Economy

Court saves employers from matching NHIF contributions

nhif

The National Hospital Insurance Fund building in Nairobi. PHOTO | JEFF ANGOTE | NMG

The court has saved employers from paying the National Health Insurance Fund (NHIF) an estimated Sh31 billion after it blocked enforcement of a law that seeks to compel them to match contributions for their workers.

NHIF chief executive Peter Kamunyo made the revelations to lawmakers on the ruling that was made by the Employment and Labour Relations Court.

The NHIF Amendment Act, 2022 which became law in January seeks to compel employers to match the NHIF contributions of their workers and not deduct the cash from their salaries.

Those seeking to be exempted will be required to provide a private medical scheme with benefits equal to or better than those offered by NHIF.

Matching the contributions would have increased NHIF annual premiums to Sh111 billion from the current Sh80 billion, boosting the scheme in the provision of universal healthcare.

“However, we were served with a court order stopping the implementation of the new Act. We appeal to you (MPs) to help us pass draft regulations to implement the law,” Dr Kamunyo told the National Assembly committee on Health.

Employers had said the change would significantly increase operational costs and hit hiring.

The court froze implementation of the law and also barred Health Cabinet Secretary from gazetting any regulations that would operationalise the amended law.

Unaudited results for the 2021-22 financial year show that NHIF raked in Sh80.43 billion in premiums, a 29.4 percent jump from last year.

But medical payouts rose 31.9 percent to Sh71.34 billion in the same period, eroding the premiums gain.

The Federation of Kenya Employers (FKE) had argued that NHIF did not conduct public participation to meet the constitutional threshold prior to enacting the law and added that the amendment also violated employer rights to fair administrative action.

NHIF will roll out Universal Health Care (UHC) as part of the government’s plan to provide affordable and quality healthcare to all Kenyans.

The NHIF (Amendment) Act, 2022 made membership compulsory for adults while the national and county governments will pay premiums for vulnerable households.

The NHIF is also targeting to peg contributions at 1.7 percent of the monthly pay for all workers earning Sh100,000 per month in another bid to increase its funding pool in anticipation of increased medical claims and payouts under UHC.

The proposal is a shift from the current model where workers who are earning more than Sh100,000 pay a fixed monthly contribution of Sh1,700 to the State insurer.

Increased funding for the scheme is critical to its sustainability and adequately providing affordable and quality healthcare, especially for low-income earners.

The push to match contributions and increase the rate for top earners comes amid a rise in medical payouts that has nearly matched the increase in premiums collected.

NHIF has for years been grappling with revenue leakages that are estimated to cost the fund between 10 to 20 percent of its total annual revenues, prompting the legal changes ahead of UHC launch.

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