Nepal’s Health Insurance Crisis: Why the National Health Insurance Programme is on the Brink and What It Means for Universal Health Coverage

• Prakash Subedi

1. Introduction: A System in Cardiac Arrest

The promise of “health for all” in Nepal is currently facing a life-threatening crisis. On January 15, 2026, the Tribhuvan University Teaching Hospital (TUTH)—the nation’s premier referral center officially terminated all treatment services under the National Health Insurance Programme (NHIP). The hospital administration cited an unsustainable monthly loss of Rs 20 million and a staggering backlog of unpaid claims exceeding Rs 400 million. TUTH was not alone; the Manmohan Cardiothoracic, Vascular and Transplant Centre followed suit, while major provincial centers like Lumbini Provincial Hospital warned they were on the verge of closure due to Rs 247 million in arrears.

As of early 2026, the Health Insurance Board (HIB) owes approximately Rs 10.5 billion to over 500 healthcare facilities nationwide. This financial hemorrhaging has reached a point where the board exhausted its entire annual government allocation of Rs 11 billion and its premium collection of Rs 3 billion just four months into the fiscal year. For the millions of Nepalis who have pinned their hopes on this scheme to escape the cycle of poverty driven by medical debt, the “backbone” of Nepal’s health sector is now on the brink of collapse. 

2. Background: The Architecture of Social Protection

The NHIP was launched in 2016 (piloted in Kailali, Baglung, and Ilam) with the ambitious aim of ensuring quality healthcare for all citizens without financial hardship. Its existence is rooted in the 2015 Constitution, which recognizes access to basic health services as a fundamental right and directs the state to ensure citizens’ access to health insurance. The program was formalized under the Health Insurance Act of 2017, establishing the HIB as an autonomous body to oversee risk pooling and service purchasing.

Key Features of the NHIP:

• Unit of Enrollment: Family-based model.
• Premium Structure: A family of up to five members pays an annual premium of Rs 3,500. For each additional member, Rs 700 is added.
• Benefit Package: Entitles a five-member family to health services worth up to Rs 100,000 per year, with a maximum ceiling of Rs 200,000 for larger families.
• Targeted Subsidies: The government provides a 100% premium waiver for the ultra-poor (identified in 26 districts), senior citizens over 70, persons with total disabilities, and patients with HIV, leprosy, or MDR-TB. Female Community Health Volunteers (FCHVs) receive a 50% subsidy.
• Service Scope: Covers preventive, curative, diagnostic, and emergency services through a network of accredited public and private facilities.

3. Current Status and Achievements: Progress Amidst Instability

Since its inception, the NHIP has achieved significant expansion, now covering all 77 districts and 753 local levels. By the end of FY 2080/81 (2023/24), the program reported a cumulative enrollment of over 8.29 million individuals, representing roughly 28% of the total population.

Table 1: Key Performance Indicators (FY 2079/80 – FY 2081/82)

Indicator	FY 2079/80 (2022/23)	FY 2080/81 (2023/24)	FY 2081/82 (2024/25)
Cumulative Population Enrolled	7.2 million	8.2 million	~10.4 million
Active Population Coverage	16%	17%	~33%
Active Household Coverage	25%	28%	~38%
Policy Renewal Rate	~54%	54%	62%
Service Utilization Rate	38%	43%	48%

 

While the expansion to 10 million people by 2026 is a significant milestone, “active” participation—those with valid, renewed cards—remains much lower. Furthermore, service utilization has seen an upward trend, rising to 48% in the latest fiscal year, which, while indicating increased trust, has simultaneously placed immense pressure on the fund’s liquidity.

 

4. Major Challenges: The “Death Spiral” of Voluntary Insurance

The fundamental flaw in the NHIP’s design is its voluntary nature. According to health economists, this has led to a “death spiral” driven by adverse selection: individuals with chronic illnesses or high health needs are the most likely to enroll and renew, while the healthy population remains outside the pool.

