The trouble with SHIF and what should be done to fix it

Social Health Authority building in Nairobi. [File, Standard] The Social Health Insurance Fund (Shif) was launched with pomp and colour as a transformative moment in Kenya's journey toward Universal Health Coverage (UHC). However, its implementation has been marred by several problems. To many experts, this is not surprising. The funding model is flawed, structurally unsustainable and risky. It relies on a small number of contributors, and an unnecessary campaign for everyone to register and go to hospitals. The earlier this structure is redesigned, the better for everyone. Insurance works on the principle of risk pooling. In health insurance, this happens when many individuals, most of whom are healthy, contribute regularly to cover the healthcare costs of a few who become ill. By collecting premiums from everyone in the pool, insurance companies can accumulate sufficient funds to pay for the expenses of those who need treatment. SHIF should not be any different, however, its mechanisms are the complete opposite. After a rigorous government campaign for Kenyans to register for SHIF, without a corresponding push for contributions, only 4.5 million Kenyans are contributing against 26 million registered. As a result, SHIF collects about Sh6 billion per month, while facing claims of Sh9 billion. This structural deficit of Sh3 billion monthly is a financial time bomb. Further, politicians have been rallying Kenyans to go to hospital because treatment is free. The fact is that healthcare is not free. As a result of this campaign, in just 11 months, SHIF accumulated claims worth Sh96 billion but because of relatively low contributions, has only paid Sh53 billion, accumulating a debt of Sh43 billion. Comparatively, the NHIF, with all its flaws, worked because every person seeking treatment was ultimately a contributor. This resulted in two factors that led to its relative success. Firstly, due to the requirement to have up-to-date payments before treatment, comparatively fewer people were seeking healthcare. This reduced the burden on the healthcare system and subsequently the claims from hospitals. Secondly, contribution to NHIF was relatively higher than SHIF. This was not only because of the fact that payment was a prerequisite for treatment, but also because the amounts were standard and simple. Sh500 per month or Sh6,000 annually for the vast majority. As a result, while SHIF has accumulated a Sh43 billion debt in less than a year, NHIF accumulated a debt of Sh30 billion in five decades. Additionally, despite the authority enforcing a deduction of 2.75 per cent of gross pay from salaried Kenyans, SHIF collects Sh72 billion annually while NHIF collected Sh86 billion. The main problem with SHIF is the funding model. 3.5 million salaried employees shouldering a colossal 96 per cent of the entire contribution revenue is unjust. SHIF must develop a strategic shift from registration to contribution. With a largely informal economy, the options are not many. The notion that millions in this sector will voluntarily pay premiums out of goodwill is naive. The government must leverage the technology and data it possesses to create fair and enforceable contribution mechanisms. This could mean integrating SHIF contributions with other essential services or licences such as business permits. The principle must remain, if you are registered to benefit, you must have a clear, accessible, and obligatory pathway to contribute. The second option could be the most viable. Identify a product or service consumed by a significant majority and charge a direct levy on it to fund universal healthcare. This deduction should be protected to only fund universal healthcare. Mr Omanga is a certified member of the Institute of Risk Management East Africa Chapter

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