Pain of employees going without medical cover as firms cut costs

Kenya’s medical inflation is growing at an alarming rate - surpassing the country’s general inflation by almost half.

This has driven many families into a cycle of poverty as huge medical bills eat into their earning and savings.

At a recent forum in Nairobi, insurance brokerage firm Minet revealed that general inflation stood at 8.02 per cent while medical inflation stood at 12 per cent last year.

Recent figures also show that Kenyan families were paying huge bills on healthcare compared to what they were spending on other household necessities such as food, clothing and transport.

According to the World Bank, the country’s health insurance coverage stands at 20 per cent.

This is despite more Kenyans falling into the poverty trap annually due to health-related expenses.

The majority of this 20 per cent with the cover is in formal employment and accesses medical insurance courtesy of the employer.

Minet Chief Executive Sammy Muthui said the low medical cover is threatened by the economic slowdown.

Job losses, salary freezes and poor businesses are hurting most Kenyan families.

And with job loss comes an end to the employer’s medical cover - leaving the worker and his dependants susceptible to illnesses that are expensive to treat.

Job holders

The United Nations Human Development Index 2017 report notes that the number of job holders in Kenya dropped to an all-time low of 60.9 per cent.

Kenya’s unemployment rate stands at 39.1 per cent - equal to that of Ethiopia and Rwanda combined.

Ethiopia’s unemployment rate stands at 21.6 per cent, while Rwanda’s stands at 17.1.

The sustained economic growth that does not match generation of jobs has culminated into poor distribution of the benefits.

“Companies nowadays are like the biblical David, while rising health costs are like Goliath. As the economy slows, companies’ balance sheets also shrink,” said Mr Muthui, who was addressing a group of Human Resource (HR) Practitioners and underwriters.

“They want to cut costs through layoffs and reduce expenditure on insurance premiums for their employees. It’s a gloomy situation.”

Patricia Kiwanuka, founder of advisory firm Revenue Stream, says the conversation between HR staff and finance department mostly revolves around cost cutting.

“As a HR person, when you prepare a budget and take it to the finance manager, the first thing they do is to look at what has been proposed for staff insurance premiums and recommend that you cut it by at least 10 to 15 per cent,” she said.

“We have no option but exclude some staff or do away with some covers altogether.”

The low population of Kenyans with health insurance cover is compounded by rising cases of infections and some diseases becoming resistant to drugs.

Increasing incidences of non-communicable diseases is also putting pressure on healthcare cost, prompting insurance providers to warn of an impending burden.

Lifestyle diseases among Kenyans have become a sad reality that is killing them painfully, while leaving their loved ones lurching in huge debts.

A 2014 report by the World Health Organisation (WHO) indicates that about a quarter of Kenyan women aged 15 years and above are either overweight or obese, which makes them susceptible to lifestyle diseases.

WHO notes that 44 per cent, 23 and 41 per cent of diabetes, heart disease and cancer burdens respectively are attributable to being overweight and obese.

Diabetes affects 3.5 million Kenyans. Prevalent diseases such as HIV and Aids, malaria and tuberculosis also add strain to family budgets.

According to a new WHO report in partnership with the Bill and Melinda Gates Foundation, the number of malaria cases in Africa, have been on the rise since 2016.

UAP Old Mutual Group Managing Director, Health, Isaac Nzyoka, says that while planning layoffs, or changing employees’ employment terms from permanent and pensionable to contract to avoid providing medical covers, employers should not look at the direct cost they are cutting.

Instead, they should quantify the non-direct costs involved when employees are grappling with health problems.

“Look at the absenteeism from work when employees are sick. Look at the time wasted and emotional stress involved when employees are forming WhatsApp groups to fund-raise for colleagues or former colleagues with huge medical bills and no covers. I think this is what employers should look at before denying employees medical cover,” he said.

Ms Kiwanuka says that diminishing resources means that companies can’t keep up with provision of covers in the face of escalating medical costs due to turbulent business environments.

“Loss of a job or refusal by an employer to offer medical cover should not be the reason why someone should not get themselves a cover,” she said.

“We have people investing in Bitcoin instead of getting medical cover.”

She urged employees to take a medical cover as a basic necessity - not waiting for the employer to provide it for them.

There are also rising cases of employees going into retirement without the financial muscle to get medical covers.

Growing cases of retirees grappling with debilitating illnesses while suffering in debt due to lack of post-retirement medical cover are common.

Post-retirement pension

According to Nzyoka, insurers are strategising on a post-retirement pension covers, with guidance from the Retirement Benefits Authority.

“Most people are moving away from social insurance, such as the one offered by the National Hospital Insurance Fund, because of the restrictive options it offers,” he said.

“In retirement, it is imperative for individuals to have a robust medical cover that can be funded by their pension.”

Nzyoka’s sentiments follow a survey by the Zamara Fanaka Retirement Fund that painted a gloomy picture of Kenya’s retirees earning way below the recommended pension dues.

This is attributed to poor saving culture and high taxation of pension schemes by the government.

The survey found that Kenyans retiring at 55 and above today live on about 22 per cent of their preretirement salaries against the market-recommended standard of 66 per cent.

This is way below what can comfortably pay for a medical cover.

And with changing medical trends – such as technology and expenses incurred in training good doctors – health costs will continue going up.