to cover part of the backlog, but the financial gap remains unaddressed.

The Board collects around Rs 4 billion annually through insurance premiums, which falls far short of the program’s growing expenses. Although the government provides subsidies to bridge the gap, delayed disbursements have disrupted service delivery.

In a country where over 20 percent of the population lives below the poverty line, the health insurance program is vital. It has enabled low-income families to access medical care. However, limited coverage, poor oversight, and financial mismanagement have pushed the program toward collapse.

Of Nepal’s 29.165 million population, only 8.99 million people have enrolled in the program, and just 5.753 million have active insurance—representing only 19.72 percent of the population. Efforts to expand coverage have fallen short, and over half of the enrolled population has not renewed their policies.

Compounding the issue, nearly 48 percent of insured individuals are utilizing health services—far higher than the standard benchmark of 15–20 percent. This high usage rate, combined with alleged over-treatment by hospitals and excessive claims by patients, has inflated costs.

Hospitals, expecting eventual government reimbursement, have reportedly provided unnecessary treatments. Meanwhile, the Board has failed to implement adequate oversight to curb such practices. As a result, the program’s Medical Loss Ratio—which measures how much of the premium is spent on services—has ballooned to 220 percent. In comparison, an acceptable ratio is typically around 80 percent.

According to the Board’s data, an insured family pays Rs 3,800 annually on average but receives benefits worth Rs 8,250.

The Board plans to release a white paper on Monday to reveal the program’s financial condition. Sources say the program has succeeded in expanding service access, but fiscal mismanagement remains a serious concern.

“Citizens’ participation is increasing, but not at the required scale. If the program had grown further, revenue would have risen, and the government could have stepped in with more subsidies. Despite its success in service delivery, financial sustainability is now the biggest challenge,” a source said.

“As of today, we still owe Rs 18 billion to hospitals. The debt is rising by Rs 2 billion each month. We don’t have the funds. Shutting down the program is not an option—we must find a way to restore financial balance,” the source added.