Prior to this, the law under the National Hospital Insurance Fund Act 9 of 1998 only required an employer to deduct an employee’s contribution from their salary and pay it into the fund. An employer was therefore not required to contribute out of its own account. However, the Act changes this as it obligates an employer to make an equal contribution to its employee’s fund, depending on the employee’s salary band. At the date of this alert, the contribution rates range from KES 150 to KES 1,700 (approximately USD 1,50 to USD 17) and the salary bands from KES 5,999 to KES 100,000 and over (approximately USD 60 to USD 1,000 and over). This provision was fiercely contested during the legislative process, as aggrieved employers argued that it would hurt their wage bills and limit their ability to create jobs in a challenging pandemic economy. Notably, at that stage, Parliament had not indicated whether the requirement to make a matching contribution was in addition to, or as an alternative to private healthcare insurance and employers foresaw a dual obligation to insure their employees. The Act, however, has addressed this concern as it permits an employer to apply for an exemption to make this matching contribution where the employer is providing private medical cover.
In order to qualify for this exemption, an employer will need to apply to the National Health Insurance Fund Management Board (Board) and present a certificate from the Insurance Regulatory Authority, certifying that the employer is insured and specifying the details, benefits, and duration of the insurance cover, in addition to any other documents that may be required under the regulations. Thereafter, if the Board is satisfied that the private insurance is adequate, it will grant the employer the exemption within 30 days.
Expanded definition of an employer
Notably, the Act expands the definition of an employer to include “any person, government entity, firm, or company that has entered into a contract of service with an individual”. Given that the Employment Act of 2007 defines a contract of service as meaning “an agreement, whether oral or in writing, and whether expressed or implied to employ or to serve as an employee for a period of time”, the effect of these two provisions read together reaffirm that the Act will govern all employment relationships that fall within the definition of “employer” and “employee” respectively, regardless of whether the employment agreement is expressly entered into or captured in writing. This is because the definition of a contract of service includes a written and express contract, as well as an oral and implied contract. For example, a person who employs a domestic worker in their household may fall within this definition of an employer, even where the agreement is not in writing or expressly agreed upon, and may therefore be required to deduct their employee’s contribution from their salary and make an equal contribution. It will be interesting to see how this requirement is implemented and complied with.
The Act seeks to make healthcare more accessible in Kenya, with the ultimate aim of attaining universal healthcare coverage. Given that most employers already provide comprehensive private health insurance, the Act is unlikely to increase the burden on an employer’s wage bill, as initially foreseen in the legislative process. This is, however, only to the extent that the standard of healthcare provision required by the Act is equal to or less than an employer’s private insurance. The Act is therefore only set to substantially impact those who previously did not provide healthcare insurance, or who did not make substantial contributions to an employee’s healthcare coverage.
Notably, the title of the Act has been changed from the National Hospital Insurance Fund to the National Health Insurance Fund. Likewise, the list of healthcare providers has been widened from strictly “declared hospitals” to include any healthcare provider that is enlisted by the Board, as provided on the National Hospital Insurance Fund website. Without clear interpretation, we presume this may mean that employees will be able to enjoy access to their health insurance across more facilities, as the list of healthcare providers is likely to be broader than the list of declared hospitals, aligning itself to the Government’s objective of facilitating greater healthcare coverage.
Although the Act has come into force, its accompanying regulations are yet to be enacted. The National Health Insurance Fund is in the process of drafting the amended regulations to account for the changes. Once enacted, employers will need to either apply for an exemption or prepare to make an equal contribution to each employee’s fund.
Employers need to be aware of these new requirements and prepare to comply with them. Employers that intend to seek an exemption are advised to begin facilitating the process of obtaining the above-mentioned certificate from the Insurance Regulatory Authority (where possible) ahead of the regulations.