KENYA : NHIF underused by workers in informal sector

July 2016 DailyNation; Workers in Kenya’s informal sector are being largely bypassed by the benefits of Kenya’s public health insurance system, a review of health financing data shows.

Informal sector workers make up only 39 per cent of the 5.2 million workers who were contributing members of NHIF in 2015, despite constituting four fifths or 83 per cent of all the 15.2 million workers in the country, Nation Newsplex has found.

Low income earners in the informal sector often struggle to pay premiums to the National Hospital Insurance Fund (NHIF), jeopardising their ability to make a claim in case of illness when they default.

According to Dr Ambrose Nyangao, a healthcare financing expert with the Private Sector Programme Alliance for Health which is funded by the British government, there is a mismatch between the structure of the programme and user behaviour.

“When it comes to informal sector, I think their distribution mechanism is not 100 per cent working. A lot of people default a lot, and so at the time of going to the hospital, maybe they are not eligible to make a claim,” he said.He added that users from the informal sector were very few. “They are not too many people in the informal sector who are buying NHIF.”

So far this year, NHIF has 6.3 million principal members who pay monthly contributions. This is 24 per cent short of the target contained in the insurer’s 2014 – 2018 strategic plan, which projected that 8.3 million principal members would have enrolled with NHIF by the end of the current financial year.

NHIF spokesman Mr Gerald Kainga acknowledged the gap between the projected numbers and actual enrolment. “The target will always be ahead because we need every Kenyan on board,” he said.

“There was a directive from the government, and the target was to 25 million by December,” he added. NHIF estimates that for every contributor there are three dependents, which would place the total membership at around 25.2 million.

NHIF CEO Mr Geoffrey Mwangi, told Newsplex that the 25 million estimate includes the undeclared dependents of principal members. “Many members only declare their dependants when they get sick,” he said, adding that declared dependents are no more than 18 million.

According to the 2016 Economic Survey, the proportion of informal sector workers using NHIF has increased over the last five years, from 24 per cent in 2010/11 to 38 per cent in 2014/2015.

In 2013, Kenyans paid Sh62.1 billion in health expenses from their pockets, according to the 2013 Kenya Household Health Expenditure and Utilisation Survey (KHHEUS) published in October 2015.

That’s almost seven times the Sh9 billion in contributions NHIF received in the 2013/2014 financial year, when it had 3.8 million contributing members registered. It’s also three times the gross premiums paid to private medical insurers in 2013, which amounted to Sh20.8 billion, according to the Association of Kenya Insurers (AKI).

Uptake had initially slowed after special premiums for the self-employed were set at Sh500 per month, but the numbers were now rising, he said.

As recently as 2014, according to the World Bank, one quarter of all expenditure on healthcare in Kenya was out of pocket spending (OOP), meaning the patient paid the doctor directly from income or savings.

This is an improvement from the mid-nineties when out of pocket spending actually made up 40 to 50 per cent of health spending, before dropping by half from 2010 to 2012.


In 2010, NHIF allowed contributors to pay premiums through M-Pesa. USAID, which supported the project, says the number of people who used M-Pesa to pay premiums increased from 10,000 in 2010 to 100,000 in 2014.

Going by 2014 figures, Kenya just about makes the top third of African countries with least OOP spending as a share of all healthcare expenditure, but Dr Nyang’ao says there is nothing to celebrate.

“We are not so bad as others, but still not good. In other words, our neighbours could be doing poorer, but that just makes us the best out of the worst,” he says.

People without medical insurance find themselves in a precarious position when they or a family member fall ill. In 2013, the KHHEUS found that 6.2 per cent of all households were pushed into poverty after meeting healthcare costs from their pockets.

Across Africa, the countries with the lowest OOP spending rates use larger portions of their GDP on public healthcare and provide easier access to quality care for the lowest income earners. On average, the ten countries with the lowest rate of OOP spending in Africa spent an average of 5 per cent of their GDP on public healthcare. Kenya spent 3.5 per cent.

Seychelles, Botswana and South Africa spent 2.3 per cent, 5.2 per cent and 6.3 per cent of total health spending respectively out of pocket, the lowest in Africa. Seychelles provides free health care to its population, while Bostwana charges a fee of 70 US cents (Sh70) to all users, which it waives for those deemed unable to pay. South Africa has a sliding scale of fees that includes subsidies for low income earners.

In 2014, Ghana and Cameroon had similar GDP per capita to Kenya’s, in the $1300 – $1400 range, but wildly different rates of out of pocket spending. Ghana, which spent 2.1 per cent of its GDP on public healthcare, had an OOP spending rate of 27 per cent. However, Cameroon, which spent only 0.9 per cent of GDP on public health, had an OOP rate of 66 per cent, the third-highest in Africa. A 2013 World Bank report also found the country suffers a proliferation of illegal clinics.

