President Ruto's new NHIF proposal will see top earners pay more for NHIF
On May 1st, President William Ruto announced changes to the National Health Insurance Fund (NHIF) contributions that would affect salaried and informal workers in the country. The changes propose that top salaried workers will have to pay higher contributions while informal contributors will enjoy lower rates.
Currently, salaried workers in Kenya pay between Sh150 and Sh1,700, depending on their monthly income. However, President Ruto said that these rates will be phased out and replaced with a flat rate of 2.7% of their salary. The proposed changes will see earners between Sh39,999 and Sh100,000 per month increase their contributions by between 8% and 74%. This calls attention to the impression of using higher earners to subsidize those earning less.
Those earning above Sh100,000 will have even steeper contributions, with those taking home half a million witnessing their deductions rise eight times to Sh13,500. In contrast, informal sector workers will see their monthly contributions drop by 40% from the current Sh500 to Sh300 if the President’s proposal is adopted.
President Ruto believes that these changes will create an equitable contribution mechanism where everyone contributes 2.7% of their earnings to the NHIF. He explained that the changes are meant to give a lifeline to the NHIF, which collected premiums worth Sh78.84 billion in the financial year ending June 2022, falling short of its targeted Sh90.57 billion as dormant members hit 8.8 million from 5.03 million in the preceding period.
The NHIF added 1.34 million members under the informal sector to bring the total to 10.64 million, while the formal sector saw 175,651 new registrations to take membership to 4.82 million. The State last year changed the NHIF Act, making it compulsory for Kenyans aged 18 years and above to contribute to the fund.
Part of the draft regulations to actualize the revised Act was to leave unchanged the contributions for earners of up to Sh99,999 but replace the Sh1,700 flat rate contributions for earners of Sh100,000 and above with a 1.7% deduction on the pay. However, President Ruto appeared to drop the earlier plan by announcing the new changes that will see those earning up to Sh30,000 enjoy reduced contributions of between 5% and 46%.
Salaried workers earning Sh100,000 will start paying Sh2,700, up from the current Sh1,700, representing a 59% rise. The hike will be higher for earners above Sh100,000 given that the upper ceiling has been Sh1,700 in what has been shielding top earners from steep deductions.
In conclusion, President Ruto’s proposed changes to the NHIF contributions will have a significant impact on both salaried and informal workers in Kenya. While the changes will mean that top salaried workers will have to pay higher contributions, informal sector workers will enjoy lower rates. The proposed changes are meant to give a lifeline to the NHIF, which has been struggling to meet its premium collection targets.