President Ruto Intends to Impose Mandatory 2.75% NHIF Deductions

In the latest round of pay slip demands, President William Ruto’s proposal to require every household in Kenya to contribute 2.75 percent of its income to a new social healthcare fund will see the government deducting at least 20 percent of the monthly pay from Kenyans earning Sh50,000 and above.

The National Health Insurance Fund (NHIF), which is already in effect, would be replaced by a new social insurance program under the Social Health Insurance Bill, 2023, according to information obtained by a local daily.

The State intends to raise deductions from the existing range of Sh150 to Sh1,700 to a fixed charge calculated at 2.75 percent of total monthly wages in order to pay for the expansive health program.

The impending deductions would further reduce the take-home pay for Kenyan employees whose monthly wages have already been affected by the housing tax and increasing National Social Security Fund (NSSF) contributions.

In addition to the current Sh8,460, the State would now deduct Sh10,264, or 20.5 percent, from people making Sh50,000 in gross income through the pay-as-you-earn, NSSF, housing levy, and health care contribution.

Earners of Sh100,000 will forfeit Sh27,389, or 27.4%, with higher income earners feeling the pinch more keenly.

The deductions show how difficult it is for employees to contribute to President Ruto’s financial priorities, which also include universal health care (UHC), cheap housing, and improved pension schemes.

UHC will be based on three distinct funds—one for primary and preventive care, another for referrals, and a third for the management of chronic diseases—under the State-backed Social Health Insurance Bill, 2023.

“These funds are to be managed by a single board and secretariat, based on the proposed 2.75 percent deductions on household income from both formal and informal sectors,” State House spokesperson Hussein Mohammed said.

According to Mr. Mohammed, the money constitutes a component of the President’s strategy to fulfill the UHC promise.

In its manifesto, the Kenya Kwanza coalition that currently controls government promised to hire community health promoters, start paying them, and combine preventive and promotional programs.

According to Mr. Mohammed, the Primary Health Care Bill 2023 establishes a framework for the provision of primary healthcare, as well as for patient access and administration.

The Bill calls for the restructuring of primary health care service delivery, including dispensaries and health facilities.

“It establishes the framework for the 100,000 community health promoters to be commissioned by the President in October 2023 and outlines the services they will offer when they visit households,” he said.

“This means Kenyans seeking services at these levels can walk in and walk out without incurring any Bill.”

But in order to make the fantasy a reality, the government will set up rules that will make enrollment in the new health insurance compulsory in an effort to enlist the support of the 80 percent of Kenyans who work in the unorganized sector.

In accordance with the regulations that will put social health care membership on par with Kenya Revenue Authority (KRA) personal identification numbers (PINs), anyone without evidence of current contributions would be denied access to State services.

This means that individuals who do not pay into the health care system will be prohibited from carrying out necessary acts like registering land titles, approving development plans, transferring and registering their automobiles, and using the Hustler Fund.

Increased contributions are seen by the State as a method to save the UHC, but they come with the pain of dormant membership, which has over the years damaged the NHIF.

The public health insurer failed to pay hospitals for the services they provided in the year to June 2022, collecting premiums worth Sh78.84 billion instead of the intended Sh90.57 billion.

Hospitals began turning away NHIF-covered patients in May of this year due to outstanding claims totaling at least Sh12 billion, exposing the scheme’s precarious financial situation.

Higher health care contributions, combined with the new housing levy, a new band of PAYE of 35 percent, and NSSF will see Kenyans earning over Sh200,000 a month give the State at least 30.8 percent of their earnings from the current 27 percent.

A Sh200,000 payslip will cede Sh61,639 from the current Sh53,959, being an additional Sh7,680 while workers earning Sh500,000 face deductions of Sh164,389 (33 percent), up from Sh143,959.

A Sh800,000 earner will give the State Sh276,106 or 34.5 percent, being an additional Sh42,147.

National Assembly Leader of Majority Kimani Ichung’wah is expected to table the bill in Parliament for debate and passage into law.

Others are Primary Healthcare Bill, 2023, Digital Health Bill, 2023 and the Facility Improvement Financing Bill, 2023.