Influence Of Employment Status on the Retention of National Health Insurance Coverage in the Unorganized Sector in Homa Bay County, Kenya

Influence Of Employment Status on the Retention of National Health Insurance Coverage in the Unorganized Sector in Homa Bay County, Kenya

Otieno Frank¹, Nyaboga Ibrahim²

¹Department of Management, School of Business and Economics, Mount Kenya University, Kenya

²Lecturer, Mount Kenya University, Kenya

DOI : https://dx.doi.org/10.47772/IJRISS.2024.8110161

Received: 23 October 2024; Accepted: 11 November 2024; Published: 13 December 2024

ABSTRACT

Retaining health insurance coverage among informal sector workers is a persistent challenge, particularly in low-income countries like Kenya. This study investigates the influence of employment status on the retention of National Health Insurance Fund (NHIF) coverage among informal sector workers in Homa Bay County. A descriptive cross-sectional survey design was employed, with data collected from a stratified random sample of 382 respondents across three key locations in the county: Homa Bay, Mbita, and Oyugis. Of these, 363 responses were completed and analyzed, yielding a response rate of 95%. Descriptive findings indicate that 53% of respondents were wage earners, while 47% were self-employed. Gender distribution was nearly balanced, with 55% female and 45% male participants, and the majority (40%) were aged 30–39 years. Analysis revealed that wage earners were significantly more likely to retain NHIF coverage, with 75% retention among wage earners compared to only 45% among self-employed individuals. Regression analysis showed that employment status alone explained 80% of the variance in NHIF retention, with demographic factors such as age, education, and marital status also contributing significantly. Qualitative findings from focus group discussions highlighted barriers faced by self-employed workers, including income instability and limited financial literacy, which hindered consistent NHIF contributions. These findings underscore the critical role of employment stability and demographic factors in sustaining health insurance coverage. Policy recommendations include implementing flexible NHIF payment plans, enhancing financial literacy programs, and providing subsidies for low-income workers to improve NHIF retention among the informal sector, advancing Kenya’s Universal Health Coverage goals.

Keywords: Employment status, health insurance retention, informal sector, National Health Insurance Fund, Homa Bay County, Kenya.

INTRODUCTION

Health insurance is globally recognized as a vital mechanism to provide financial protection against catastrophic healthcare costs, especially in low-income economies (WHO, 2015). Access to affordable healthcare through insurance schemes enables individuals to seek medical care without facing financial ruin, a challenge particularly pressing in developing countries where out-of-pocket healthcare expenditures are high (Kutzin, 2013). The World Health Organization (WHO) estimates that 400 million people globally lack access to essential healthcare services, with the majority of these individuals residing in low- and middle-income countries (WHO, 2015; Kutzin, 2013). In these settings, health insurance schemes like Kenya’s National Health Insurance Fund (NHIF) play a crucial role in bridging the gap between healthcare needs and financial affordability.

The NHIF, established in 1966, is Kenya’s primary instrument for achieving Universal Health Coverage (UHC). The NHIF provides insurance for both formal and informal sector workers, although participation is mandatory for the formal sector and voluntary for the informal sector. Given that the informal sector constitutes over 80% of Kenya’s workforce, the retention of NHIF coverage in this sector is critical to the country’s UHC ambitions (Lagomarsino et al., 2012; Barasa et al., 2017). However, the unorganized nature of informal employment often leads to unstable incomes and irregular NHIF contributions, making retention a persistent challenge (Obermann et al., 2013; Wang et al., 2012).

In rural areas like Homa Bay County, these challenges are particularly pronounced due to the high poverty levels and the prevalence of informal employment. According to Kenya National Bureau of Statistics (KNBS) and Society for International Development (SID), over 61% of the population in Homa Bay County lives below the poverty line, and the county’s economy is predominantly driven by informal employment (KNBS, 2013). The informal sector, characterized by irregular employment and income instability, contributes to difficulties in maintaining consistent health insurance contributions, leading to lapses in NHIF membership and diminished access to healthcare services. Previous research has highlighted that workers in the informal sector often prioritize immediate financial needs such as food, housing, and school fees over long-term investments like health insurance, further exacerbating the problem of insurance retention (Nsiah-Boateng et al., 2019; Oxfam, 2013).

While previous studies have explored the role of socio-economic factors such as income and education in influencing NHIF coverage, the specific role of employment status—whether a worker is self-employed, casually employed, or formally employed—has received limited attention in the Kenyan context (Barasa et al., 2021; Dalaba et al., 2012). Understanding how employment status influences health insurance retention is crucial for designing targeted interventions that can enhance coverage in the unorganized sector. Therefore, this study seeks to fill this gap by examining the influence of employment status on the retention of NHIF coverage in Homa Bay County’s informal sector. By identifying the barriers that informal sector workers face in maintaining consistent NHIF contributions, the study aims to inform policy recommendations that can improve health insurance retention and, consequently, access to healthcare for vulnerable populations.