• Financial Mismatch: In 2023, premiums covered 49% of claim costs; by late 2025, this collapsed to just 24%. A cohort analysis of repeat enrollees showed that a family paying Rs 7,000 in premiums over two years might consume Rs 91,000 in services—a loss ratio of 1,300%.
• Reimbursement Backlogs: The manual and slow claims verification process at the HIB—which has a capacity to review only about 6,000 of the 30,000 claims received daily—has led to delays of six to twelve months for hospital payments.
• Provider Withdrawal: The government’s recent policy to restrict private hospitals and medical colleges from providing insurance services led to the withdrawal of over 52 private institutions, which previously handled 30% of the service volume. This has overwhelmed state-run facilities like Bir Hospital, which are now struggling with massive patient loads.
• Geographic and Socioeconomic Disparities: Coverage is highly unequal across Nepal. Koshi Province boasts a 28-31% active population coverage, while Madhesh Province lags at only 6-8%. In terms of wealth, those in the highest quintile are nearly six times more likely to be enrolled than those in the poorest, despite the existence of government subsidies.

 Public Health Impacts: The High Cost of Failure

The primary goal of the NHIP is to provide financial risk protection, yet the current crisis is reversing gains in this area. Nepal’s out-of-pocket (OOP) health expenditure remains alarmingly high at 54.2%—far above the WHO-recommended threshold of 15–20%.

Public Health Consequences:

• Catastrophic Spending: Approximately 10.3% to 10.7% of Nepalese households continue to face catastrophic health expenditures annually.
• Impoverishment: Every year, expensive medical care pushes an estimated 1.7% to 2.5% of the population (roughly 500,000 to 700,000 people) below the poverty line.
• The Triple Burden of Disease: Nepal is undergoing an epidemiological transition where non-communicable diseases (NCDs) like cancer and cardiovascular diseases now account for 71.1% of all deaths. These chronic conditions drive 62% of NCD-related expenses through OOP payments, as the current insurance cap of Rs 100,000 is often exhausted quickly.
• Equity Gaps: Despite the constitutional mandate, 85% of OOP costs among the poorest residents are for life-saving drugs that are frequently out of stock in designated insurance pharmacies, forcing them to purchase from private retailers. 

6. Recent Developments and Government Response (2024–2026)

In response to the early 2026 hospital crisis, the Ministry of Health and Population released an emergency injection of Rs 750 million by reallocating funds from other programs. However, experts have dubbed this “temporary relief,” as it was immediately swallowed by old debts.

Policy Reforms and Budget Actions (2025/26):

• Lowering Ceilings: To contain uncontrolled expenses, the HIB reduced the outpatient care coverage from Rs 100,000 to a separate ceiling of just Rs 25,000 per patient. Public health experts warn this may further discourage policy renewals.
• Introduction of Copayments: From December 2023, a 10% copayment was implemented at public hospitals and 20% at private hospitals to reduce “moral hazards” and unnecessary claims.
• The RSP’s “Healthy Nepal Campaign”: Under the new administration of Prime Minister Balen Shah and Health Minister Nisha Mehta, the government has pledged to integrate all fragmented health subsidies (like the Aama Program and SSF) into the insurance scheme.
• Digital Transformation: Efforts are underway to issuing digital insurance cards and enabling real-time claim submission through API integration with hospital Electronic Medical Records (EMR).

7. Policy Recommendations: A Public Health Roadmap

To transition from a “fiscally terminal” program to a sustainable one, the following evidence-based actions are recommended:

• Enforce Mandatory Enrollment: Transition the NHIP from a voluntary to a mandatory contributory model, starting with all formal sector employees, civil servants, and security forces. This will balance the risk pool with healthy individuals and reduce the loss ratio.
• Merge Fragmented Schemes: Nepal currently operates parallel schemes (HIB, Social Security Fund, Employee Provident Fund, and ministry-specific disease funds) with no unified database. Merging these into a single risk pool will increase strategic purchasing power and reduce administrative redundancy.
• Expand Domestic Financing (The 5% Target): Nepal currently spends only about 4% to 5.8% of its national budget on health. The government must strive for 10% of the national budget or 5% of GDP by implementing earmarked “sin taxes” on tobacco and alcohol to specifically fund insurance for the poor.
• Actuarial Re-calibration: The Rs 3,500 premium was never grounded in utilization data. The HIB should commission a fresh actuarial review to implement a progressive premium structure based on household income levels.
• Strengthen Primary Care Gatekeeping: Implement a capitation-based payment model for primary care that encourages prevention and restricts expensive tertiary hospital visits to genuine referrals only.

8. Conclusion: The Window of Opportunity

Nepal stands at a critical crossroads. While the country is on track to graduate from Least Developed Country (LDC) status by 2026, its “Human Assets Index” will remain fragile if the health insurance system collapses. The achievement of Sustainable Development Goal 3.8 and Universal Health Coverage requires more than just a legislative mandate; it requires the political will to restructure a failing financial model.

