National Hospital Insurance Fund(NHIF) has said that 5.7 Million Kenyans, or 54% of its 10.6 million members, have stopped making their monthly contributions, dealing the insurer a deadly financial blow.
This high default rate comes as many households lose their jobs or are on half-pay due to the adverse effects of the COVID-19 pandemic on business and the economy.
According to NHIF Chief Executive Peter Kamunyo, many dormant members stop making their monthly payments after taking out covers huge covers.
Those workers employed in the informal sector are not required by law to contribute to the Fund, unlike those in the formal sector.
According to Kamuyo, some join the NHIF, make a couple of payments, go to a hospital, and quickly disappear once they receive treatment.
He says it is this kind of behaviour, known as an adverse selection in insurance jargon, that has now made the insurance fund unsustainable-
NHIF now unable to settle claims
The Fund cannot thus meet its administrative expenses or settle claims.
Available figures indicate that the Fund received KSh 59.5 Billion from 8.998 Million contributors in the financial year ended June 2020 and paid claims totalling KSh 54.9 Billion.
The Fund said a massive chunk of its voluntary members suffers chronic illnesses, exposing the scheme to enormous monthly payments to hospitals.
While voluntary members pay KSh 500 per month to NHIF, those in the formal sector contribute between KSh 150 and KSh 1700 depending on one’s earnings.
The Fund says the 5.7 million defaulters have caused the fund huge losses. For each Shilling collected from defaulters, it paid bills of KSh 2.
The new law that seeks to make contributions to NHIF compulsory for all Kenyans above 18 years, is currently on the floor of parliament.
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