The National Health Insurance Fund (NHIF) nearly doubled its cash surplus in its financial year ended June, helped by a sharp rise in premiums that eclipsed a jump in medical payouts and other costs.
NHIF’s unaudited results for the period show that the scheme had Sh800.97 million in surplus, representing a 78 percent jump from Sh449.9 million held a year earlier.
The health fund’s premiums grew 29.4 percent to Sh80.43 billion, while medical payouts jumped 31.9 percent to Sh71.34 billion. Other costs increased by 10.3 percent to Sh7.78 billion.
The jump in NHIF’s cash reserves represents a turnaround for the State-backed insurer that had sunk to a negative cash surplus of Sh3.65 billion in the year ended June 2019.
NHIF’s Chief Executive Officer Peter Kamunyo said a spike in the cost of drugs and other medical inputs dampened the impact of a record collection in premiums. “In June 2021, our payouts ratio was at 87 percent, and in June 2022 slightly increased to 89 percent. In this period we saw a massive increase in the cost of healthcare inputs due to dollar hitches,” Dr Kamunyo told Business Daily in an interview.
The cost of medical drugs and procedures has been on the increase in the wake of the shilling’s decline against the dollar forcing healthcare providers to pass the increased cost to insurers and patients who pay out of pocket.
Health inflation was at 3.85 percent in July last year— the start of the financial year under review— as medical services like other sectors were not spared from the soaring cost of living.
The increase in cash surplus strengthened NHIF’s financial state at a time the State-backed insurer is set to spearhead the roll-out of Universal Healthcare Coverage (UHC) in line with new rules that have made membership to the scheme compulsory—pending regulations to give effect to the law change.
The law was early this year changed compelling all Kenyans aged above 18 to register and pay monthly premiums of Sh500 per month as part of the UHC. The NHIF (Amendment) Act, 2022 made membership compulsory for all Kenyan adults while the national and county governments will pay premiums for households that are classified as vulnerable.
The two levels of government piloted the model of paying NHIF premiums for poor households last year and have spent over Sh1 billion.
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Dr Kamunyo says that NHIF is bracing for a spike in medical claims under the UHC given the increase in members, adding there is need to ensure the scheme significantly grows its revenues from premiums. “We must ensure we increase the retention level and also address other sustainability measures like contribution rates including those earning more than Sh100,000 a month to pay more,” Dr Kamunyo added.
Mandatory membership to the NHIF is an upgrade of the previous scheme where only workers in the formal sector are compelled to join. Workers in the informal sector had a choice to join or drop the NHIF membership with their monthly contributions set at Sh500.
NHIF estimates that it will raise Sh81 billion annually under the compulsory listing, helping it to remain financially stable even in the face of the anticipated rise in medical claims.
SOURCE: Business daily