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10 July, 2023

The National Health Insurance Fund (NHIF) was established in 1966 through an act of parliament. Its core mandate is to provide affordable medical insurance coverage to all Kenyans, thereby enabling Kenyans to access quality and affordable medical services from medical institutions. The fund is governed by the NHIF Act (1998), which over the years, has been subjected to a number of amendments to address the changing healthcare needs of the health sector in the country. Some of the notable changes in recent years include: i) Introduction of the Comprehensive Medical Insurance Scheme for Civil Servants (CMSCS), ii) Introduction of the Health Insurance Subsidy Program (HISP) to cater for those classified as poor and vulnerable, iii) Upward revision of NHIF rates, iv) Launch of Universal Health Coverage program, v) Launch of biometric registration for all NHIF member

On 1 May 2023, President William Ruto announced that there would be changes to the National Health Insurance Fund (NHIF) contributions deducted from the employee’s gross salary. The move aims to increase the total contributions received by revising the contribution rate to 2.75% of the gross salary instead of charging a fixed rate of between Kshs 500 – Kshs 1,700, depending on the monthly gross salary bracket. Additionally, the increase in contributions is expected to enable the NHIF to address some of the witnessed cash crunch, which has resulted in some hospitals declining the use of NHIF cards to cover medical bills due to the delayed disbursements of funds by the NHIF to hospitals. According to the Ministry of Health Sector working group report 2021-2022, NHIF paid a total claim of Kshs 71.3 bn against the Kshs 78.8 bn it received from member contributions. This represents a 90.5% claim ratio, which was the highest claim ratio in the last 5 years, leaving only 9.5% of the total contributions received to cater for the fund’s other expenses, thereby exacerbating the Fund’s solvency risk and the possibility of its inability to meet future financial obligations.

NHIF Membership is mandatory for all workers in formal employment, with a contribution rate between Kshs 500 – Kshs 1,700, depending on the gross monthly salary. However, for the self-employed and workers in the informal sector, membership is voluntary, and they pay a fixed amount of Kshs 500 per month. According to the Ministry of Health Sector working group report 2021-2022, NHIF membership stood at 15.5 mn members with an active membership of 6.7 mn as of 30 June 2022. The chart below shows the evolution of membership since FY’2016/2017:

Source: Ministry of Health Sector working group report

The total contributions made to the Fund have grown at a 5-year CAGR of 17.7% to Kshs 78.8 bn in FY’2021/2022, up from Kshs 35.0 bn collected in FY’2016/2017. This is mainly attributable to the upward revision of workers’ monthly contribution rates to a scale of between Kshs 500.0 and Kshs 1,700.0 from Kshs 350.0 in 2015, revision of the monthly contribution rates to 1.7% in 2022 in contrast to the flat rate of Kshs 1,700 per month for individuals earning above Kshs 100,000 and inclusion of special initiatives such as the Health Insurance Subsidy Programme (HISP), Universal Health Care and Linda Mama Programme. The total claims paid out of the fund have also increased at a 5-year CAGR of 22.1% to Kshs 71.3 bn in FY’2021/2022, from Kshs 26.3 bn in FY’2016/2017, mainly attributable to increased uptake of outpatient cover and special cover packages. The graph below shows the growth of the total contribution received and claims paid out of the Fund:


 Source: Ministry of Health Sector working group report

Despite the progress made by NHIF over the 57 years, it has been in operation, the fund has encountered a number of challenges that have hampered its ability to achieve its objectives. Some of the notable challenges include; i) High pay-out ratio which stood at 90.5% in FY’2021/2022 leaving only 9.5% of the total contributions received to cater for the fund’s other expenses, ii) Kenya’s low insurance penetration rate of 2.3% which is below the global average of 7.0%, according to the Swiss RE institute, iii) failure by NHIF not to attain its revenue target with the fund collecting a total revenue of Kshs 80.4 bn which was below the revenue target of Kshs 90.6 bn representing a revenue target attainment of 88.8%, iv) The fund has had instances of fraudulent claims which has increased to the total pay-out done by the fund, v) Rise in cost of medical services due to depreciation of the Kenyan’ shilling forcing healthcare providers to pass on the increased cost to insurers and patients, vi) overdependence on total contributions as the source of funding with other income contributing a mere 2.0% of the total revenue collected, vii) delayed remittances of the NHIF contributions by government, some employers and self-employed individuals

The proposed revision of NHIF contributions rates to 2.75% of the gross salary will see a drop in contributions for individuals earning less than Kshs 30,000.0 per month while an increase for persons earning Kshs 30,000.0 and above per month. The table below shows the comparison of current and proposed rates for members for the select income bracket;

Cytonn Report: Current and Proposed NHIF Rates

Employee Gross monthly Income per month(Kshs)

Current Rate (Kshs)

Proposed Rate (2.75% of the Gross Salary) (Kshs)

15, 000.0 - 19,999.0


412.5 - 550.0

25,000.0 – 29,999.0


687.5 – 825.0

35,000.0 - 39, 999.0


962.5 – 1,100.0

45,000.0 - 49,999.0


1,237.5 - 1,375.0

60,000.0 - 69,999.0


1,650.0 - 1,925.0

80,000 .0 - 89,999.0


2,200.0 - 2,475.0

100,000.0 - 200,000.0


2,750.0 - 5,500.0

300,000.0 - 500,000.0


8,250.0 - 13,750.0

Source: Cytonn Research

For more information, please see our report on the National Health Insurance Fund (NHIF) review