17.3 Health Financing & Universal Health Coverage under the Social Health Authority

17.3 Health Financing & Universal Health Coverage under the Social Health Authority

Quick Summary: Kenya replaced the National Hospital Insurance Fund with the Social Health Authority in October 2024. SHA runs three funds — the Primary Healthcare Fund (tax-financed, Levels 2 and 3), the Social Health Insurance Fund (contribution-financed, Levels 4 to 6), and the Emergency, Chronic and Critical Illness Fund (catastrophic care). Contributions are 2.75% of gross income with a KSh 300 monthly floor and no ceiling. Know the three funds, the rate, and the floor; they are the most reliably examined facts in this subject.

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The Three Functions of Any Health Financing System

Before the Kenyan detail, the framework examiners build questions on. Every health financing system does three things:

1. Revenue collection — where the money comes from: taxation, mandatory contributions, voluntary insurance premiums, out-of-pocket payments, donor funds.
2. Pooling — combining funds so that the healthy cross-subsidise the sick and the rich cross-subsidise the poor. Larger pools spread risk better. This is the single strongest argument for a national scheme over fragmented county or employer schemes.
3. Purchasing — buying services on behalf of the pooled members. Passive purchasing reimburses whatever is claimed; strategic purchasing decides what to buy, from whom, and at what price, using tariffs, empanelment criteria, and pre-authorisation. SHA is designed as a strategic purchaser; NHIF largely was not.

Why Out-of-Pocket Payment Is the Worst Mechanism

Out-of-pocket payment fails on every equity test because it is levied at the exact moment a household is least able to pay:

• It does no pooling, so the sick bear their own costs entirely.
• It is regressive — the same bill is a larger share of a poor household's income.
• It deters care-seeking, so people present late with advanced disease.
• It causes catastrophic health expenditure, conventionally defined as out-of-pocket spending exceeding roughly 40% of a household's capacity to pay (income remaining after subsistence needs), and impoverishment, where paying for care pushes a household below the poverty line.

Every clinical officer sees the clinical consequence of this: the patient who arrived in obstructed labour after two days at home, or the diabetic whose insulin ran out because a child's school fees came first.

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From NHIF to the Social Health Authority

The Three Funds

                        SOCIAL HEALTH AUTHORITY (SHA)
                                     │
        ┌────────────────────────────┼────────────────────────────┐
        ▼                            ▼                            ▼
┌────────────────────┐   ┌────────────────────────┐   ┌────────────────────────┐
│ PRIMARY HEALTHCARE │   │  SOCIAL HEALTH         │   │ EMERGENCY, CHRONIC &   │
│ FUND (PHCF)        │   │  INSURANCE FUND (SHIF) │   │ CRITICAL ILLNESS FUND  │
├────────────────────┤   ├────────────────────────┤   ├────────────────────────┤
│ Financed by        │   │ Financed by member     │   │ Financed by exchequer   │
│ TAXATION           │   │ CONTRIBUTIONS          │   │ allocation and other    │
│                    │   │                        │   │ sources                 │
│ Buys care at       │   │ Buys outpatient and    │   │ Buys catastrophic,      │
│ LEVELS 2 and 3     │   │ inpatient care at      │   │ long-term and emergency │
│ (dispensaries and  │   │ LEVELS 4, 5 and 6      │   │ care — oncology,        │
│ health centres)    │   │                        │   │ dialysis, emergency     │
│                    │   │                        │   │ treatment               │
│ No user fee at     │   │ Benefit package with   │   │ Triggered when SHIF     │
│ point of care      │   │ published tariffs      │   │ benefit limits are      │
│                    │   │                        │   │ exhausted               │
└────────────────────┘   └────────────────────────┘   └────────────────────────┘

The examinable distinction: the Primary Healthcare Fund is tax-financed, not contribution-financed. That is why a patient at a dispensary does not pay at the point of care regardless of contribution status — and it is the specific design choice that makes Level 2 and 3 care free.

Contribution Rules

Three details that get tested:

• There is no upper cap. This is the sharpest break from NHIF, where the maximum contribution was KSh 1,700 regardless of income. A member earning KSh 200,000 now contributes KSh 5,500.
• Non-salaried income is assessed, not declared. Means testing examines housing, assets, and household composition, which is why two households reporting the same cash income can be assessed differently.
• Late remittance attracts a penalty of 2% of the unpaid amount, and employers must register both themselves and their employees with the Authority.

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What This Means at the Facility Desk

Health financing reaches a clinical officer through four practical mechanisms.

1. Empanelment and contracting. A facility must be registered on the Kenya Master Health Facility List, licensed, and formally empanelled by SHA before it can claim. An unempanelled facility can treat a patient but cannot be reimbursed, so the cost falls on the facility or on the patient.

2. Verification at registration. Members are verified biometrically or through the SHA portal. A clinical officer must understand the boundary here: verification is an administrative step, not a clinical gate. Article 43(2) of the Constitution guarantees that no person shall be denied emergency medical treatment, and the Health Act 2017 restates it. Stabilise first, sort the paperwork afterwards. A question describing an unverified member in extremis is testing this, and the answer is always to treat.

3. Pre-authorisation and tariffs. Non-emergency inpatient admissions and specified procedures require pre-authorisation against the published SHA tariff. Accurate clinical documentation and correct diagnosis coding are what make a claim payable — which is the direct link between the notes you write and whether the facility gets paid.

4. Facility improvement financing. Under the Facility Improvement Financing Act 2023, reimbursements and other facility revenue are retained by the facility and spent on facility priorities through the Health Facility Management Committee, rather than disappearing into the county revenue fund.

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Universal Health Coverage Has Three Dimensions

UHC means all people receive the health services they need, of sufficient quality, without suffering financial hardship. The WHO "UHC cube" separates three axes, and progress on one can be bought at the expense of another:

A scheme that covers everyone for very few services, or covers many services but leaves a large co-payment, is not delivering UHC. When a question describes a reform that expands one dimension while quietly contracting another — for example enrolling the whole population but capping a benefit so tightly that families still pay most of the bill — the correct answer names that trade-off.

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Other Financing Sources You Should Recognise

• General taxation — the dominant source of public health spending in Kenya, channelled through national and county budgets. Progressive and pools widely.
• Donor and development partner funding — historically large for HIV, TB, malaria, and immunisation. Volatile and vertical, which is why abrupt donor transitions create sudden programme gaps, and why domestic resource mobilisation is a stated national priority.
• Private voluntary insurance — covers a small, mostly urban and formally employed minority.
• Community-based health financing — small mutual schemes; limited pooling capacity.
• Facility user fees — abolished at Levels 2 and 3, retained in modified form above that.

The general principle examiners reward: prepayment and pooling are equitable; payment at the point of illness is not.