Employee Medical Scheme Agreement (Kenya)

An Employee Medical Scheme Agreement in Kenya records the obligations the parties accept and the terms governing their arrangement.

A written Employee Medical Scheme Agreement goes beyond the statutory SHIF contribution obligation. Many employers in Kenya — particularly in the private sector, NGOs, and multinational corporations — provide supplementary medical cover through commercial health insurance policies underwritten by licensed insurers under the Insurance Act Cap. 487 and regulated by the Insurance Regulatory Authority (IRA). The IRA registers medical insurance providers (MIPs) who underwrite group medical schemes for employers. An Employee Medical Scheme Agreement formalises the employer's commitment to fund this supplementary cover, specifies the benefit limits, outlines employee and dependant eligibility criteria, and describes the claims procedure.

The Employment Act No. 11 of 2007, administered by the Directorate of Employment under the Ministry of Labour and Social Protection, requires employers to provide a safe and healthy working environment under Section 12. While the Act does not mandate employer-funded medical insurance above SHIF contributions, many Collective Bargaining Agreements (CBAs) negotiated under the Labour Relations Act No. 14 of 2007 with recognised trade unions include binding medical scheme provisions. Where a CBA negotiated with a union recognised by the Registrar of Trade Unions under the Labour Relations Act specifies medical benefit levels, the Employee Medical Scheme Agreement must be consistent with those CBA terms.

The Kenya Revenue Authority (KRA) treats employer contributions to medical schemes as a fringe benefit for income tax purposes under the Income Tax Act Cap. 470. However, employer contributions to a registered group medical insurance policy for employees and their dependants are treated as an allowable business deduction for the employer, and up to KES 15,000 per month of employer-paid medical premiums may be exempt from fringe benefits tax for employees under the current Income Tax (Fringe Benefits) Rules.

The Insurance Act Cap. 487 and the IRA's Prudential Guidelines require group medical schemes established by employers to either be underwritten by a licensed medical insurance provider or operated as self-funded schemes only where the employer has obtained an exemption from the IRA. Most Kenyan employers use commercial medical insurance providers — such as AAR Insurance Kenya, Jubilee Health Insurance, CIC Insurance Group, or APA Insurance — to underwrite their group medical schemes.

An Employee Medical Scheme Agreement in Kenya is required whenever an employer wishes to provide health insurance benefits above the statutory Social Health Insurance Fund (SHIF) contribution level, or to document the terms and conditions under which employees and their dependants access employer-funded medical coverage.

An Employee Medical Scheme Agreement is needed when a company registered under the Companies Act No. 17 of 2015 engages a licensed medical insurance provider (MIP) to underwrite a group medical policy for its employees. The written agreement between the employer and the insurer — and the summary benefit document provided to employees — constitutes the contractual framework for claims, exclusions, and renewals.

An Employee Medical Scheme Agreement is required when a Collective Bargaining Agreement (CBA) negotiated between an employer and a recognised trade union under the Labour Relations Act No. 14 of 2007 includes a medical scheme clause. The agreement translates the CBA commitment into an operational document, specifying benefit levels, eligibility criteria, and contribution rates for individual and family cover.

An Employee Medical Scheme Agreement is needed when a multinational corporation establishes a local medical scheme for its Kenyan workforce, confirming that the scheme's design, contributions, and benefit levels comply with the Social Health Insurance Act No. 16 of 2024, the Insurance Act Cap. 487, and the IRA's guidelines on group medical insurance.

An Employee Medical Scheme Agreement is required when an employer amends or upgrades an existing medical scheme — for example, increasing inpatient benefit limits, adding dental and optical cover, or extending cover to employees' parents — to confirm that all employees receive clear written notice of the new benefit terms as required by Section 10 of the Employment Act No. 11 of 2007, which mandates written terms of employment.

An Employee Medical Scheme Agreement is needed when an employer operating a self-funded medical scheme — where the employer bears the claims risk directly rather than paying insurance premiums — needs to document the scheme rules, benefit levels, claims procedure, and the employer's liability to employees, particularly given the IRA's requirements for self-funded schemes.

