Employers oppose paying NHIF contributions for staff

Kenyan employers have rejected proposals in a Bill that require them to match workers’ monthly contributions to the National Hospital Insurance Fund (NHIF).

The Federation of Kenya Employers (FKE) warned compelling employers to match the contributions to the public health insurer would destroy private medical insurance and force firms to deepen job cuts.

Doubling the Sh1,700 that top contributors make to the fund ranks high on the list of targeted changes to the NHIF Act, which will be introduced to Parliament on Wednesday morning.

The plan is to have the workers continue paying same amounts and employers matching in a structure modelled on the National Social Security Fund (NSSF).

This will see employers pay at least Sh25 billion to the NHIF, an added burden to firms that are yet to recover from coronavirus-induced slump, which triggered job cuts, hiring freezes and business closures.

“This will not only affect the wage bill and sustainability of enterprises but also destroy the capacity of enterprises to create new jobs and sustain the existing jobs,” Jacqueline Mugo, the FKE chief executive, told Parliament.

In a memorandum to the National Assembly committee on Health, Ms Mugo said the proposals contained in the NHIF (Amendment) Bill, 2021 overlook the fact that some employers provide medical insurance for their staff

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.

Formal workers contributed Sh24.89 billion to the NHIF in the financial year ended June 2017, the latest available detailed financial statement shows, a pointer that employers will pay at least Sh25 billion.

This has the potential of making the NHIF the richest State-backed firm with annual collections of close to Sh100 billion given its receipts of Sh60 billion in the year to June. It paid out Sh54.3 billion to hospitals as members’ claims.

Yesterday, Ms Mugo told the Health committee most employers in Kenya operate private medical insurance schemes for their employees.

“Making it mandatory for the employers to match their employees’ contribution will mean that they are paying double for the health insurance. This will not only lead to unnecessary increase in the cost of labour in Kenya, but it will also destroy the private health insurance industry and the competitiveness of Kenya’s business operating environment,” she said in the memorandum.

Employers who remit the money late or beyond the 9th of each month will be liable to a penalty of 25 percent of the outstanding contribution and also foot all medical bills for workers who fall sick within the default period.

Individual contributors who fail to pay their premiums by the 9th of every month pay a 50 percent penalty.

“Employer shall be liable to pay the penalty prescribed in subsection (I) and pay the costs incurred by the employee when seeking treatment from a contracted health care provider during the period when the contribution is due,” says the government-backed Bill.

The proposal comes barely six years after the NHIF raised workers’ contributions from Sh320 to a graduated scale of between Sh500 and Sh1,700 per month based on monthly pay.

Ms Mugo told a virtual public participation forum on the Bill that all employers will be saddled with the cost of matching their employees’ contributions.

The employers also rejected a section of the Bill that requires the NHIF to only pay hospital bills after patients who have private covers exhaust the limit from private insurers.

The proposal in the Bill is a shift from the current practice where the NHIF makes the first payment — usually a small portion of the total bill — leaving the rest to private insurers.