Police recruits during a passing out parade at the National Police College Main Campus Kiganjo in Nyeri County on January 10, 2023.
Public servants with chronic illnesses and insurance companies face tough times ahead after the government slashed by half the cost of privately managed insurance schemes, citing the Social Health Authority (SHA) rollout.
Collectively, medical insurance covers for civil servants, teachers, police and prisons officers cost the government an estimated Sh43.7 billion, which means the 50 per cent budget cuts envisaged by the National Treasury will save about Sh22 billion.
The details of the government’s move emerged from a communication by Treasury Cabinet Secretary John Mbadi to his then Interior counterpart Kithure Kindiki (now Deputy President), who had appealed for an additional Sh8.3 billion to cater for insurance schemes for police and prisons officers.
Apart from the National Police Service (NPS) and Kenya Prisons Service (KPS), other government ministries, departments and agencies (MDAs), including the Teachers Service Commission (TSC) have contracted similar schemes for their employees.
Mr Mbadi noted that the rationalisation is informed by the reduction of the 2024-2025 financial year budget which he said has “very limited scope” for additional funding except for unforeseen and unavoidable expenditures.
In the communication, Mr Mbadi advised MDAs to consider reviewing the existing contracts with the insurance companies, including cancellation.
“During the finalisation of the 2024-2025 financial year budget, the Cabinet approved rationalisation of the allocation for insurance costs by 50 per cent across all MDAs ... awaiting transition to the Social Health Authority,” Mr Mbadi wrote in the letter responding to the one from the Interior ministry.
On August 30, the State Department for Medical Services “advised that under the new dispensation, private insurance companies will be offering complimentary insurance cover over and above what SHA will be offering as per the various applicable benefit packages,” Mr Mbadi noted.
Full transition
The Cabinet approved the framework for full transition to SHA effective October 1 “in furtherance of the implementation of the Universal Health Coverage (UHC)”, a key pillar of the Bottom-Up Economic Transformation Agenda.
“Consequently, the National Treasury wishes to reiterate its earlier advice in the letter of July 24, 2024, that the NPS and KPS should explore the possibility for review of the current contracts. The contracts also provide for cancellation and termination,” Mr Mbadi said.
The review of the contracts, according to the CS, is with a view to accommodating the services within “the available FY 2024/25 budget for insurance costs, while leveraging on the benefit packages offered under the SHA framework”.
Mr Mbadi concludes that approval for any additional expenditure on the privately managed insurance schemes “will not be consistent with the current government policy priority on delivery of the UHC through SHA”.
Yesterday, the secretary-general of the Kenya Union of Post Primary Education Teachers, Akello Misori, opposed the plan saying the union will make a decision on it tomorrow during its annual delegates conference in Vihiga County.
“Any variation can’t be unilateral, especially for those governed by a collective bargaining agreement. Our budget must not be touched. We’ll make a decision because before 2015 when our medical insurance scheme began, teachers were earning a medical allowance,” Mr Misori told the Nation.
Kenya Union of Civil Servants Secretary-General Tom Odege said that the insurance budget cuts will severely affect the already overburdened public service employees.
“The government needs to consult members and undertake public participation before taking such a drastic step. The members are already overburdened with taxes. How will they cope?” Mr Odege, who is also the Nyatike MP, asked. “It is not healthy to members at all,” he said, adding that significant budget cuts can lead to reduced access to essential health services, particularly for vulnerable populations.
Kitutu Chache South MP Anthony Kibagendi, a member of the National Assembly’s Health committee, warned that the budget cuts could have serious consequences on public health, healthcare providers and insurance companies.
The government has been providing comprehensive insurance coverage for public officers that includes medical, group life, group personal accident (GPA) and Work Injury Benefit Act (Wiba).
Teachers through the TSC are allocated Sh19.7 billion in medical cover but have no GPA. However, they have group life and Wiba on tender.
Civil servants have a medical cover of Sh5.4 billion with GPA not available. Their Sh1.1 billion GPA, Sh3.6 billion Group Life and Sh1.1 billion Wiba expired.
The police have a medical of Sh8.6 billion and a combined Group Life, GPA and Wiba of Sh4.2 billion.
