Low income earners to bear the most burden as Cotu launches a fresh bid to block the roll-out of new health insurance charges.
The Central Organisation of Trade Unions (Cotu) on Thursday launched a fresh attempt to block public health insurer NHIF from raising member contributions after it lost a court case seeking to stop the new charges.
George Muchai, the deputy secretary-general of the umbrella trade union, said Cotu had instructed its lawyers to seek a stay of the new rates as it prepares to challenge Wednesday’s judgment in the Court of Appeal.
“We have instructed our lawyers to temporarily stop the National Hospital Insurance Fund (NHIF) from charging the new rates,” he said.
The High Court threw out Cotu’s case that sought to block NHIF’s bid to raise monthly member contributions by more than 600 per cent to fund an expanded universal health insurance scheme.
Those earning between Sh50,000 and Sh100,000 would pay Sh1,500 per month while the lowest paid formal sector workers earning a salary of less than Sh5,999 would contribute Sh150.
The scheme has a separate band for the self-employed who would pay Sh500 per month.
Cotu’s main argument against the new charges is that the NHIF has in the past not managed the funds to the best interest of members and should not be entrusted with more money until it demonstrates that it has the capacity to improve the quality of services offered.
“Our position is that the NHIF must first reform itself and prove that it can offer better services before it can be entrusted with billions of shillings,” Mr Muchai said.
NHIF is seeking higher contributions to help the government offer universal access to health services as stipulated in the Constitution.
Medical Services minister Anyang’ Nyong’o said the state can only meet that obligation with the help of a universal health insurance scheme provided by a public institution such as the NHIF.
The public health insurer says higher member contributions will enable it to provide comprehensive health services, including covers for outpatient and chronic illnesses such as diabetes, kidney problems and HIV/Aids that most private health insurers do not cover.
Paid-up members will also have their medication, consultation fees, family planning services, X-Ray and ultra sound diagnosis paid for by the fund.
Richard Kerich, the NHIF chief executive, says the scheme will also cover the elderly and place no limit to the size of a nucleus family that can benefit from a subscription.
Private sector organisations have joined Cotu in opposing NHIF’s new fees arguing that they will raise the cost of doing business in Kenya and increase inflation pressure as companies pass on the additional costs to consumers.
“This scheme translates to a huge increase in costs for employers who already have private medical insurance schemes for their workers,” said Jacqueline Mugo, the executive director of the Federation of Kenya Employers (FKE).
She said that employers will also come under pressure to increase wages as the contributions eat into the workers’ take home.
Patrick Obath, the chairman of the Kenya Private Sector Alliance (Kepsa), said that in the long term, companies will have to include the increased costs in the prices of their products.
“Most companies will retain the private medical insurance schemes alongside the NHIF’s higher statutory charges and the additional costs will be borne by the consumer,” he said.
If NHIF wins against Cotu’s latest legal challenge, Kenya’s lowest paid workers will be hardest hit by the new charges even as they enjoy the expanded medical services.
The fund plans to offer standard medical covers regardless of income bands, meaning that those earning more than Sh100,000 will have a lighter burden despite accessing the same services as the low-income earners.
It also means that workers in the middle income bands with less than Sh100,000 monthly salary will subsidise the lower income earners, raising questions of equity in the scheme.
NHIF says higher member contributions are also necessary to meet the high cost of medical services that have increased five-fold since 1990, with the steady rise in doctors’ fees, cost of food, medicine and equipment.
The premiums were last reviewed in 1988. Formal sector workers contribute between Sh30 and Sh320 to the NHIF based on gross salary.
The proposed NHIF covers will see the bulk of workers pay Sh12,000 per year or less, making it significantly cheaper compared to the annual insurance premiums charged by private insurers that cost an average of 20,000 per year.
Private insurers typically cap the number of children covered per family at six and limits outpatient benefits to Sh100,000 and Sh2 million for inpatient services.
“We anticipate that the NHIF scheme will appeal to the mass market. The wealthy and the middle class will certainly choose to retain premium insurance that is the forte of private insurers,” said Nelson Kuria, the chief executive of CIC Insurance.
He said the NHIF’s comprehensive cover would spur innovation as private sector players seek to differentiate themselves.
But Ms Mugo said the rollout of the plan could see some employers abandon private medical insurance schemes to avoid duplication.
Such a move would deny private medical insurers some Sh12 billion they earn annually from employer-funded premiums.
NHIF says the current rate of Sh320 has limited it to offering in-patient cover, locking out the bulk of the population from comprehensive medical care that remains the preserve of the rich and middle class households.
Only a quarter of Kenyans have medical cover and the increased contributions are expected to boost that number by about 20 percentage points in the next five years.
NHIF’s claims rose to Sh3.1 billion as of June 2010 from Sh1.1 billion in 2006, partly driven by rising membership from 1.7 million to 2.8 million.
The corporation’s medical claims and high wage bill deeply eroded its cash reserves from Sh990 million in 2006 to Sh173.4 million in June 2010.
