Economic hardships have pushed 8.8 million or 43 percent of National Health Insurance Fund (NHIF) members to default on monthly contributions, effectively condemning them to out-of-pocket medical expenses.
The latest NHIF data for the financial year ended June 2022 shows that dormant members hit 8.8 million from 5.03 million the year before, making the insurer miss its Sh90.57 billion targeted premium collections for the review period.
Membership grew to 15.4 million from 13.94 million but those identified as active stood at only 6.7 million and 5.3 million respectively, with NHIF linking the faster rise in defaulted contributions to economic hardships.
“The target was not achieved due to macro-economic factors in the country which caused companies to downsize, reduce salaries and some to close,” said NHIF in a health sector report made public by the Treasury.
“The informal sector has also faced financial challenges caused by the poor economic conditions thus making it difficult for members of this sector to make their voluntary contributions to the fund and adverse selection.”
Voluntary contributors — usually drawn from the informal sector — pay Sh500 a month to the NHIF while those in the formal sector contribute between Sh150 and Sh1,700 every month, depending on the salary scale.
Registered members who have defaulted on the monthly premiums are usually locked out of utilising their insurance covers for hospital bills.
Defaulted premiums condemn members to out-of-pocket expenses to settle the bills, with NHIF requiring them to settle the arrears first.
The fund occasionally gives a window to defaulters to pay Sh1,500 to reactivate their membership but they have to wait for three months before becoming eligible to enjoy the cover.
NHIF had in the financial year ended June 2021 suffered the first decline in annual premiums in 18 years but this recovered in the period under review, pointing to the softening economic woes as the effects of Covid-19 continue to clear.
The fund says premiums collected rose by 30 percent from Sh60.78 billion in the 2020/2021 financial year to Sh78.84 billion in the period under review.
However, benefits paid out jumped by 45 percent from Sh49.04 billion to Sh71.34 billion. The sharp rise in payouts was fueled by increased hospital visits unlike in the preceding period when many people avoided hospitals due to the fear of contracting the infectious Covid-19 virus.
The cost of medical drugs and procedures has also been on the increase in the wake of the shilling’s decline against the dollar forcing healthcare providers to pass the increased cost to insurers and patients who pay out of pocket.
NHIF’s loss ratio —claims paid and expenses used as a portion of earned premiums— remains above 90 percent, leaving the fund with a little headroom to increase benefits that can be paid out to members.
The fund added 1.34 million members under the informal sector to bring the total to 10.64 million as the formal sector saw 175,651 new registrations to take membership to 4.82 million.