Scrapping these covers raises the fear that unless an individual has private medical insurance, they may be exposed to increased out-of-pocket expenditures to settle medical bills, especially for patients with chronic illnesses. Vulnerable populations may also suffer worse health outcomes due to decreased access to treatments and preventive care.
These cuts also mean that public servants will have to contend with a different panel of medical providers, possibly public hospitals, which are not sufficiently equipped to handle the range of services the members have enjoyed and need. The most sought-after medical providers by public servants will therefore be out of scope unless through a referral process that may take a long winding route.
SHA replaced the National Health Insurance Fund (NHIF) and established three new funds—Primary Health Care Fund, Emergency, Chronic and Critical Illness Fund and Social Health Insurance Fund (SHIF). The first two funds are directly financed by the exchequer. Although SHIF is also funded by the taxpayer, it also gets funded at the rate of 2.75 per cent of the salaries of Kenyans in formal employment. Its other funding is derived from non-employed Kenyans who have gone through the means testing instrument (MTI).
“Data shows that the two government-sponsored funds are not sufficiently funded. This means not enough funding to offset the cost that will be incurred at most medical providers,” said an insurance player who did not want to go on record.
He warned that this may lead to an unwillingness to provide much-needed services to the public, which includes the public servants’ schemes “where there shall be an expectation for the primary care and chronic care to be taken up by these funds”.
The current insurance contracts for the police and prison officers run for three years from April 1 to March 31, 2027, renewable annually “subject to satisfactory” performance. The current annual contracts end on March 31, 2025.
The Health Committee of the National Assembly has previously been told that under the SHA package, bills are to be paid as per the prescribed tariffs.
However, the cost of treatment in a majority of the health facilities may be higher than the tariffs in most cases and for most conditions, which will leave members with top-ups to be done either out of pocket or through private medical insurance.
For instance, SHA limits for out-patient cover have been reduced from Sh1,200 to Sh900. The dental limit is up to Sh2,000 per household, which will possibly be rolled out in year two of its implementation, but subject to funding. Cancer treatment costs range from Sh1 million, with SHIF catering for only Sh400,000 per household.
Data shows that SHA is not able to undertake the full amounts as per hospital billing, which has seen members forced to bridge the gap between what it offers and that which the medical scheme can cater for.
SHA tariffs
In the recent past, reports have shown that SHA tariffs are not comprehensive and therefore members are depending on their private medical insurance covers. The other alternative is for the members to fundraise in order to pay out of pocket, leaving a majority of Kenyans worse off than before.
The hospital infrastructure and equipment in the country are also not equitable, meaning that individuals from some regions may not get commensurate medical cover.
“The budget cuts might exacerbate health inequalities within society,” Mr Odege said. “This may lead to reduced availability of preventive care and public health initiatives, potentially increasing the long-term burden of diseases in the country.”
According to Mr Kibagendi, the reduced funding will see hospitals and clinics experience financial strain due to decreased reimbursements from insurance companies. He warned that this could lead to cuts in services, staff layoffs or reduced operational hours “and it is a threat to quality care”.
“With less funding, institutions may struggle to maintain the quality of care, impacting patient outcomes and satisfaction,” said Mr Kibagendi.
The risk of increased patient load in private hospitals due to underfunding in public hospitals may lead to an influx of patients who cannot afford care, “leading to overcrowding and longer waiting periods hence compromising quality”.
The budget cuts may also see insurance companies adjusting their premiums to cover operational costs, potentially making coverage less affordable for consumers. Alternatively, the insurers may limit the benefits or increase out-of-pocket expenses for policyholders, which could discourage individuals from seeking necessary medical care.
“A reduction in health insurance coverage may lead to a rise in the number of uninsured individuals, placing additional pressure on emergency services and public health systems,” said Mr Kibagendi.
“The implication of this is poor health impacts and productivity, which can have broader economic repercussions. Increased healthcare costs can also strain government resources and budgets,” he added.
The MP said that the government may need to explore alternative funding mechanisms, such as public-private partnerships or increased taxes, to mitigate the negative effects of budget cuts.
He also pushed for a re-evaluation of health policies that require prioritisation of essential services to ensure that the most critical areas of healthcare remain funded.
