Police, civil servants and parastatal employees will this year have to seek alternative medical insurance cover after Treasury barred the National Hospital Insurance Fund (NHIF) from providing commercial insurance services.
SH1.9 BILLION
Acting Treasury Cabinet Secretary Ukur Yatani in December last year decreed that NHIF will have to abide by Section 19 of the Insurance Act if it wants to continue providing commercial insurance services as it has been doing for the state employees and private companies.
The directive will leave NHIF with its core mandate of only collecting contributions from members in both the formal and informal sectors of the economy and social insurance schemes. It will also see the fund lose billions of shillings in premiums from the organisations to which it has been offering commercial insurance schemes.
If NHIF defies the directive, the Insurance Regulatory Authority (IRA) can apply to have the fund liquidated in court.
The health insurer has been raking in more than Sh1.9 billion per year in premiums from 40 parastatals and 15 private companies and associations in the country. This is apart from the Sh5 billion premiums received for the police medical insurance scheme and another similar amount for civil servants.
CAPITAL THRESHOLD
Acting Treasury Cabinet Secretary Ukur Yattani, in a letter dated December 13, 2019, informed Health Cabinet Secretary Sicily Kariuki that NHIF will have to comply with Section 19 of the Insurance Act, which places all commercial insurers under the IRA where they have to do regular reports, pay regulatory levies and meet capital thresholds to ensure they have money to pay claims.
“In the event that NHIF decides to provide commercial insurance services to public entities and private companies, they will have to comply with Section 19 of the Insurance Act,” the Treasury CS says in the letter with reference number TNT/CONF180/01U (92).
A meeting to discuss the Insurance (Amendment) Act 2019, attended by representatives from the Health ministry, IRA, the Presidential Delivery Unit and the Attorney General’s office observed that under the new law IRA would monitor NHIF’s financial soundness, investment of funds, payment of contributors’ benefits, contracts with health facilities and service level agreements, and the types of services available to contributors.
CONSIDERED ANALYSIS
It was also agreed that NHIF needs to be supervised by IRA to ensure prudent management.
The meeting was held after CS Kariuki, on October 2019, sought the Attorney General’s and Solicitor General’s opinions on the Insurance (Amendment) Act 2019 which put NHIF under the ambit of IRA.
“We would like at the outset to indicate that we have not established any ground that would necessitate a departure from our earlier opinion. The said opinion was based on our objective and considered analysis of the law and was in fact predicated on the same premises as your letters of 21st August 2019 and 3rd October 2019, namely, that the Insurance (Amendment) Act 2019 extends the coverage of the Insurance Act to the National Hospital Insurance Fund (NHIF),” Solicitor General Kennedy Ogeto said in a letter to the Health CS dated October 7, 2019.
400,000 CITIZENS
In another letter, reference number MOH/ADM/1//1/106 and dated November 19, 2019, the Health CS requested the acting Treasury CS for the exemption of NHIF from provisions of the Insurance Act saying it regulated commercial insurance yet NHIF managed social health insurance schemes.
“The Insurance Amendment Act, 2019, under Section 2 thereof loops social health insurance schemes into the ambit of the Insurance Act. The National Health Insurance Fund (NHIF) manages social health Insurance schemes and therefore by virtue of the Amendment Act, the Fund’s management and administration will be impacted on by the amendment,” Ms Kariuki opines in the letter.
CS Yattani granted NHIF exemptions from the provision of the insurance Act, as long as it stuck to its core mandate. On its part, the IRA agreed to exclude NHIF from the one per cent levy on premiums payable by insurers after the Ministry of Health expressed fears that the payment of the levy might lead to the exclusion of about 400,000 citizens from receiving healthcare under the scheme.
MEDICAL COVER
The directive by Treasury has caused apprehension within the NHIF Board of directors who had not been appraised on the illegality NHIF was involved in by providing commercial insurance services against IRA regulations.
IRA had in July 2019 directed the NHIF to stop offering group medical cover and last expenses cover to civil servants until it abides by the regulations.
For the second time in as many years, the insurance regulator cautioned and directed the NHIF not to involve itself in offering medical cover for civil servants as it isn’t within its mandate.
IRA Commissioner and Chief Executive Officer (CEO) Godfrey Kiptum had expressed concern that NHIF was engaged in providing conventional insurance services yet the Fund was not operating in line with insurance principles.
NATIONAL SCHEME
“To this end, the Authority directs NHIF to desist from providing or engaging in the provision of conventional insurance services or advertising, stating, promising or broadcasting misleading information intended to induce or attempt to induce another person to enter into a contract relating to insurance business until the Fund assumes the right structure and form as envisaged in the Insurance (Amendment) Act No. 11 of 2019,” a letter by Mr Kiptum to NHIF acting CEO Nicodemous Odongo read.
IRA, however, clarified that the prohibition to NHIF to stop engaging in conventional insurance did not include its provision of universal health care (UHC) and the mandatory national scheme that is provided for under the NHIF Act.
In the letter dated October 29, 2019, the IRA boss observed that NHIF was not authorised to carry on insurance business.
BENEFIT PACKAGE
“The Authority wishes to bring to your attention the provisions of Section 19 of the Insurance Act, which provides that only persons registered under the Act are authorised to carry on Insurance business in Kenya. The National Hospital Insurance Fund (NHIF) as currently constituted is not authorised to carry on insurance business,” the letter reads.
On October 24 last year, the Health CS received “The Health Financing Expert Panel Reform Report on the Transformation and Repositioning of the National Hospital Insurance Fund as a Strategic Purchaser of Health services in the context of Universal Health Care”.
The report emphasised the need to use actuarial services to determine the premiums to be paid and determine benefit package entitlements in order to facilitate the sustainability of NHIF.