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One of the key risks that retirees face globally upon retirement is the high cost of medical bills. The risk is escalated by the fact that medical costs increase at a pace greater than that of consumer price inflation. By extension, financing health care cost in Kenya remains a critical challenge for retirees, family and the government where subsidies exist.

  Health insurance coverage is particularly important to older individuals given their vulnerability to old-age related sicknesses. Worse still, most retirees will have enjoyed the comfort of a medical cover provided by employers during working years. The medical cover provided usually ceases on retirement.  Consequently, most retirees have to come up with ways of bridging the gap including financing medical bills using their pension income.

 Provisions under the Retirement Benefits Regulations

 As part of resolving this growing challenge, in 2016 the government through the National Treasury introduced provisions in the retirement benefits regulations to facilitate savings for medical benefits in retirement. In particular, the provisions allow members of retirement benefits schemes to contribute to a medical fund to be used to either purchase a medical cover or directly offset medical bills in retirement. It also allows members of retirement schemes to assign a portion of their retirement benefit (income/cash lump sum) to a medical fund.

 Retirement Benefits Authority (RBA) Guidelines

 Consequently, the Retirement Benefits Authority has developed Guidelines to guide Trustees, members and service providers of the retirement benefits schemes to implement the medical funds. The Guidelines provide advice regarding setting up, contributions, investment, administration and benefits access to medical funds. The regulator will oversee the prudent management of the funds in line with the retirement benefits’ operations and reporting framework.

 It is anticipated that the National Hospital Insurance Fund (NHIF) and insurance companies will play a critical role at the benefit provision stage.

 What is next?

 We have exposed the current draft of the Guidelines for discussions and validation by key stakeholders and members of the public. This draft is available on the Authority’s website.  It is expected that the Guidelines will be published by June this year (2018).

 We call upon stakeholders (mainly employers, members, Trustees, service providers, consultants, NHIF and insurance companies) to support the establishment, implementation and growth of the medical funds once the Guidelines are published.

 The initiative to join and contribute to the medical funds will reduce future financial burden from medical bills incurred by retirees. It is commendable that some employers have shown interest in sharing the burden of financing the medical fund by contributing for their employees.

 John Mutisya, Actuarial Officer, RBA



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