BACKGROUND: In response to the 2005 World Health Assembly, many low income countries developed different healthcare financing mechanisms with risk pooling stategy to ensure universal coverage of health services. Accordingly, service availability and readiness of the health system to bear the responsibility of providing service have critical importance. The objective of this study was to assess service availability and readiness of health centers and primary hospitals to bear the responsibility of providing service for the members of health insurance schemes. METHODS AND MATERIALS: A facility based cross sectional study design with quantitative data collection methods was employed. Of the total 18 districts in Jimma Zone, 6(33.3%) districts were selected randomly. In the selected districts, there were 21 functional public health facilities (health centers and primary hospitals) which were included in the study. Data were collected by interviewer administered questionnaire. Descriptive statistics were calculated by using SPSS version 20.0. Prior to data collection, ethical clearance was obtained. RESULTS: Among the total 21 public health facilities surveyed, only 38.1% had all the categories of health professionals as compared to the national standards. The majority, 85.2%, of the facilities fulfilled the criteria for basic equipment, but 47.7% of the facilities did not fulfill the criteria for infection prevention supplies. Moreover, only two facilities fulfilled the criteria for laboratory services, and 95.2% of the facilities had no units/departmenst to coordinate the health insurance schemes. CONCLUSIONS: More than nine out of ten facilities did not fulfill the criteria for providing healthcare services for insurance beneficiaries and are not ready to provide general services according to the standard. Hence, policy makers and implementers should devise strategies to fill the identified gaps for successful and sustainable implementation of the proposed insurance scheme.