NHIF voluntary scheme needs a major review

The massive losses reported by the National Health Insurance Fund (NHIF) from policies in the informal sector call for a major review of the scheme.

The State-controlled fund has set a premium of Sh500 per month for individuals who are self-employed in a bid to increase coverage to the most vulnerable groups.

Those working in the formal sector pay statutory graduated amounts, starting from Sh150 to a maximum of Sh1,700 per month depending on the salary.

This higher contribution was expected to help subsidise the lower premiums by those in the informal sector.

But the performance of the policies covering self-employed individuals has been so dismal that the premiums will either have to go up or the government will chip in to sustain the scheme.

It turns out that there are massive defaults in the informal policies. The fund lost Sh39 billion in the year ended June 2022, representing an 80 percent default rate on premiums in the voluntary contributions category.

The NHIF previously said the majority of those keeping up with payments have chronic illnesses, meaning they utilise the insurance card regularly.

With an annual contribution of Sh6,000 per annum, the average NHIF voluntary member is claiming benefits running up to eight times the premium he or she has paid.

These are very high loss ratios and dwarf the costs borne by private insurers.

The goal of giving everyone a chance to access quality health insurance is noble.

But the voluntary scheme must change either by re-pricing of the premiums or the government biting the bullet to subsidise the fund.