NHIF risks collapse over cash crisis

Wednesday March 18 2020
nhipic

National Hospital Insurance Fund acting Chief Executive Officer Nicodemus Odongo appears before National Assembly Public Investments Committee on October 15, 2019. The agency is facing financial crisis. PHOTO | FILE | NATION MEDIA GROUP

By NASIBO KABALE
By SAMWEL OWINO

The National Hospital Insurance Fund (NHIF) risks collapse within two years unless the proposed rates President Uhuru Kenyatta halted mid last month are implemented.

A report by a Health Financing Reforms Expert Panel (Hefrep), which Health Cabinet Secretary Sicily Kariuki set up to transform and reposition the NHIF task force, has expressed concern that if all factors remain constant, the insurer’s financial sustainability will be compromised.

The report that was shared with the National Assembly's health committee indicates the panel raised concern that if the revenues of the fund remain the same, then it might not be tenable for them to continue offering services in the next two years.

The panel that made revenue-expenditure projections of the NHIF confirmed that the fund may start running deficits from as early as this year.

“Several county schemes also default on their premium payments. Given the trend in growth in premiums and claims, when future revenues and claims for the county schemes are projected, claims will outstrip revenues by 2026 making the county schemes unsustainable,” the panel indicates in the report.

TAX FINANCING

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The report said the national insurer’s administrative costs remain way too high, which also reflects inefficiencies in the system.

The main expenditure contributing to administrative costs is staff costs, comprising 54 per cent in 2017/18.

Others are advertising and publicity (24 per cent), travel and accommodation (10 per cent), medical expenses (10 per cent) and transport expenses (six per cent).

The panel recommends that NHIF transits from collecting voluntary premiums from the informal sector and the poor and instead adopt tax financing.

“It is clear from the analysis of the NHIF and from international experience that UHC cannot be achieved through a voluntary mechanism. Therefore, the government should allocate funds from general tax revenues to the NHIF to cover the poor and the informal sector, while the formal sector will continue to make mandatory contributions to the NHIF,” the report states.

MONITOR SITUATION

Appearing before the committee chaired by Murang’a Woman Representative Sabina Chege, Health Principal Secretary Susan Mochache said that while premium contributions have increased three-fold, benefit payouts have increased five-fold over the same period, meaning growth in benefit payouts has outpaced growth in premium contributions.

“The health financing reforms expert panel, therefore, recommended that given the recent volatility in NHIF claims experience, it is important that the Fund’s solvency position be monitored closely,” she said.

Ms Mochache said the outcomes of board discussions, including issuance of new operational guidelines, were yet to be discussed and considered by various stakeholders -- including the Cabinet.

She said the information was “prematurely leaked in the public domain, which resulted in public outcry leading to the presidential directive to ensure adequate stakeholder consultations”.

INFORMATION LEAKED

Acting NHIF Chief Executive Officer Nicodemus Odongo concurred on leakage of information, which had affected evaluation of gaps in the package and review relevant guidelines in benefits administration.

He had been asked to explain the circumstances surrounding the matter.

Meanwhile, MPs have warned National Treasury Cabinet Secretary Ukur Yatani against rescinding his decision to block NHIF from engaging in the provision of commercial medical insurance despite appeals from the Health ministry.

What annoyed MPs Simba Arati (Dagoretti North), Godfrey Osotsi (nominated) and Eseli Simiyu (Tongaren), in separate interviews, is the fact that NHIF was using contributions from the poor to settle medical bills for the rich seeking expensive treatment abroad.

“Commercial medical insurance is not the mandate of NHIF,” Mr Arati said, adding that, by engaging in commercial medical insurance, NHIF was using mandatory contributions to subsidise its commercial clients at the expense of the contributors.

LOSS IN PREMIUMS

On February 4, the CS, in a letter to Mr Yatani, said that restrictions placed on NHIF could cause about Sh16 billion loss in premiums from agencies it has been offering commercial insurance services.

This will shrink NHIF’s total revenue and reduce the benefit payment capacity by about 30 per cent.

The CS demanded unconditional exemption from the provision of the Insurance Act, saying “premium chargeable in respect of the negotiated scheme is far much less as compared to the prevailing commercial rates”.

Additional reporting by David Mwere