The National Health Insurance Fund (NHIF) is embroiled in yet another financial scandal after it emerged that it cannot account how Sh400 million in excess of loss of insurance cover for police officers was used.
The expenditure of the ex-gratia amount has been flagged by Auditor-General Nancy Gathungu in the accounts of the Interior ministry, under whose mandate the National Police Service falls, for the 2018/19 and 2019/20 financial years.
Failure to address the matter has seen the audit query recur in the audited accounts of the ministry for the financial year 2020/21, currently before parliament. The scandal has seen the Public Accounts Committee (PAC) of the National Assembly summon NHIF Chief Executive Officer Peter Kamunyo and Inspector General of Police (IG) Hillary Mutyambai to explain how the money was used. The summons come after Interior Principal Secretary Karanja Kibicho told PAC, chaired by Ugunja MP Opiyo Wandayi, that the NHIF boss has not yet explained how the funds were used despite requests for the necessary documentation supporting the expenditure.
Although Mr Kamunyo had previously said that the amount was used to pay for officers who sought medical help after exceeding their medical cover, Dr Kibicho told the committee that NHIF has not been able to provide documentation supporting the expenditure including the list of the beneficiaries.
“We have been struggling to get information from NHIF to prove the expenditure of the funds,” Dr Kibicho told PAC, a watchdog committee of the House. The failure by NHIF to comply has led to the Ministry of Interior being cited adversely by Ms Gathungu.
“We would appreciate it if this committee intervenes because you are the people in charge and we don’t understand why NHIF would be unable to address small things like [providing] information,” Dr Kibicho said.
PAC members Dr Otiende Amollo (Rarieda) and Dr Wilberforce Oundo (Funyula) regretted that the matter has dragged on for years because of NHIF’s failure to provide the PS with the required information.
“It is important that we specifically summon the NHIF CEO to come here and explain to this committee why he is not providing the required information to the PS,” said Dr Amollo. Dr Ojiambo noted that the matter has been recurring for long and now had to be resolved.
“If NHIF cannot account for this money then the CEO must be held to account. He must be ready to pay it back,” said Dr Ojiambo. The excess of loss amount was part of the Sh4.79 billion comprehensive medical cover for the police awarded to NHIF on September 26, 2017 in a two-year contract running to September 30, 2019 that was later extended to June 30, 2020.
The deal had the Sh200 million ex-gratia funds allocated every financial year over and above the contract sum for the duration of the contract.
The ex-gratia amount was meant to cushion police and prison officers who had exhausted their annual cover limits but needed treatment.
According to the contract document signed by the Interior ministry, National Treasury and NHIF, the amount was refundable at the end of the contract period if not used. The contract further provided that any request for the excess of loss cover can only be authorised by the IG. This means that NHIF cannot use the money without the IG’s approval.
NHIF has not provided evidence that Mr Mutyambai authorised the expenditure. This comes as it emerged that Dr Kibicho and Mr Mutyambai were frustrated by Mr Kamunyo’s failure to respond to their requests for explanation.
For instance, in a February 19, 2021 letter to the NHIF boss, Mr Mutyambai told Mr Kamunyo that any explanation on the expenditure of the amount must include beneficiary’s name, medical institution, amount, member’s name, and the date of medication, job group, rank and the total excess of loss cover.
As part of the recovery measures, Dr Kibicho told PAC that the ministry has since decided to withhold the insurance premium payable to the NHIF.
At the time the Sh4.79 billion medical insurance contract for the police was signed, NHIF was not a registered insurance company under the provisions of the Insurance Act.
Section 19 of the Insurance Act stipulates that any insurance provider operating in the country must be registered with the Insurance Regulatory Authority (IRA).However, through a gazette notice of April 17, 2020, National Treasury Cabinet Secretary Ukur Yattani exempted NHIF from that provision of the law effectively allowing the fund to engage in the commercial insurance business.
Last year, the government mandated NHIF to provide medical cover to civil servants, the police and prison officers.
The government cited the high cost of private insurance and lack of structures to provide a medical cover of such a magnitude as reasons why NHIF was preferred.
On June 30, 2021, the contract was awarded to NHIF at Sh3.29 billion. Mr Kamunyo, the accounting officer at NHIF, had told PAC when he appeared before it over the audited accounts for 2019/20 that he had settled the matter with Dr Kibicho, claims which the latter refuted.
In his May 5, 2021, letter to the NHIF boss, Dr Kibicho requested that it be furnished with a detailed report on the expenditure by May 6, 2021 . To date, according to Dr Kibicho, this letter has not been responded to.
