Is the Social Health Insurance Fund (SHIF) a scam?

Kenyans have been left to grapple with the implementation of the Social Health Insurance Fund (SHIF) which was officially rolled out on 1st October 2024. SHIF is meant to replace the National Health Insurance Fund (NHIF), the pre-existing social health insurance scheme which was initially rolled out in 1966.

SHIF came into force through the Social Health Insurance Act, Primary Healthcare Act and the Digital Health Act all proposed in the Finance Act, 2023.

Consequently, the Social Health Insurance Regulations passed on 8th March 2024 were meant to operationalize the Social Health Authority (SHA) which is mandated with bringing into force the Primary Healthcare Fund, the Social Health Insurance Fund and the Emergency, Chronic and Critical Care Fund.

The kickoff date on enrollment for SHIF was initially postponed from July 2024 following a court case that had been filed at the High Court, challenging the constitutionality of the programme. The High Court declared some sections of the act as being unconstitutional, which prompted the Health Cabinet Secretary to file an appeal motion at the Court of Appeal.

On 20th September 2024, the Court of Appeal ruled that the Act would remain in force, pending the determination of the substantive appeal case.

SHIF is a contributory tax deduction, directly sourced from an employee’s payslip. The monthly contributory rate for salaried employees is set at 2.75% of the gross salary with a minimum of Ksh 300 and no maximum cap set on deductible amounts. The remittances are to be undertaken by the employers to the tax-collecting authority by the 9th day of the subsequent month.

For non-salaried employees, the rate is also set at 2.75% of the household income, with a minimum threshold of Ksh 300 and no maximum cap. The regulation states that the government shall implement instruments to measure and determine household income and to determine vulnerable households that may not be able to pay for SHIF. It, however, does not provide details of how it intends to do so.

Failure to make the remittance payments results in a penalty of 2% of the unremitted contribution for the period in question. Contributing employers who fail to pay on time, or withhold payments are guilty of a crime and are liable to a penalty of not exceeding Ksh 2 Million, or a prison term not exceeding 3 years.

The need for universal health coverage.

The movement to SHIF is geared as part of the government’s move to establish a more inclusive universal healthcare coverage structure that

1. Targets coverage for workers and employees in both formal and informal sectors, as well as vulnerable groups who have long been ignored by previous social health insurance systems.
2. Factors income levels of contributors, using a tiered contribution system that can be adjusted to accommodate people on different income levels.
3. Offers comprehensive coverage for a broad spectrum of health services; i.e. outpatient, chronic disease management, child and maternal healthcare.
4. Is built on a decentralized system; meaning that patients can access healthcare at local, county and national levels.

The accomplishments of NHIF.

NHIF has been marred with allegations of corruption, mismanagement, poor service delivery and gross public mistrust. Nonetheless, it also managed to score some important wins during its run as the country’s primary social healthcare insurance provider.

• It expanded healthcare coverage to the informal sector, despite being initially tailored for formal sector employees. 83% of Kenya’s workforce is in the informal sector and expanding NHIF to include them has managed to bring a huge chunk of the country’s population into affordable healthcare coverage.
• It offered coverage for both outpatient and inpatient services; granting members access to day-to-day healthcare needs.
• It included coverage for chronic disease management, e.g. kidney dialysis.
• It offered increased coverage to private hospitals as well.
• It managed to digitize service delivery. Registration, contribution and claims processing could all be done online.

The Social Health Authority (SHA), through SHIF, promises to level up on these and more benefits by improving service delivery, focusing and affordability and accessibility and expanding the scope of coverage.

President Ruto has continually reiterated his commitment towards delivering universal health coverage and has promised to do so through SHIF.

For a country that has a weak and grossly underfunded system of social welfare, SHIF does seem like a very good idea, on paper. In actuality, however, it is the complete opposite.

The harsh reality

The biggest debacle with the new system has to do with the transition from NHIF to SHIF. As per the government directive detailing the launch of SHIF, all citizens who were members of NHIF would be automatically moved over to SHIF. They were to continue accessing healthcare services as normal.

Many healthcare services, particularly in the private sector, had initially suspended offering services under NHIF starting May 2024 citing unpaid claims of over Ksh 12 Billion.

Given the huge backlog of these claims, SHIF is taking longer than expected to onboard many of these healthcare facilities. These healthcare facilities have raised concerns over these ‘carry-over claims’ some going as far back as 7 years, and have expressed worry whether they would still be addressed by SHA.

The clarity on services under SHIF is in murky detail and many private health stakeholders unsure of whether they are to retain offering the same caliber of services that they did under NHIF.

However, patients who are in dire need of healthcare services have suffered the most.

Many saw their NHIF cards deactivated and could not access the new system, forcing them to pay in cash for the medical services that they were seeking.

Some who had life-saving surgeries scheduled and approved under NHIF have been left in the dark after some hospitals were forced to turn them away. All in all, SHIF is barely operational in many healthcare facilities.

Huge remittances, reduced benefits

All persons are supposed to receive free healthcare services under the insurance plan which is catered for under the Primary Healthcare (PHC) Fund. However, that is capped at a figure of Ksh 900 per annum, per person, meaning that every extra expense incurred is paid for out of pocket.

