NHIF revives law raising premiums for top earners

National Health Insurance Fund CEO Peter Kamunyo (right) with Murang’a governor Irungu Kang’ata when they signed an MOU on cover known as Kang’ata-care October 24, 2022. PHOTO | LUCY WANJIRU | NMG

The National Hospital Insurance Fund (NHIF) has revived a controversial law seeking to have workers earning more than Sh100,000 per month pay more in monthly contributions, signalling a heavier financial strain on staff and employers.

The NHIF republished regulations that were rejected by Parliament before the August 8 General Election and wants workers earning more than Sh100,000 pay 1.7 percent of their gross salary to the fund.

With the backing of President William Ruto, the fund is seeking community input on the new regulations ahead of parliamentary approval for the new rates.

The new premium is a shift from the present model where employees earning over Sh100,000 pay a fixed monthly contribution of Sh1,700 to the NHIF.

In August, the public health insurer dropped its bid to have top earners pay more after Parliament rejected the push to increase the monthly contributions.

The renewed push for the high rates comes weeks after President Ruto backed the proposal to have the rich pay higher monthly premiums to the NHIF.

Contributions of workers earning Sh200,000 will double to Sh3,400 if the regulations are adopted while the burden on 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.

“We proposed the 1.7 percent rate which we believe is fair and equitable and we still stand by that,” Peter Kamunyo, the NHIF chief executive, told Business Daily.

“But Parliament removed it, not us. If we had a choice, the 1.7 percent would remain but we are going to push for it.”

The upward review of NHIF contributions is likely to encounter resistance by employers and workers already strained by inflationary pressures.

Kenya’s inflation is at a multi-year high of 9.2 percent on the back of a jump in the price of essential items like food, fuel and soap, squeezing household budgets and demand for goods and services.

This has forced many households, especially those in the low-income segment, to reduce their shopping basket in an environment where firms have frozen salaries as they recover from Covid-19 economic hardships.

The rise in the cost of essential commodities has forced workers to cut back spending on non-essential items such as beer and airtime, ultimately hurting firms like East Africa Breweries Limited (EABL) and Safaricom.

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 keep the existing jobs.

Mandatory membership

The additional payouts will add tens of billions of shillings to the coffers of the NHIF, which in the year to June raised Sh80.43 billion from workers — making it one of Kenya’s richest State-backed firms.

The fresh regulations are 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 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 cancer and kidney dialysis.

The new law is 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 last year had 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 9.306 million members at the end of June 2021, with 4.537 million drawn from the formal sector and 4.769 million from the informal segment.

The NHIF is grappling with increased payouts that have piled pressure on the fund’s 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’s 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.

It hopes to cure this problem with the new law that makes it compulsory for all adult Kenyans to be NHIF members.

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