A Detailed Guide Into The Social Health Insurance Fund

The Social Health Insurance Fund (SHIF) introduction has fostered mixed reactions from many Kenyans. With the challenging economic times, many residents believe that adding new taxes on their already strained salaries might be pushing the limit.

Besides the salary deductions that most people see, there are many things that people might not understand when it comes to the SHIF. As we speak, the SHIF scheme is undergoing public participation, and once it is approved, it might replace the National Health Insurance Fund (NHIF). It will be a pivotal shift in Kenya’s healthcare system. 

So, what does the introduction of SHIF mean to the country’s healthcare journey and employees’ payslips? The article will analyze the effects of SHIF on Kenya’s formal sector and how it differs from NHIF. 

What is SHIF?

Kenya’s constitution gives everyone the right to proper health care by providing the appropriate required services. To try to meet this demand, in 2023, the government introduced a bill that would transform Kenya’s healthcare landscape and provide a lower cost of healthcare through the SHIF. The system was suggested to ensure equity and access to healthcare by covering everyone in the country who NHIF left out.

All workers under the insurance scheme are expected to contribute 2.75% of their income to the fund. Additionally, the government will cover any residents who cannot afford to pay for the contributions. Self-employed or unemployed Kenyans contributing KES 500 monthly towards NHIF will now pay KES 300 in a graduated arrangement based on their contribution ability. 

SHIF Kenya addresses basic health care services in the country and provides a broad range of services available to Kenyans across multiple medical fields. In essence, the scheme should provide residents with holistic healthcare coverage. 

Why the Shift From NHIF?

The NHIF is the oldest government insurance scheme providing Kenyans with quality and affordable healthcare. For over 57 years, the agency scheme provided healthcare insurance to the employed. However, most Kenyans in the informal sector or without jobs were left to cater to their own healthcare needs. 

The government requires all employees who receive a salary to have an NHIF membership. Employees contribute to the scheme through an automatic compulsory salary deduction each month. The premium contributions are calculated based on the income class of the employee. 

On the other hand, for self-employed or Kenyans working in the informal sector, NHIF membership is voluntary. Members must contribute a particular monthly amount to be eligible for the service. 

Over the decades, NHIF has undergone countless reforms, but there continues to be a growing gap between the healthcare services available in the country. In 2014, only about 4.5 million Kenyans (11% of the population) were registered members. That is where SHIF comes in!

Impact of New SHIF Deductions on Employees

The new SHIF (Social Health Insurance Fund) deductions on employees will have several significant impacts on individuals in Kenya. They include the following:

Cost of Healthcare

The first thing that will change is that healthcare will be more equitable. It means that low-income individuals will pay less or access healthcare for free. It significantly alleviates the financial burden on people with limited financial resources while providing them access to medical care.

However, it also means that some employees must sacrifice more of their income to meet contribution requirements. For example, those earning 500,000 monthly must part with about Ksh.13,750. In tough economic times, it could prove strenuous. 

Access to Healthcare Services

The SHIF aims to improve access to healthcare, especially for low-income individuals. The expansive coverage will help employees access a broader range of healthcare services. As Social Health Authority (SHA) Chairman Dr Timothy Olweny stated, each beneficiary will have access to an essential healthcare benefits package. 

In addition, SHIF will incorporate various healthcare facilities into a primary care network. These facilities are not just public but private and faith-based facilities accredited by SHA. It ensures that individuals will have access to services where they are available. 

Healthcare Quality

The increased funding from SHIF could mean improved quality of care, facilities, and access to advanced medical technologies.

In addition, the SHIF offers extensive healthcare coverage and support for chronic illnesses. It will encourage individuals to seek healthcare and preventive services since they contribute to the healthcare system. It can lead to better public health outcomes. 

The Impact on Businesses

The introduction of a new healthcare tax deduction for employees can also have various impacts on businesses, including:

Cost

Businesses might see a reduction in their overall income since they must allocate resources to comply with the new tax requirements. It may, in turn, increase their operational costs.  It can include accurately determining what deductions apply to which employee. Businesses may need to invest in SHIF experts. 

Compliance Burden

New deductions or taxes often come with additional compliance requirements. Businesses may need to invest in systems and personnel to ensure compliance with the new regulations, which can shift resources away from other productive activities.

Consumer Behaviour

Changes in deductions or taxes can also impact consumer behaviour, affecting businesses.

For example, if the SHIF deduction amount increases for an individual, their consumer behaviour may be directed towards spending strictly on necessities. Certain businesses will lose consumers if their product or service does not fall under necessities.

It is vice versa for those who will contribute less than their usual NHIF contribution. They may have a more flexible income, leading to want purchasing, meaning businesses may gain customers. 

Transitioning from NHIF to SHIF

Introducing the Social Health Insurance Fund (SHIF) in Kenya marks a significant step towards providing comprehensive healthcare coverage for all residents. This new system aims to ensure equity and access to healthcare services by covering individuals previously left out by the current healthcare fund.

The shift from NHIF to SHIF signifies a move towards a more inclusive healthcare system that addresses basic healthcare needs and offers a wide range of medical services across various fields. SHIF aims to provide holistic healthcare for all Kenyans by expanding coverage and reducing costs. It is a step towards a healthier, more inclusive future for the country.

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