NHIF drops bid to have top earners pay more monthly

The National Hospital Insurance Fund building in Nairobi. 

Photo credit: File | Nation Media Group

The National Hospital Insurance Fund (NHIF) has dropped its bid to have workers earning more than Sh100,000 pay more in monthly contributions, easing the financial strain on top earners and their employers.

The State-backed health insurer has committed to keeping the monthly premiums unchanged in response to a parliamentary petition opposing the planned increase of monthly contributions for top earners.

The NHIF had earlier published fresh regulations that indicated that workers earning more than Sh100,000 monthly would pay 1.7 percent of their gross salary to the fund.

This was a shift from the present model where employees earning over Sh100,000 pay a fixed monthly contribution of Sh1,700 to the NHIF.

Contributions of workers earning Sh200,000 were to double to Sh3,400 if the regulations were adopted while the burden of those on Sh500,000 was to increase five times to Sh8,500 monthly.

Lobbies led by the Kenya Healthcare Federation (KHF) opposed the planned increase, arguing that premiums should be pegged on factors like age, past medical history, occupation and smoking habits.

“Imposing a higher premium for people with higher income, therefore, overlooks this fact (premium for health insurance is not and must not be solely determined by the income of a contributor) and will unfairly deduct high and unjustified premiums for people with higher incomes without the assurance of better quality care,” KHF said in the petition.

This forced the NHIF to climb down and the fund is now targeting additional resources from the new membership under the law, which makes it compulsory for all adults to join the State-backed health insurer.

“The schedule on the contributions regulations schedule will be reviewed to provide that anyone earning above Sh100,000 to be mandated to pay a fixed amount of 1700/-,” the NHIF said in response to the petitions.

This will come as a relief to employers, although they will still be concerned about the effect of the requirement to match workers’ contributions on their wage bill, sustainability and the capacity to create new jobs and sustain the existing jobs.

Employers who have not provided a superior private insurance cover will be expected to match the workers’ monthly contributions to the NHIF, a further hit to firms that are yet to recover from the coronavirus-induced slump that triggered job cuts, hiring freezes and business closures.

The new changes will be implemented once the NHIF gazettes regulations, which are before Parliament for review and will guide the fresh law that called for compulsory membership.

The mandatory NHIF membership is an upgrade of the previous scheme where only workers in the formal sector are compelled to join.

Informal workers had a choice to join or drop NHIF membership, with their monthly contributions set at Sh500. Their monthly fee remains unchanged. The new regulations have also dropped the Sh20,000 fine for adults who fail to register.

The NHIF last reviewed its rates in April 2015 and is seeking to increase its income to boost coverage for diseases such as cancer and offer health insurance to all Kenyans.

It raised workers’ contributions from Sh320 to a graduated scale of between Sh500 and Sh1,700 per month based on monthly pay.

The higher fees came with the introduction of outpatient cover for contributors and enhanced benefits for specialised treatment such as chemotherapy for cancer and kidney dialysis.

The new law, which was signed by President Uhuru Kenyatta in January, is silent on whether the fund will enhance its benefits on the back of a near doubling of its annual collection.

But the NHIF is seeking additional resources to cater to the expected jump in new members, especially from the informal sector who pay Sh500 monthly. This will hinge on its model where the rich are expected to take care of the poor.

Kenya currently has some 84,870 workers earning more than Sh100,000, representing three percent of the 2.74 million-strong formal workforce, according to the latest data from the Kenya National Bureau of Statistics (KNBS).

Official data shows that the NHIF had 8.898 million members at the end of June 2020, with 4.452 million drawn from the formal sector and 4.546 million from the informal segment.

The NHIF is grappling with increased payouts that have piled pressure on its near-stagnant collections from premiums. It paid Sh54 billion as claims in the year ended June 2021, representing 91 percent of the 61.5 billion that it collected as premiums.

It hopes to collect an estimated Sh81 billion annually on the back of the compulsory membership but does not disclose the anticipated medical costs.

The fund has also flagged a significant number of patients with chronic illnesses who join the fund after falling ill and quit after receiving treatment.

The patients pay Sh6,000 annually and stop contributions after receiving benefits of nearly Sh1 million per year.

The scenario — called adverse selection in insurance terms— is hampering the NHIF’s ability to settle claims and meet administrative costs.

Adverse selection refers to situations where an insurance company extends coverage to an applicant whose actual risk is substantially higher than the risk known by the insurance company.

Data shows that the NHIF had 10.6 million members in the year ended last June but 5.7 million or 54 percent of the total had stopped their contributions by the end of August last year in the wake of the coronavirus-induced layoffs and salary cuts.

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