Introduction

In giving effect to Article 43 (1) (a) of the Constitution, the government has overseen the enactment of the Social Health Insurance Act, 2023. The Act seeks to establish a framework for the management of social health insurance by entrenching the right to health and universal health coverage. Furthermore, the Act seeks to realign healthcare systems, enhance pooling of resources and risks based on principles of solidarity, equity and efficiency and promote strategic purchasing of healthcare services.

Notably, the Act establishes the Social Health Authority (replacing the defunct National Health Insurance Fund), which shall be managed by a Board. Core functions of this Authority include receiving all contributions, contracting and making payments to healthcare providers and healthcare facilities out of the funds and implementing all government policies on social health insurance, among others.  

In addition, the Act establishes three Funds, namely: Primary Healthcare Fund, Social Health Insurance Fund (“SHIF”) and the Emergency Chronic and Critical Illness Fund.

Primary Healthcare Fund

The purpose of the Primary Healthcare Fund shall be to purchase primary healthcare services from health facilities. The capital of the Fund shall include appropriations from the National Assembly.

Social Health Insurance Fund contributions

Every Kenyan shall be registered as a member of the SHIF, and further, any children born after the commencement of the Act shall be registered at birth as members of the Social Health Insurance Fund. A non-Kenyan resident residing in Kenya for more than 12 months shall be eligible for registration and liable for contribution to SHIF.

SHIF shall consist of funds from:

1. Contributions under the Act
2. Appropriations by the National Assembly for indigent and vulnerable persons.
3. National and county governments for the administration of compulsory public service employee insurance benefit schemes and
4. Any other employer

Contributions to the SHIF shall vary among the different Kenyan households, i.e., salaried, non-salaried and those in need of financial assistance and shall be paid at the time of registration. The contribution variation shall entail the following:

1.     Salaried households who shall contribute monthly.
2. Non-salaried households who shall contribute annually in accordance with a proportion of household income determined by means testing instrument (“MTI”), which contains a set of indicators that capture various socio-economic aspects of a household for purposes of determining the ability to pay social health insurance premium.
3. In case of households in need of financial assistance as determined by the MTI, by the government at a rate from the appropriated funds by Parliament and County Assemblies.
4. In case of persons under lawful custody by the government at a rate from the appropriated funds by Parliament.

A member of the SHIF shall produce registration proof and updated contributions before accessing public services from either the national or county governments. Any person who fails to pay any contribution shall be liable to a penalty equal to 2% of the amount due for contribution.

Emergency Chronic and Critical Illness Fund

The Emergency Chronic and Critical Illness Fund shall be used for financing the costs of management of chronic illnesses after depletion of the SHIF and to cover emergency treatment costs. The National Assembly shall allocate money to this Emergency Chronic and Critical Illness Fund.

Tariffs and Benefits Package

Essential healthcare benefits package shall be payable based on tariffs which the Cabinet Secretary responsible for health shall prescribe. Tariffs are rates or fees payable to healthcare facilities or providers for services provided under the Act under the contractual terms.

Claims Management Office

The Act establishes the Claims Management Office within the Authority, which shall be responsible for; reviewing and validating medical claims from healthcare providers, issuing pre-authorization for access to healthcare services and appraising medical claims based on benefit packages among other things.

Notably, the SHIF Authority shall only make payments to a contracted healthcare provider/facility upon submission of a claim by the Claims Management Office.

Dispute Resolution Tribunal

The Act also establishes the Dispute Resolution Tribunal for purposes of hearing and determining disputes, complaints or appeals. The Tribunal shall be chaired by a Chairperson appointed by the President from persons qualified to be judges of the High Court. The Tribunal shall have the power to uphold, reverse, revoke or vary any decision of the Board.

Regulations

The Act delegates the authority to the Cabinet Secretary to make regulations prescribing the rates, payment, and collection of any contributions, among others.

Repeal of NHIF

The Act repeals the National Health Insurance Fund (NHIF) and further notes that the NHIF Board shall wind up the Fund within 1 year of coming into operation of the SHIF Act, 2023. The SHIF Board shall competitively recruit its own staff. Staff from NHIF shall apply for positions advertised by the SHIF Board. Anyone who is not recruited can either choose to retire from public service or be redeployed within public service.

Analysis

The Social Health Insurance Act replaces the National Health Insurance Fund and creates three Funds managed by the Social Health Authority, whose operations shall be managed by a Board. The three Funds proposed to be established under the Act include Primary Healthcare Fund, Social Health Insurance Fund and Emergency, Chronic and Critical Illness Fund. National and County Governments and every Kenyan household will be required to contribute to the Social Health Insurance Fund, whereas the other two Funds will get their capital from monies appropriated by the National Assembly.

The three Funds created under the Act supplement each other, noting that the Emergency Fund is used to access healthcare services where the SHIF has been depleted.  The new changes in SHIF, particularly on the establishment of the three Funds, conforms to WHO’s recommendation on reforming health systems using a primary health care approach which ensures access to healthcare services at the community level and provision of quality services hence improving coverage and financial protection.

Draft Social Health Insurance (General) Regulations, 2023

Contributions

The SHIF Act commenced on 21st November 2023 upon its Gazettement by the Cabinet Secretary (“CS”) for Health, Susan Nakhumicha. However, contributions to SHIF could not take effect until the CS made the necessary regulations for the implementation of the provisions of the Act. 

The Cabinet Secretary recently published the draft Social Health Insurance (General) Regulations, 2023 (“Regulations”) on the implementation of the SHIF Act. The Regulations are currently undergoing public participation, with submissions from the public due on 12th December 2023. The Regulations propose that a salaried household shall pay a monthly statutory deduction at a rate of 2.75% of the gross salary or wage of the household by the ninth day of each month.  This amount shall not be less than KShs.300 per month which previously NHIF was deducting a capped rate of KShs.500

On the other hand, households whose income is not derived from salaried employment shall pay an annual contribution to SHIF at a rate of 2.75% of the proportion of household income as determined by MTI. This amount shall not be less than KShs.300 per month.

The Regulations propose that the Ministry of Health and Social Protection and county governments shall be responsible for identifying households that require financial assistance and submit the list to the Authority.

The Regulations propose that a person who attains the age of 25 and has no income of their own and living with the contributor shall be treated as a household separate from the contributor and shall pay KShs.300 per month.

Means Testing

The Regulations propose that MTI shall be determined through the collection of data from households. The data shall be based on socio-economic aspects, including:

(a)   Housing characteristics

(b)  Access to basic services

(c)   Household composition and characteristics and

(d)  Any other relevant socio-economic aspects.

Conclusion

The Regulations propose several regulations on the implementation of the Act. However, the key one is the rate of contributions. The proposed 2.75% is not backed by any study as to how the Cabinet Secretary settled on the rate. The 2.75% of the gross salary for salaried beneficiaries is too high, given the recent increase in income taxes. This continues to reduce the disposable income of the beneficiary and further exacerbates the cost of living. Additionally, while SHIF seeks to reform healthcare services, this rate must be reduced or capped to ease the economic pressures and cost of living. 

Until the Regulations are adopted, the NHIF rates shall continue to apply for purposes of remittance to the SHIF Authority.