The National Health Insurance Fund (NHIF) expenditure overshot revenue by Sh908 million in the financial year ended June, sinking the fund into a deficit status as more members defaulted on monthly premiums contributions.
Data shared with the National Treasury shows NHIF had targeted to collect Sh93 billion but collected Sh82.1 billion, even as claims paid out shot to Sh74.2 billion in the year ended June from Sh68.66 billion a year earlier.
Salaried Kenyans are required to contribute between Sh150 and Sh1,700 depending on their salary to NHIF monthly while those in the informal sector part with Sh500. The Fund is, however, grappling with defaults.
The health insurer says only 22 percent of the registered members from the informal sectors were active compared with the targeted 74 percent. The retention rate for formal sector workers was 77 percent against the targeted minimum of 88 percent.
“The slight negative variance was attributable to the low retention rate, especially in the informal sector of the national scheme due to adverse selection of the members under this sector and the difficult economic times experienced in recent years,” said the NHIF.
The Sh908 million deficit partly explains the struggles it has faced in settling claims coming from hospitals. Hospitals have several times this year turned away patients with NHIF covers in protest over unpaid claims.
The insurer is worried that the continued scenario where it is only the sick who are consistently paying the premiums, with many dropping off once they get the full benefit, is rendering the scheme unsustainable.
The scenario —called adverse selection in insurance terms— is putting at risk the ability of the insurer 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 to it.
NHIF says the benefit pay-out ratio stood at 90 percent, being higher than the projected pay-out ratio of 85 percent and means that for every Sh100 that it collected as revenue, it spent Sh90 on paying hospital bills.
Benefits the NHIF paid out have continued to grow over time, from Sh52.6 billion in the financial year 2020/21 to Sh68.6 billion in 2021/22 and Sh74.2 billion in the year under review.
Personnel emoluments amounted to Sh5.2 billion in the year ended June compared to a budget of Sh6 billion while other recurrent expenditures amounted to Sh3.5 billion against the budget of Sh4.1 billion.
The 57-year-old NHIF is in the process of being replaced with the Social Health Authority which will be in charge of three funds—primary healthcare fund, healthcare fund and emergency, chronic and critical illness fund—in line with the Social Health Insurance Act, 2023.
The new Act makes contributions mandatory, with draft regulations putting new rates at 2.75 percent of gross salary for those in formal employment and a minimum of Sh300 for those in the informal sector.
