The NHIF on Wednesday published fresh regulations that will see workers earning more than Sh100,000 pay 1.7 percent of their gross salary to the fund.
This is 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 will double to Sh3,400 if the regulations are adopted while the burden of those on Sh500, 000 will increase five times to Sh8,500 monthly.
Workers earning more than Sh100, 000 per month will pay more in monthly contributions to the National Hospital Insurance Fund (NHIF), indicating deeper financial strain on them and employers if Parliament approves the higher rates.
The NHIF on Wednesday published fresh regulations that will see workers earning more than Sh100,000 pay 1.7 percent of their gross salary to the fund.
This is 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 will double to Sh3,400 if the regulations are adopted while the burden of those on Sh500, 000 will increase five times to Sh8,500 monthly.
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 upward review of NHIF contributions is likely to encounter resistance by employers and workers already strained by inflationary pressures.
Employers have previously opposed proposals to match workers’ contributions, warning that it would affect the wage bill and sustainability of enterprises and weaken the capacity of businesses to create new jobs and sustain the existing jobs.
“I do not think that this is right and justifiable, and it will increase the cost of business. Allowances are part of the gross pay and are not fixed and so this means that it will just be too big of a cost to the employers,” Jacqueline Mugo, the chief executive of the Federation of Kenya Employers (FKE), said on Wednesday.
The additional payouts will add tens of billions of shillings to the coffers of the NHIF, which last year raised Sh61.5 billion from workers — making it one of Kenya’s richest State-backed firms.
The regulations, which were published yesterday for public review ahead of implementation, is part of the new law that made it compulsory for all adult Kenyans to contribute to the NHIF.
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 NHIF last reviewed its rates in April 2015 and is seeking to increase its income to boost cover 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 cancer and kidney dialysis.
The new law is, however, silent on whether the fund will enhance its benefits on the back of a near doubling of its annual collection.
But the fund 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 79,909 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 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 the fund’s near-stagnant collections from premiums.
Besides the increase in treatment costs, the NHIF loses an estimated Sh16 billion to fraudulent claims every year, further piling pressure on the scheme’ funding pool.
It 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 end of August last year in the wake of the coronavirus-induced layoffs and salary cuts.
It hopes to cure this problem with the new law that makes it compulsory for all adult Kenyans to be NHIF members.
The NHIF last year said it would cut benefits for renal dialysis, major surgeries and diagnostic tests such as MRI and CT-scans in a drive meant to reduce payouts by at least Sh2.9 billion and protect its funding pool.
