Employers to make full NHIF contributions in the third year

NHIF Building in Upper Hill, Nairobi. FILE PHOTO | NM

By JOHN MUTUA
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SUMMARY

• Employers have been spared the pain of fully matching the National Hospital Insurance Fund (NHIF) contributions of their workers by two years.
• Members of Parliament changes to the NHIF Bill compels companies to match contributions of their staff who pay less than Sh500 monthly but in a graduated scale that will see them remit 50 per cent in the first year when the changes become law.
• Contributions will rise to 75 per cent in the second year with firms fully matching the them in the third year.

Employers have been spared the pain of fully matching the National Hospital Insurance Fund (NHIF) contributions of their workers by two years.

Members of Parliament changes to the NHIF Bill compels companies to match contributions of their staff who pay less than Sh500 monthly but in a graduated scale that will see them remit 50 per cent in the first year when the changes become law.

Contributions will rise to 75 per cent in the second year with firms fully matching the them in the third year.

The changes aimed at boosting the funding base of the State-controlled insurer had faced stiff opposition from businesses which argued that it would destroy private medical insurance and force them to cut more jobs.

“In the first year from the date of commencement of this section, the employer shall be liable to pay 50 per centum (50 percent) of the employer’s contribution,” reads the amendments.

“In the third year and subsequent years, the employer shall be liable to pay the full employer’s contribution matching the employee’s contribution.”

MPs approved the changes to the NHIF Act of 1998 on Tuesday evening and now the Bill awaits presidential signature to become law, setting the stage for firms to contribute billions of shillings annually to the scheme.

“This will not only affect the wage bill and sustainability of enterprises but also destroy the capacity of enterprises to create new jobs and sustain the existing jobs,” Jacqueline Mugo, Federation of Kenyan Employers chief executive, told Parliament.

FKE added that firms are still reeling from the Coronavirus-induced slump, which triggered job cuts, hiring freezes and business closures. Formal workers contributed Sh24.89 billion to NHIF in the year to June 2017, the latest available detailed financial statement shows.

The move to have employers top up contributions and compulsory membership of all Kenyans above 18 years are two key changes to the NHIF Act of 1998, meant to increase collections to the State-controlled insurer.

NHIF received Sh60 billion in contribution in the year to June and paid out Sh54.3 billion to hospitals as members’ claims.