Now Kenyans can save for medicare in retirement

Alexander Forbes Group Chief Executive Sundeep Raichura (left) and Director James Olubayi during the launch of a post—retirement medical scheme. [PHOTO:WILBERFORCE OKWIRI/STANDARD]

NAIROBI: Employees can now save for medical costs they will incur in retirement.

This is after financial service provider Alexander Forbes launched a post-retirement medical (PRM) plan that will see employees aged between 18 and 55 years contribute funds for medical purposes in their sunset years.

Employers will subscribe under the umbrella scheme dubbed Ngao Milele. According to the CEO of Alexander Forbes Kenya Sundeep Raichura, healthcare is much more expensive for the older population, yet there is no medical scheme designed for this category of people. Studies show that 60 per cent of an individual’s medical costs are incurred in his retirement age.

Due to their high risk, older people have had to pay high premiums to get medical insurance with some insurance providers not offering medical cover to people aged above 65.

The aim of the scheme is to help employees spread the cost of medical care so that it becomes manageable in their retirement age. Contributors will take year-on-year medical insurance cover from a panel of selected insurers. If employees want to move to another scheme, they can do so by giving 90 days’ notice.

The scheme is designed on a defined contribution basis meaning contributions are allocated to individual members’ accounts where they receive returns earned on the underlying investments. Employers in consultation with the employees determine the monthly contribution.

Alexander Forbes’ actuarial team will advise on the structure and level of contributions required to finance various levels of post-retirement medical cover. So far, the financial company has reached an agreement with two subscribers who will offer medical insurance to the retirees at rates which have been negotiated by Alexander Forbes. The scheme will cover chronic illnesses such as hepatitis C and arthritis. This will also cover pre-existing conditions. This is the first PRM in Kenya. Other countries that have implemented this include South Africa. Even though advances in technology have made it possible for certain diseases to be cured, new ones are coming up which make healthcare even more expensive in the future.

“We need to make conscious decision to save for medical care,” Shruti Shah, an actuary at Alexander Forbes said.

Charges

Alexander Forbes Finance Director James Olubayi regretted that while the Government has a policy for pension schemes, it does not have one for medical. “A responsible employer should be thinking about what their employees will be doing once they retire,” said Mr Olubayi.

They have identified four fund managers, out of which they will settle for two. Besides the umbrella scheme, there is also the stand-alone post-retirement medical plan for employers with more than 1,000 employees. This one is set up by the employers themselves.

However, the scheme is already running into regulatory headwinds. Neither the Insurance Act nor the Pension Act has anything on post-retirement scheme.  “We have taken the best of insurance and the best pension to come up with an innovative product,” said Mr Raichura.

More than 70 per cent of the Kenyan population do not have any form of insurance cover. Most insurance providers charge, on average, a consultation fee of Sh1,800.