NHIF, police service in trouble as auditor questions Sh8.1bn premium cover

NHIF building

The National Hospital Insurance Fund building in Nairobi in this photo taken on February 9, 2022.

Photo credit: Jeff Angote | Nation Media Group

The National Health Insurance Fund and the National Police Service are on the spot after an audit report questioned the manner in which the cost of an annual premium cover was adjusted from the initial Sh2.3 billion to Sh8.1 billion.

This was revealed in a report last week by Auditor-General Nancy Gathungu in the accounts of the Interior Ministry, under whose mandate the National Police Service (NPS) falls, for the 2018/19 and 2019/20 financial years.

The report says the national insurer entered into a one-year contract with NPS for the provision of enhanced comprehensive group life cover and group personal accident cover for 131, 816 principal members and dependents for Sh2.3 billion from January to December 2021.

However, at the review of the contract, it indicated that the NHIF had quoted Sh8.3 billion as an annual premium for the cover to cater for members of the National Police Service and the Kenya Police Service. “Negotiation minutes agreed that the two parties agreed to a total premium of Sh2.3 billion; however, there was no agreed schedule of the adjustment made to the rates,” says the report.

Insurance contract

Further review of procurement documents for the insurance contract revealed that the Service initiated direct procurement of the group cover without justification for the procurement method adopted.

The report also established that the Fund has not settled Sh67 million claims for the last funeral expenses for 374 submitted claims for principal members, spouses, and children.

“Review of the claims for last (funeral) expenses covered under the comprehensive group life made in 2021 revealed that 374 claims of principal members, spouses, and children totalling Sh67 million were submitted to NHIF for settlement and had not been settled by December 31, 2021,” says the report.

The NHIF, according to the report, had not explained why it had not settled the claims, contrary to Clause 5 of the contract that provides that the Fund, upon written notification of the death of a member or dependent, pay to the next of kin amount specified for funeral expenses within two days, subject to provision of a duly completed claim form and copy of burial permit.

Also, the Kenya police, during the year 2021, had 38 unpaid claims resulting from accidents and deaths.

Kenya Police Service

“No documentary evidence was provided on the status of unpaid accident and death claims. Although the Kenya Police Service provided details of injury claims under the Work Injury Benefit Act, the Fund had not paid any injury claim for the year 2021, resulting in 734 unpaid injury claims as of December 31, 2021,” says the report.

It was only last week that the Fund could not account for how Sh400 million in excess of loss of insurance cover for police officers was used. The lost amount was part of the Sh4.79 billion comprehensive medical cover for the police awarded to NHIF on September 26, 2017, in a two-year contract running to September 30, 2019—later extended to June 30, 2020.

The deal had the Sh200 million ex-gratia funds allocated every financial year over and above the contract sum for the duration of the contract.

The ex-gratia amount was meant to cushion police and prison officers who had exhausted their annual cover limits but needed treatment.

According to the contract document signed by the Interior Ministry, National Treasury, and NHIF, the amount was refundable at the end of the contract period if not used.

The contract further provided that any request for the excess of loss cover can only be authorised by the Inspector General, Hillary Mutyambai. This means that NHIF cannot use the money without the IG’s approval.

NHIF has not provided evidence that Mr Mutyambai authorised the expenditure.

Failure to address the matter has seen the audit query recur in the audited accounts of the ministry for the financial year 2020/21, currently before parliament.

The scandal has seen the Public Accounts Committee (PAC) of the National Assembly summon NHIF Chief Executive Officer Peter Kamunyo and Inspector General of Police (IG) Hillary Mutyambai to explain how the money was used.

The failure by NHIF to comply has led to the Ministry of Interior being cited adversely by Ms Nancy Gathungu.