Top salaried workers will from July pay higher for National Health Insurance Fund (NHIF) as informal contributors enjoy lower rates in proposed changes announced on Monday by President William Ruto.
President Ruto said the current rates, in which salaried workers pay between Sh150 and Sh1,700 depending on their monthly pay, are going to be phased out and replaced with a flat rate of 2.7 percent of the salary.
The proposed changes will see earners of between Sh39,999 and Sh100,000 per month increase contributions of between eight percent and 74 percent, highlighting the impact of using higher earners to subsidise those earning less.
There will be even steeper contributions for that earning above Sh100,000, with those taking home half a million witnessing their deductions rise eight times to Sh13,500.
Monthly contributions of informal sector earners will drop by 40 percent from the current Sh500 to Sh300 if the President’s proposal is adopted ahead of the start of a new financial year in July.
“We have changed the contribution mechanism and contribution formula---so that we have an equitable contribution mechanism. Every one of us is going to contribute 2.7 percent of their earnings to NHIF so that we can carry this load of NHIF equally,” said President Ruto.
“Those who have been paying Sh500 to NHIF, we will reduce that to Sh300. And for me as President who has been paying Sh1,700, I will be paying Sh27,500.”
The changes are meant to give a lifeline to the NHIF, which in the financial year ended June 2022 collected premiums worth Sh78.84 billion against the targeted Sh90.57 billion as dormant members hit 8.8 million from 5.03 million in the preceding similar period.
NHIF 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.
The State last year changed the NHIF Act, making it compulsory for Kenyans aged 18 years and above to contribute to the fund.
Part of the draft regulations to actualise the revised Act was to leave unchanged the contributions for earners of up to Sh99,999 but replace the Sh1,700 flat rate contributions for earners of Sh100,000 and above with 1.7 percent deduction on the pay.
However, President Ruto, on Monday appeared to drop the earlier plan by announcing the new changes that will see those earning up to Sh30,000 enjoy reduced contributions of between five percent and 46 percent.
Salaried workers earning Sh100,000 will start paying Sh2,700, up from the current Sh1,700, representing a 59 percent rise.
The hike will be steeper for earners above Sh100,000 given that the upper ceiling has been Sh1,700 in what has been shielding top earners from steep deductions.