Chronic ailment coverage is offered for chronic diseases that last for over a year. There is no talk of chronic diseases that may be sporadic and last for a shorter period.

Intensive Care Unit (ICU) costs are capped at Ksh 3,360-Ksh 4,480 per day for 180 days, which is a gross underestimation of true ICU costs.

SHA makes it clear that it only offers you basic coverage for your healthcare needs. You are expected to pay from pocket for any extra costs that arise.

The basic package that SHIF offers is barely enough to cater for the costs of healthcare needs for most Kenyans. Most times, you will still need to pay out-of-pocket to top up on the healthcare services that you require.

The whole point of having Universal Healthcare Coverage is to provide comprehensive payment for the healthcare needs of most if not all Kenyans. At the end of the day, most people will still turn to private insurance carriers to supplement their SHIF remittances. Those who cannot have private insurance will be forced to turn to harambees and fundraisers to raise money for their medical expenses. All that in a country that supposedly has Universal Healthcare Coverage!

The removal of a maximum capitation on remittances also makes contributions to SHIF exorbitant at worst and unfair at best, especially for salaried employees. In addition to the increased tax burden exerted through the payment of PAYE tax, SHIF is also making away with a bigger piece of the salary pie. All in exchange for healthcare benefits that still remain inaccessible and force you to churn out more money out of pocket.

NHIF initially capped maximum contributions to Kshs 1,700 per month. Despite an initial proposal to cap SHIF contributions to KSh 5,000 per month, high-income earners are now faced with paying premiums of as high as Ksh 27,000.

In fact, compared to private healthcare insurance providers, SHIF offers the lowest amount of benefits compared to the premiums charged.

Furthermore, SHIF now forces patients seeking outpatient services to first visit a level 2 or level 3 facility before they can referred to a level 4 or 5 facility. That defeats the purpose of offering primary healthcare services across all levels, which is a primordial constituent of universal healthcare.

Unfounded expectations

SHIF is one of three funding models set forth under the SHIA Act. The other two, the Primary Healthcare Fund (PHC) and the Emergency Chronic and Critical Care Fund (ECC) draw funding directly from the exchequer; with the funds allocated through budgeting by the National Assembly.

The SHIA Act does not provide for the process of allocation of these funds. It is very clear how the funds under SHIF will be raised from the public. However, it is tight-lipped on how much is to be allocated to the PHC and ECC funds.

The government should be the main bankroller for any social service. In as much as it hopes to raise money through contributory mechanisms such as SHIF, the PHC and ECC funds should be treated as the primary funds, only to be complimented by SHIF. The situation is nonetheless flipped, with SHIF expected to be the main source of funding for the Social Health Authority. scheme.

Consequently, the burden of raising funds to finance social health welfare is placed on the public, adding yet more levies and deductions to the cumbersome taxes already being paid under Income tax.

If universal healthcare is of any priority for the government, then it needs to walk the talk and commit to more funding from the national budget.

Generally, the government still spends very little on social welfare programmes despite a continued vocal commitment to do so. Kenya’s social protection programmes were allocated a paltry Ksh 38.8 Billion in the 2022/23 budget, a 1.17% share of the yearly budget. The country’s social protection spending represents a 0.3% share of the country’s GDP which is low even by regional standards as the Sub-Saharan average stands at about 2.7%. For context, social protection and welfare programmes in developed countries such as France can be as high as 30% of the share of GDP.

The International Labour Organization (ILO) recommends that Kenya improve its spending on social protection by at least 3 percentage points, which amounts to a financing gap of Ksh 380 Billion. By account of the current spending trajectory by the government, achieving that figure remains etched in hot air.

This financing gap cannot be filled by relying on contributory programmes such as SHIF alone. More budgetary allocation is needed for the exchequer funds, PHC and ECC.

The real scandal surrounding SHIF

Earlier during the year, Safaricom PLC, one of Kenya’s biggest tech and communication firms had offered to set up the SHIF digital system and platform for a cost of Ksh 48 Billion.

The figure is a far cry from the Ksh 104 Billion that was eventually allocated to set up the SHIF programme.

The entry of ‘foreign players’ saw Safaricom withdrawing its initial proposal, quickly tabling another valued at Ksh 104 Billion which was approved and awarded in the course of one day. The process for approving a program of such magnitude typically lasts for about 6 months, if not more.

It is therefore crystal clear that some individuals in places of power have a lot to gain from the implementation of SHIF.

The deal is also remarkably similar to the airport takeover and energy transmission projects that have been unscrupulously awarded to Adani Group, a shady Indian conglomerate.

That is no coincidence. Adani Group is said to play a huge role in this deal as well. One of the entity’s subsidiaries, Apeiro Limited is a majority stakeholder in Ksh 104 Billion deal. It is the entry of this ‘foreign player’ that saw the cost of the project inflated by Ksh 56 Billion.

Nonetheless, the creation of a new social insurance scheme and the migration from NHIF was uncalled for. Granted, NHIF had many flaws but it was operational enough to service the healthcare needs of millions of Kenyans, especially those in the lower-income demographic. The system only needed to be improved, but not to be completely undone with.

Improving the NHIF system would have cost a tune of Ksh 700 Million. How that ended up translating to Ksh 104 Billion amounts to daylight robbery.