Parties in Kenya should prepare a Employee Medical Scheme Agreement (Kenya) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Employment Act No. 11 of 2007, the Employment and Labour Relations Court (ELRC) adjudicates workplace disputes in Kenya. Section 35 of the Employment Act 2007 governs termination of employment. The National Social Security Fund Act No. 45 of 2013 mandates employer contributions to NSSF. The Social Health Insurance Fund (SHIF) replaced NHIF in 2024. The Kenya Revenue Authority (KRA) administers PAYE under the Income Tax Act (Cap. 470). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A Kenya Employee Medical Scheme Agreement under the Social Health Insurance Act No. 16 of 2024 and the Insurance Act Cap. 487 must contain the following essential elements to be operationally effective and legally compliant.

Parties and Scheme Identification: Full legal name of the employer, the employer's KRA PIN, the Business Registration Service (BRS) number, and the name and address of the medical insurance provider (MIP) licensed by the Insurance Regulatory Authority (IRA); or, for self-funded schemes, the scheme administrator's name and the IRA exemption reference.

Eligibility and Enrolment: The categories of employees covered (permanent, contract, probationary, part-time), the waiting period before coverage commences, the dependants eligible for cover (spouse, children up to a specified age), and the enrolment procedure including any health declarations required by the insurer.

Benefit Schedule: The annual benefit limits for inpatient hospitalisation, outpatient consultations, maternity benefits, dental and optical cover, chronic disease management, and emergency evacuation; the per-visit co-payment or excess borne by the employee; and any exclusions — pre-existing conditions, cosmetic procedures, or experimental treatments — clearly listed as required by the IRA's Insurance (Health) Regulations.

Social Health Insurance Fund (SHIF) Coordination: Confirmation that SHIF contributions under the Social Health Insurance Act No. 16 of 2024 are deducted at 2.75% of gross salary and remitted to the Social Health Authority (SHA) on a monthly basis, and a description of how the commercial scheme coordinates with SHIF benefits — whether the commercial insurer pays primary and SHIF pays secondary, or vice versa.

Premium Contributions and Cost Sharing: The total annual premium, the employer's contribution (amount or percentage), the employee's contribution deducted from salary (if any), the payment schedule to the insurer, and the Income Tax Act Cap. 470 fringe benefit tax treatment of employer contributions.

Claims Procedure: The claims submission process — direct billing at panel hospitals and clinics versus reimbursement claims; the documentation required (receipts, medical reports, discharge summaries); the claims timeline; and the appeal process for denied claims under the Insurance Act Cap. 487.

Scheme Administration and Renewal: The role of the insurance broker (if any) licensed under the Insurance Act Cap. 487; the annual renewal process; the employer's right to change insurers on renewal; the procedure for adding or removing employees from the scheme mid-year; and the treatment of employees on unpaid leave or maternity leave under the Employment Act No. 11 of 2007.

Termination and Run-off: The circumstances under which the scheme terminates — employer insolvency under the Insolvency Act No. 18 of 2015, non-payment of premiums, or expiry without renewal — and the treatment of claims incurred but not yet submitted (IBNR) at termination.

Data Protection: Obligations regarding the handling of employees' medical and personal data under the Data Protection Act No. 24 of 2019, administered by the Office of the Data Protection Commissioner (ODPC); the principle of purpose limitation for medical data; and the prohibition on sharing employee health data with third parties without consent.

Governing Law: The agreement is governed by the laws of Kenya. Disputes involving the insurer may be referred to the Insurance Appeals Tribunal under the Insurance Act Cap. 487, or to arbitration under the Arbitration Act No. 4 of 1995. The forms-legal.com Kenya Employee Medical Scheme Agreement template covers all mandatory elements required under the Social Health Insurance Act No. 16 of 2024 and the IRA's Insurance (Health) Regulations.