The National Hospital Insurance Fund building in Nairobi. FILE PHOTO | NMG


State mute on 2.75pc NHIF rate as new Fund kicks in

The State has kept employees and employers guessing on how much they will pay to fund Kenya’s most ambitious social healthcare programme, days after appointing the board that will implement the plan.

This follows the delays in publishing the regulations that will reveal if the State will honour its promise to cap contributions at Sh5,000 in monthly deductions or stick with the 2.75 percent rate that will mean the most paid will contribute more to the fund.

The draft regulations will contain the proposed charges that will undergo public participation before the shift from the current deductions of Sh150 to Sh1,700 for salaried workers and Sh500 for self-employed can be effected.

The publishing of the Social Health Insurance Act, 2023 and the appointment of the board of Social Health Authority has sent the clearest indication that the State is proceeding with the plan to phase out the 57-year-old National Health Insurance Fund (NHIF).

President Ruto said Wednesday he would like to see the debate on contributions settled before January next year to pave the way for the full roll-out of Universal Health Coverage (UHC) even as he threw his weight behind a model that will see top earners pay more.

“Beginning this week, we will be having a conversation on regulations that are going to inform what kind of charges people pay on health insurance,” he said in Machakos.

“That conversation must determine how much somebody like the President pays and how much mama mboga pays. My suggestion is that payment of health insurance should be commensurate to people’s income.”

The public, carrying new payslip deductions such as the 1.5 percent housing levy on gross pay, will have to wait for the draft to know how much more the State intends to start deducting them come January.

Several government officials, including Health Cabinet Secretary Susan Nakhumicha, had said new deductions will be 2.75 percent of gross salary, capped at Sh5,000 while those in the informal sector would pay Sh300.

The new Act does not disclose the amount that Kenyans will pay to the three funds—primary healthcare fund, healthcare fund and emergency, chronic and critical illness fund— that will be replace the NHIF, instead leaving it to the Ministry of Health to prescribe this through regulations.

The new Act says contributions will be “at a rate prescribed under this Act,” meaning that the figure will be in the expected regulations.

President Ruto on Wednesday appointed Timothy Olweny as the chairperson of Social Health Authority while the Health CS Susan Nakhumicha appointed Francis Atwoli, Jacinta Mutegi and Zakayo Gichuki as members of the Authority, empowering the new outfit to start setting up the three funds.

The Act, under transitional clauses, says the assenting into law of the Act means all the funds and assets under NHIF “shall, by virtue of this paragraph and without further assurance, vest in the Authority.”

The State has in the past three years made several changes to the NHIF Act (1998) and published two sets of draft regulations before it decided to overhaul the Act in entirety, leaving the draft regulations without the primary law to back them.

The first draft was published in 2022, proposing to amend deductions of earners of Sh100,000 and above to 1.7 percent of the gross pay instead of the current flat rate of Sh1,700.

The 2022 draft was varied in May this year, after a second round of public consultations, introducing a flat rate of 2.75 percent of gross pay for all salary bands.

However, the total overhaul of the NHIF Act into the Social Health Insurance Act, 2023 has left the May draft referencing an obsolete law.

If the State changes only the wording of the May draft to reference the new Act, then the current maximum of Sh1,700 will be scrapped, exposing high income earners to higher deductions towards funding the healthcare insurance.

“Those of us who can pay more should know that they are paying more so as to carry those who are not as endowed as we are. But that is not for me to decide. That is a conversation for Kenyans to decide,” said Dr Ruto.

People in the informal sector who have been paying Sh500 per month will enjoy a 40 percent reduction in contribution to Sh300, going by the old draft and the figure that President Ruto has been mentioning.

For the salaried people earning up to Sh30,000 a month, there is going to be a drop of between three percent and 45 percent in contributions.

However, those earning above Sh30,000 to Sh100,000 will see a rise in contributions by between one percent and 77 percent. Those earning above Sh100,000 will see even steeper deductions.

Salaried workers earning Sh100,000 will start paying Sh2,750, up from the current 1,700, representing a 62 percent rise. Those taking home half a million will see their deductions rise eight times to Sh13,750 unless a cap is introduced.

The government has been rolling out the UHC in which it is seeking to provide quality and affordable healthcare for all Kenyans. It has picked Social Health Authority as the primary implementer of UHC.

The Authority will, however, have to overcome challenges such as fraud, corruption, liquidity strain, high claims ratio and rampant defaulting on contributions, all of which NHIF is grappling with.

As at end of June last year, NHIF had 15.4 million members but just about half were actively making contributions as about 8.8 million were marked as dormant. The new Act has now tied access to government services to one being an active contributor towards social healthcare. It has also put a two-percent penalty on defaulted contributions.