For the past two weeks, Elijah Mugambi has been a restless worker. Starting this month, he will be earning Sh. 750 less from his Sh. 22,000 salary. His Sh. 100,000 bank loan will not make things any easier to bear. You see, currently, Mr. Mugambi parts with Sh. 9,100 for his monthly loan repayment. From the remaining Sh. 12,900 gross salary, Sh. 1,400 has been getting deducted to cater for his statutory deductions. Of these deductions, Sh. 320 has been going to his National Hospital Insurance Fund subscription. From April 1, 2015, though, Mr. Mugambi will be parting with Sh. 1,830 per month in statutory deductions! “I have been paying Sh. 320 for NHIF but this amount has now risen to Sh. 750 per month. My salary is only thinning out,” he says. Mr. Mugambi, though, is not alone. In fact, he is one among millions of workers who will be remitting increased deductions to the NHIF. This follows a gazette legal notice dated February 6,2015 that raised the minimum amount all formal workers will be paying to be covered under the NHIF. According to the legal notice that was signed by NHIF Chief Executive Officer Simeon Ole Kirgotty and Chairman Mohamud Mohamed Ali, workers will see increments of up to 431 per cent on their monthly NHIF deductions. The notice came into force on April 1 this month.

While workers had hoped that deliberations by Central Organization of Trade Unions (COTU) and the Federation of Kenya Employers (FKE) against the new rates would halt their implementation, the dye was cast in January when COTU decided to formally accept the deductions by withdrawing a lawsuit challenging them. According to COTU, NHIF had agreed to lower their maximum deduction from the previously proposed Sh. 2,000 per month on high-income earners to Sh. 1,700. In the same vein, NHIF agreed to spare self-employed workers from the high rate. They will now continue paying Sh. 160 per month. NHIF had earlier attempted to raise payments for the self-employed to Sh. 500 month.

According to Felix Otiato, the head of Communications at the Federation of Kenya Employers (FKE), employers were satisfied with the consultations done by NHIF. “NHIF came to us with an explanation on what they intended to do with the increased levies and we felt that by doing so, they had chartered a new way of conducting business,” he says, adding that though FKE had issues with the new levies, it agreed to the implementation of the new rates. According to the gazette new rates, workers who earn Sh. 5,999 and below will pay Sh. 150 per month. Evidently, the most hit will be workers earning Sh. 8,000 and above. Accordingly, those earning between Sh. 8,000 and Sh. 11,999 will now part with Sh. 400. Workers earning between Sh. 12,000 and Sh. 14,999 will henceforth contribute Sh. 500. Those making between Sh. 15,000 and Sh. 19,999 will give Sh. 600 to NHIF. Those earning between Sh. 20,000 and Sh. 24,999 will have their salaries deducted Sh. 750. Those earning between Sh. 60,000 to Sh. 90,000 range will pay between Sh. 1,300 and Sh. 1,700, while income over Sh. 100,000 will attract the highest deduction of Sh. 1,700. Like Mr. Mugambi, though, workers earning the Sh. 8,000 to Sh. 19,999 range are afraid that their budgets will be too stretched. Take Rosaline Nafula, a mother of three who earns Sh. 15,000. “The cost of basic goods at the shop has not stopped accelerating, yet my salary has remained fairy the same. I don’t know how I will structure my budget to cope with the new deductions,” she says, adding that Sh. 600 is her monthly sukuma wiki budget. But according to the NHIF, benefits of the new charges will outweigh the deficiencies. Apparently, they will be used to meet in and out patients’ costs rather than the current model where only in-patient bed charges are catered for. The new cover will be extended to X-ray, maternity, consultation, drugs, hospital accommodation, and management of chronic diseases like cancer and diabetes.

Strikingly, workers paying the highest premiums will have their benefits capped at Sh. 1.2 million while those contributing the lowest amounts will have their annual benefits limited at Sh. 30,000. Similarly, according to Mr. Kirgotty, NHIF is seeking to limit the kind of hospitals contributors can be covered at, with high-end hospitals being ruled out. Currently, private medical insurers charge average premiums of Sh. 60,000 per year or Sh. 5,000 per month for a family of four that can receive cover benefits of up to Sh. 1 million. For instance, at Jubilee Insurance, the lowest limit per family per year is Sh. 500,000 while the highest is Sh. 5 million for in-patient cover. Out-patient’s cover has low of Sh. 50,000 and a high of Sh. 150,000, while maternity limit’s has a range of between Sh. 80,000 and Sh. 150,000. Prior to the gazette notice, NHIF was rebating daily hospital bed charges of between Sh. 400 and Sh. 2,400.

Nonetheless, NHIF did not clearly outline how workers holding onto private medical schemes are to be accommodated in the new arrangements. According to Mr. Otiato, this was one of the concerns that propelled the FKE to oppose implementation of the new rates. “We were concerned about NHIF’s capacity to diligently handle the higher monies workers will be contributing, the currently existing employer-sponsored medical schemes and how they would be accommodated into the new formula, legal issues pertaining to workers with limited salary and deductions who are currently servicing loans, and the need for a phased implementation strategy” says Mr. Otiato. Further according to the Union of Kenya Civil Servants, the rates are illegal. However, according to Murigi Kamande, an advocate of the High Court of Kenya, a worker servicing a loan whose salary will suffer additional deductions beyond his current minimum would find his case a hard nut to sell if he were to go to court. “The new rates fall under statutory requirements. If you have a loan and the deductions on your account go beyond the agreed limit, the court may view your repayment obligations as a contractual arrangement between you and your bank rather than statutory, and hence rule that you have imprudent financial management,” he says.

While all formally employed workers are required to submit monthly contributions to NHIF, including those who have their own employer-sponsored health insurance schemes, a spot check reveals that private insurers will be accommodating medical charges that NHIF will not be willing to meet. Consequently, workers looking to open new medical covers with private insurers will need to pay for NHIF and their private insurer as the two covers together. For instance, if you take a medical insurance product at Resolution Insurance, your cover will extend beyond NHIF’s limit. “We shall pay all approved admissions bills less National Hospital insurance Fund rebates,” says the Resolution Insurance product guideline. The same applies for covers taken at AAR Insurance and Jubilee Insurance.