Cameroon is one of only ten countries in Africa where out of pocket spending constituted more than half of all heath expenditure in 2014. On average, those countries spend only 1.4 per cent of GDP on public health. Of these, Egypt and Morocco spend the highest proportions of GDP on healthcare at 2.2 per cent and 2 per cent respectively, and the problems with their healthcare systems are well documented.


In Kenya, the 2015 Finacess Survey shows that three fifths of rural household heads (64 per cent) would not be able to raise Sh2500 within three days in an emergency, while over half of all urban household heads would not be able to raise Sh6,000.

“Their usual expenditure is converted to health. They are likely to convert even their assets so that they can pay for health,” Dr Nyangao says.

In fact, out of pocket expenditure underestimates the amount of money needed to obtain medical care because it does not include the times when treatment is needed but foregone, according to a 2015 report by Financial Sector Deepening (FSD).

“If you require some tests to determine something, you will postpone that. Meanwhile the illness might be getting worse,” Dr Nyangao explains.

The FSD report found that when money is not enough, many people choose to wait, to see if they got better without medicine, before seeking relief from a pharmacist. Only if these two failed was medical help sought. Money running out also means the full course of medication is often not received, further jeopardising recovery.


Compromises are also made on the hospital to visit. “Instead of going to a class of hospital there you would get the actual service, you will go to facility that is a step down because that is what you can afford,” Dr Nyangao explains.

Dr Nyangao is optimistic that the new rates advertised by NHIF will lead to more people registering, but thinks that the behaviour of many people in the informal sector needs to be taken into account.

“A daily premium would suit them well, but only if it is possible electronically. The informal sector has no month end. A monthly premium might mean when the payment is due they have no money.” Deducting a share of airtime purchased for NHIF premiums could also be a solution, he suggests.

According to the KHHEUS survey, no more than a third of the respondents in each county said they were insured. Kiambu County was the best insured with 34 per cent of residents covered, while Marsabit, with 1.8 per cent, was the worst covered. Garissa, Mandera and Wajir were not included because the sampling framework had not been updated to include them at the time of the survey.

Likelihood of possessing insurance is tied to education and employment. According to KHHEUS, while more than half the insured respondents had a university or college degree (54 per cent), only nine per cent of those without any education were covered.

While a quarter of those employed were covered, only 11 per cent of the unemployed, 15 per cent of homemakers, and 16 percent of students were members.

Mr Mwangi said the challenge with NHIF also extends to insurance in general. “It’s not only NHIF, it’s generally insurance. Unless people are pushed, they may not see the value then, especially for medical insurance,” he said.

Currently, it is easier for workers in the formal sector to be members because their employers must enrol them by law, unlike workers in the informal sector, who must enrol themselves.

Access to health facilities also plays an important role in the use of NHIF. “We realised when we have a major facility, all the people around that area have already picked up membership because they can attribute membership to access to services,” Mr Mwangi said.


Private hospitals accept NHIF insurance, although it accounts for relatively small proportions of the hospital bill. While NHIF pays Sh4000 a night for inpatient admission in a private hospital, nightly inpatient rates at many hospitals are at least twice that. You can expect to pay Sh9500, Sh8,000 and Sh8,700 at Aga Khan University Hospital, MP Shah Hospital and the Nairobi Hospital respectively, per night.

The number of companies providing private health insurance to Kenyans, known as Medical Insurance Providers (MIPs) has been increasing. In 2014, there were 29 companies, up 53 per cent from the 19 in 2008, according to the Association of Kenya Insurers (AKI).

Last year, medical insurance providers received Sh29.5 billion in premiums, a rise of 400 per cent from 2010, when they received Sh5.9 billion. In 2014, Kenyans paid Sh25.5 billion in medical insurance, which was a quarter of all the premiums paid in the country according to the Association of Kenya Insurers.

The lack of access to health cover has attracted companies that are looking to connect Kenyans to medical care using their mobile phones. One company, Hello Doctor, helps Kenyans access medical advice through the Sema Doc service on the Safaricom network. “This enables early expert advice, which is vital to preventing unnecessary worsening of health conditions,” company spokesperson Wagikuyu Mirung’u said in a statement.

Another mobile healthcare platform, M-Tiba, channels funds saved by mobile users directly to healthcare providers using M-Pesa, It is still in the pilot stages and recruitment of users and healthcare providers is ongoing, according to Ms Janet Kimani, M-Tiba’s spokesperson. Afya Poa is a similar product created by Jawabu Microhealth in which users contribute daily premiums through mobile money services.

Mr John Paul Otieno, the CEO of Jawabu Microhealth, agrees that NHIF needs to improve its distribution system to reach informal sector workers. “They have to bring the product to the people instead of having them go to NHIF offices to register,” he said. “If they had agents on the ground, that would work wonders.”


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