The new constitution
Prior to the enactment of the new Kenyan Constitution in 2010, healthcare was a national government function and all policy, control, and management of the health sector was the preserve of the national government.
One policy that the Kenyan government was keen on implementing was universal health coverage (UHC), which had the goal of ensuring that all Kenyans had access to affordable healthcare. The Kenyan government first tried to achieve this through the National Hospital Insurance Fund (NHIF)—a fund established by the government and funded by taxpayers.
After the enactment of this new Constitution, the structure of the health system changed, with healthcare now made a function of the various counties. They were made responsible for running the primary healthcare facilities, ambulance services, disease prevention programmes, etc., within their jurisdictions. The national government was then left with the role of policy formulation, standards regulation, specialized medical services, and management of national referral hospitals.
This change has allowed the counties to get more creative with provision of health services. And a number of them—like Muranga and the Makueni county in particular—have set up Universal Health programs, where the counties subsidize the premiums payable per family, so that all registered residents within those counties can get in-patient and out-patient services within county health facilities at affordable rates.
These counties have also, as a result of this decentralization of healthcare, been able to drive-up registrations to the health schemes, and consequently increase access to healthcare. They have also been able to much more effectively channel resources to the equipping of health facilities with much-needed health infrastructure, medicine, and medical equipment.
The biggest challenge that these counties face, however, remains that of funding—with the inadequacy of salaries being a constant cause of strikes for doctors and nurses particularly. In addition, the county-managed universal health schemes are limited within the broader health network due to the absence of private hospitals and efficient ICT systems to support these programs. As a result, they remain constrained in scope without this involvement of the private sector, particularly the insurance industry, which has developed extensive networks, fraud detection systems, and ICT infrastructure to serve clients nationwide.
New health laws
At the national government level—which is now only mandated to handle policy matters—there have been significant and wide-ranging policy changes that have been introduced that significantly alter the direction of the Kenyan health sector. In November 2023, the Social Health Insurance Act came into force—an Act which led to the establishment of the Social Health Authority (SHA), to replace the National Health Insurance Fund (NHIF). The new Act introduced three funds; namely:
- Primary Health Fund – which covers preventive and promotive healthcare;
- Social Health Insurance Fund (SHIF) – which covers out-patient, in-patient, maternity, and chronic illnesses;
- Emergency, Chronic, and Critical Illness Fund – which covers treatments for emergency and long-term conditions.
Full operationalization of these funds has been hampered by inadequate funding, resulting in a phased approach in implementation.
To finance these funds, the law stipulates that all adults above 18 years must contribute a set percentage of their gross income to the SHIF. And these contributions are family-based—as opposed to individual-based.
Role of private medical facilities and insurance companies.
Most importantly, under this new health regime, the Kenyan government intends to rely heavily on private medical insurers and health facilities to undertake the following actions:
Vetting and administration of claims.
The Kenyan government realized very early that one of the biggest consequences of implementing universal health coverage (UHC) is that the number of individuals covered will grow considerably and consistently with time. The old public health insurance scheme, the NHIF had 11.6 million beneficiaries, while the new fund, the SHIF, has, as at January 2025, 26 million registered beneficiaries—representing a growth of over 130%!
This has obviously brought about a number of huge challenges for the Kenyan government, specifically on how to scale-up capacity overnight so as to effectively monitor, vet, and ensure medical facilities are paid claims on time. Currently, in Kenya, this capacity can only be found with private medical insurers, who have, over time, trained and established systems to do exactly this. The Kenyan government is therefore actively exploring public/private partnerships (PPPs), and is discussing the extent of support and compensation that private medical insurers will receive for assisting this new national health insurance scheme, the Social Health Insurance Fund SHIF specifically.
Offering complimentary and top-up covers.
Due to budgetary constraints, the premiums paid by each family to be enrolled onto the program is not sufficient to provide adequate coverage. Thus, both private insurers and health facilities have stepped in to provide coverage that either expands the benefits under the SHIF or includes aspects not covered by it.
A new development in the Kenyan market has been the entry of private medical facilities offering packages that individuals and employers can access to complement the coverage provided by the SHIF.
Add to this, the introduction of the Micro-insurance Regulations 2020 by the Kenyan government provides a clear roadmap and framework for the licensing of Micro-insurance companies and products. These legal and regulatory changes in health insurance have empowered and led insurance companies to focus more on product development initiatives, particularly around micro health insurance coverage.
