Social Health Insurance Fund (SHIF) vs. NHIF cover: Key Changes and Benefits for Kenyans

The introduction of the Social Health Insurance Fund (SHIF) has sparked a national debate in Kenya. As economic challenges persist, many citizens are concerned about the financial implications of additional taxes, particularly those tied to healthcare. With SHIF under public participation and expected to replace the National Health Insurance Fund (NHIF), this transition signifies a major shift in the country’s healthcare landscape.

This guide provides an in-depth analysis of SHIF, its benefits, the differences between SHIF and NHIF, and the overall impact on Kenya’s healthcare system.

What is the Social Health Insurance Fund (SHIF)?

The Social Health Insurance Fund (SHIF) is a new healthcare scheme introduced by the Government of Kenya aimed at enhancing healthcare access and affordability. The initiative was born out of the need to ensure every Kenyan has access to quality healthcare, as stipulated in the Constitution. In 2023, the government proposed the SHIF system to cover a broader demographic, particularly individuals left out by the NHIF.

Key Features of SHIF

• Mandatory Contributions: Employees contribute 2.75% of their monthly income to the fund. This contribution is designed to ensure access to basic healthcare services.
• Coverage for Vulnerable Groups: The government will cover the healthcare costs of individuals unable to afford contributions. This includes unemployed or self-employed individuals, who will contribute KES 300 monthly instead of the current KES 500 required by NHIF.
• Holistic Healthcare Services: SHIF is designed to provide comprehensive healthcare coverage across various medical services.

Why the Shift From NHIF to SHIF?

The National Health Insurance Fund (NHIF) has been Kenya’s primary government-run health insurance scheme for over 50 years. While NHIF served as a cornerstone of affordable healthcare, it primarily catered to employed individuals in the formal sector, leaving a significant portion of the population in the informal sector uninsured.

Limitations of NHIF:

• Limited Coverage: NHIF mainly served those in formal employment, with informal workers or the self-employed having to contribute voluntarily.
• Inadequate Population Coverage: By 2014, only 11% of the population was registered under NHIF, highlighting the gaps in the system.

SHIF seeks to address these gaps by extending healthcare access to all Kenyans, regardless of employment status, and by making healthcare contributions more equitable based on income levels.

How Does SHIF Impact Employees?

1. Cost of Healthcare

One of the most notable effects of SHIF will be the redistribution of healthcare costs. Under SHIF, low-income earners will pay less or even receive free healthcare services, easing the financial burden on economically disadvantaged individuals. However, higher-income earners will face larger deductions. For instance, an individual earning Ksh. 500,000 per month will contribute Ksh. 13,750 to the fund.

2. Access to Healthcare Services

SHIF is expected to significantly enhance access to healthcare services. The system is designed to offer an essential healthcare benefits package, which will be accessible through a network of public, private, and faith-based healthcare facilities. This expanded coverage ensures that more Kenyans can access quality healthcare services, regardless of location or financial situation.

3. Improvement in Healthcare Quality

Increased funding through SHIF could lead to improvements in healthcare infrastructure, the quality of care, and access to advanced medical technologies. Additionally, the fund provides coverage for chronic illnesses and encourages preventive healthcare services, improving public health outcomes.

Impact on Businesses

The implementation of SHIF will not only affect employees but also have an impact on businesses, particularly in terms of compliance and operational costs.

1. Increased Costs

Businesses will have to adjust to the new tax requirements. Employers will need to allocate resources for SHIF deductions, potentially increasing their operational expenses. Additionally, businesses may need to hire experts or upgrade their payroll systems to ensure compliance with the new regulations.

2. Compliance Burden

With new regulations often come new compliance requirements. Businesses will need to familiarize themselves with SHIF regulations, ensure accurate deductions, and submit the appropriate contributions on behalf of their employees.

3. Consumer Behavior

SHIF contributions may also impact consumer spending. With more deductions, disposable income could decrease for certain employees, leading to shifts in consumer behavior. Businesses offering non-essential goods and services may experience a drop in demand, while others may benefit from a more flexible income for those contributing less to SHIF.

Transition from NHIF to SHIF

The shift from NHIF to SHIF represents a transition to a more inclusive healthcare system. Under SHIF, all residents in Kenya are required to register and contribute. Once operational, SHIF will take over NHIF’s functions, with the NHIF Board dissolving within one year.

This transition will allow for a more integrated healthcare system that provides expanded services across different medical fields, including primary care, chronic illness management, and emergency services.

Contributions to SHIF: How Does It Work?

Who is Required to Contribute?

1. Every Kenyan Resident must register for SHIF and make the necessary contributions.
2. Foreign Residents who have lived in Kenya for more than 12 months are also required to contribute.
3. Self-Employed Individuals and those without salaried income will make contributions based on their income level.

Contribution Rates

• Salaried employees will contribute 2.75% of their income.
• Self-employed individuals or households without salaried income will contribute a proportion of their income, subject to a minimum of KES 300.
• Vulnerable and indigent individuals will have their contributions covered by the government.

Establishment of Key SHIF Funds

1. Primary Health Fund (PHF)

The PHF will focus on purchasing primary healthcare services and ensuring that residents can access essential healthcare services. The fund will be supported by government allocations, donations, and other innovative financing mechanisms.

2. Emergency, Chronic, and Critical Illness Fund (ECCIF)

The ECCIF is designed to defray the costs of managing chronic illnesses and emergencies after SHIF benefits are exhausted. This additional layer of coverage ensures that no one is left without access to critical care, even in dire situations.

Means Testing Method: Determining Contribution Ability

SHIF will use a means testing instrument to assess the financial ability of individuals or households to contribute. This system evaluates various factors such as housing, access to basic services, and household composition to determine the level of financial assistance required.

Conclusion

The introduction of the Social Health Insurance Fund (SHIF) is a pivotal moment for Kenya’s healthcare system. By expanding coverage and reducing the financial burden on low-income individuals, SHIF promises to provide comprehensive and equitable healthcare for all residents. As Kenya transitions from NHIF to SHIF, the country moves closer to achieving its goal of universal healthcare, ensuring that everyone has access to the care they need, regardless of their economic status.

SHIF represents a step towards a healthier, more inclusive future for Kenya. However, as the system undergoes public participation and awaits final approval, stakeholders, businesses, and individuals must prepare for the inevitable changes and opportunities that lie ahead.