The current crisis, exemplified by the suspension of services at TUTH, is a symptom of a system that has outgrown its current structural integrity. The youth-led movement that swept the current government into power in 2026 was not a demand for a specific premium rate, but for a state that treats constitutional rights as obligations. The window to save the NHIP is open, but only for the next twelve months. The decision to restructure health financing today will determine whether millions of Nepali families are protected from the catastrophe of disease or pushed permanently into poverty.

Call to Action: Policymakers must move beyond temporary cash injections and enact the bold legislative reforms—mandatory enrollment and scheme harmonization—necessary to safeguard the health and future of the Nepali people. Progress toward UHC cannot be a paper guarantee; it must be a fiscal reality.

Writer: Prakash Subedi , A public health student at Central Department of Public Health, IOM

References

• Acharya, D., Sharma, S. and Bietsch, K., 2024. Enrollment and associated factors of the national health insurance program of Nepal: Further analysis of the Nepal Demographic and Health Survey 2022. PLoS One, 19(10), e0310324.
• Asian Development Bank (ADB), 2024. A Study on Nepal’s National Health Insurance Program. Manila: Asian Development Bank.
• Chen, M., Thapa, D., Ma, R., Weissglass, D., Li, H. and Karmachaya, B., 2023. Impact of federalization for health financing and workforce in Nepal. PMC, 8, p.19.
• Health Insurance Board (HIB), 2024a. Health Insurance in Nepal: NHIP Enrollment, Premium & Coverage Guide. Kathmandu: Health Insurance Board.
• Health Insurance Board (HIB), 2024b. Annual Health Insurance Report for FY 2080/81. Kathmandu: Health Insurance Board.
• Insurance Khabar, 2026. Hospitals outside Kathmandu to shut down health insurance programme. [online] Available at: https://english.insurancekhabar.com/ [Accessed 31 March 2026].
• Khabarhub, 2026. Health insurance services hit as major hospitals suspend treatment over financial, policy gaps. [online] Available at: https://english.khabarhub.com/ [Accessed 31 March 2026].
• Khatri, R.B., Khanal, P., Thakuri, D.S., Jakovljevic, M. and Jakovljevic, M.B., 2025. Navigating Nepal’s health financing system: A road to universal health coverage amid epidemiological and demographic transitions. PLoS One, 20(5).
• Ministry of Health and Population (MoHP), 2025. Progress of Health and Population Sector 2024/25 (2081/82). Kathmandu: Ministry of Health and Population.
• Nepal Health Research Council (NHRC), 2022. Policy Brief – Towards Universal Health Coverage: Addressing Financial Hardship and Improving Access to Healthcare in Nepal. Kathmandu: Nepal Health Research Council.
• Republica, 2026. TUTH to suspend health insurance program from January 15. [online] Available at: https://myrepublica.nagariknetwork.com/ [Accessed 31 March 2026].
• The Himalayan Times, 2026a. Facing a daunting task of revamping health sector. [online] Available at: https://thehimalayantimes.com/ [Accessed 31 March 2026].
• The Himalayan Times, 2026b. Nepal’s health insurance system is on the brink: The new government has one chance to fix it. [online] Available at: https://thehimalayantimes.com/ [Accessed 31 March 2026].
• The Kathmandu Post, 2026a. Facing a daunting task of revamping health sector. [online] Available at: https://kathmandupost.com/ [Accessed 31 March 2026].
• The Kathmandu Post, 2026b. PM stresses health insurance scheme cannot stop despite funding crunch. [online] Available at: https://kathmandupost.com/ [Accessed 31 March 2026].
• The Kathmandu Post, 2026c. Rs 750 million released to continue health insurance programme. [online] Available at: https://kathmandupost.com/ [Accessed 31 March 2026].
• The Rising Nepal, 2026a. Omission of Health Insurance Programme in govt’s 100-point reform plan raises concern. [online] Available at: https://risingnepaldaily.com/ [Accessed 31 March 2026].
• The Rising Nepal, 2026b. Health insurance scheme at risk of closure. [online] Available at: https://risingnepaldaily.com/ [Accessed 31 March 2026].

 Subedi is Public Health Student at Central Department of Public Health, Institute of Medicine.