Insurance companies in Kenya are now offering complementary medical covers to civil servants, the police, and teachers, as supplementary covers to the Social Health Insurance Fund (SHIF). And premiums from this sub-segment contribute approximately 33 billion Kenyan Shillings (about GHS 3.96 billion) to the health insurance industry of Kenya.
Provision of medical services
As earlier highlighted, the universal health schemes provided by counties within Kenya have faced the challenge of not being able to offer services in private medical facilities, thereby limiting the range of services and expertise that persons enrolled in these schemes can access. This, again, is mainly due to the cost of private medical care that does not support a universal approach to healthcare provision.
This is why previously under NHIF, and currently under SHIF, the Kenyan government is signing contracts with various private health facilities countrywide, and actively negotiating the maximum amount the fund will pay for each type of medical service provided. That is to say that although the government acknowledges the need for both the network and expertise of private medical facilities, it recognizes the fact that the high cost of services remains a major barrier to the success of universal health coverage (UHC), hence the need to set maximum costs.
Due to the rising cost of medical care, there is a gradual drop in demand for healthcare—with individuals and corporations adapting differently. While corporations might adopt a different scheme and way of handling the increased cost, individuals and families will either just scale-down services they seek from private medical facilities or self-medicate.
Private medical facilities are therefore struggling to run their establishments, especially due to high overhead costs, leading to staff layoffs and branch closures. Any private medical facility that wants to survive in the Kenyan market must thus re-think their model to support universal health and serve the micro health segment of society.
Introduction of medical funds
The premiums paid for medical insurance in Kenya has risen steadily over the years—to a point where this line of business has proven unprofitable for insurance companies. And the only reaction available to losses in any insurance line of business is to either increase premiums, restrict coverage, or discontinue the line entirely. This creates a vicious cycle, where both the demand and supply of healthcare decrease.
In analyzing the performance of medical insurance, many insurance companies discovered that the main driver of the claims was the medical out-patient service. Although it usually has a comparatively low amount per claim, it tends to have very high frequency/utilisations. Insurers have been able to very accurately predict the number of times a family will seek out-patient treatment per year. This led insurance companies to separate the inpatient and outpatient options, pricing them separately. The inpatient cover, with its low claim ratio, was comparatively much cheaper than the outpatient cover.
This increased costs also led to the introduction of medical funds, managed by insurance companies on behalf of various employers and organizations. This approach has proven popular, causing a significant shift away from outpatient insurance coverage. Although insurance companies are losing substantial premiums, the alternative would have been to completely lose the client.
Ownership of the medical network
The drive by insurance companies to keep the cost of medical services low in Kenya has not had any meaningful success, due to the resistance from private medical facilities. And since it is impractical and unadvisable to keep insurance premiums growing to match up these increasing health costs, many Kenyan insurance companies have now resorted to setting up their own clinics, and/or partnering with pharmaceutical companies for minor diagnosis and drug dispensation—in order to have more control over cost.
The growth of leasing
These high overhead costs have led both private and public medical providers to resort to leasing expensive medical equipment, paying only a fee per service or patient served. Leasing firms focusing on this market have grown over the years and are now able to offer single machines per facility at affordable rates.
The way forward
There needs to be a realization by players in the health sector that the government is limited in what it can do and that it is incumbent upon them to take the necessary steps also.
The only organizations—whether private medical insurers or private medical facilities—that will survive are those that take the time to engage experts for market studies, periodically review their strategies, and align their business goals with the realities of the African market—focusing on the micro-economy, micro health insurance, and micro medical provision.
In conclusion, most African countries face similar healthcare needs and challenges, though we tend to be at different stages of development when it comes to the various sectors of our economies. Therefore, it is crucial to maintain the exchange of information and experiences across various African markets to create homegrown solutions for Africa—particularly, the continent’s healthcare problems.
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Christian Basil Ogolla, FCII is a Kenyan general insurance expert with over 24 years’ experience, and currently consulting across different African countries. He has also been involved in consulting for organizations wishing to set up insurance operations, and most recently participated in the preparation of the Development Roadmap report for the Rwanda Insurance Industry. He can be reached via [email protected]