LITERATURE REVIEW

Theoretical framework

This study adopts Rational Choice Theory to understand the decision-making processes of informal sector workers regarding NHIF retention. Rational Choice Theory posits that individuals make decisions based on the maximization of their personal utility, weighing the costs and benefits of different options before arriving at a choice (Sen, 2004; Mitchell & Croanzano, 2005). In the context of health insurance retention, informal workers must assess whether the immediate cost of maintaining NHIF contributions outweighs the long-term benefits of health coverage.

For many informal workers, the rational decision may be to forgo NHIF payments in favor of more pressing financial obligations, such as food, housing, and education, particularly when income is unpredictable. According to Nyman’s Expected Utility Theory (2001), health insurance is often viewed as a “luxury” good by informal workers, who prioritize immediate consumption over the potential future benefit of health insurance coverage. This is particularly true in settings where individuals are not regularly sick and may view health insurance as an unnecessary cost until a medical emergency arises.

Furthermore, the Weberian Model of Social Stratification also informs this study by considering how socio-economic status, including employment, shapes individuals’ access to resources such as health insurance. Weber (1978) emphasized the role of economic status in determining individuals’ life chances, including their ability to access healthcare. In the context of Kenya’s informal sector, workers with stable employment or those in higher-income brackets are more likely to retain NHIF coverage because they have the financial means to do so, while those in lower socio-economic strata face greater financial barriers to maintaining consistent contributions (Marmot et al., 2010; Wang et al., 2012).

Employment Status and Health Insurance Retention

Employment status has been widely recognized as a critical determinant of health insurance uptake and retention, particularly in developing economies where informal employment predominates. Studies have shown that individuals in formal employment are more likely to retain health insurance coverage due to stable income streams and employer-sponsored insurance schemes, whereas those in informal or self-employment face significant challenges in maintaining regular contributions to insurance programs (Barasa et al., 2017; Lagomarsino et al., 2012; Dalaba et al., 2012).

In sub-Saharan Africa, the informal sector dominates the labor market, with most workers earning irregular incomes. This makes it difficult for them to prioritize health insurance contributions, especially in voluntary schemes such as the NHIF in Kenya (Wang et al., 2012; Nsiah-Boateng et al., 2019). In Ghana, for example, the National Health Insurance Scheme (NHIS) has achieved moderate success in covering informal sector workers, but retention remains low due to the same challenges of income instability and a lack of regular contributions (Dalaba et al., 2012). Similar trends are observed in other countries such as Rwanda and Nigeria, where employment status is a major factor in determining whether individuals maintain their health insurance coverage over time (Smith et al., 2010; Nsiah-Boateng et al., 2019).

In Kenya, studies have similarly indicated that informal sector workers struggle to retain NHIF coverage due to fluctuating incomes and the absence of employer-sponsored contributions (Barasa, Mwaura, & Rogo, 2017; Obermann et al., 2013). Research by Ghosh (2013) in India found that individuals with unstable employment or those engaged in seasonal work are more likely to experience lapses in their health insurance coverage, as their income is often insufficient to cover both daily living expenses and periodic insurance contributions. This has significant implications for NHIF retention in Kenya, where informal workers constitute the majority of the workforce and yet exhibit some of the lowest retention rates in the insurance scheme (Barasa et al., 2021; Kenya Health Policy, 2014-2030).

METHODOLOGY

Study Design

This study employed a descriptive cross-sectional survey design to investigate the influence of employment status on NHIF retention among informal sector workers in Homa Bay County, Kenya. The cross-sectional design was chosen because it allows for the collection of data from a diverse population at a single point in time, providing insights into the current state of NHIF retention and employment status in the unorganized sector.

Study Population and Sample Size

The target population for the study consisted of 71,031 informal sector workers registered with the NHIF across three key stations in Homa Bay County: Homa Bay, Mbita, and Oyugis. The sample size was calculated using Fisher et al.’s formula (1998), resulting in a final sample of 382 respondents, ensuring representation of the diverse employment statuses within the informal sector. Stratified random sampling was employed to ensure that various subgroups, including self-employed individuals and wage earners, were adequately represented in the sample.

Data Collection Methods

Data were collected through a combination of structured questionnaires and focus group discussions (FGDs). The structured questionnaire was divided into sections covering demographic characteristics, employment status, and NHIF retention. The FGDs were conducted to gather qualitative insights into the challenges faced by informal workers in maintaining NHIF coverage.

Data Analysis

Quantitative data were analyzed using descriptive statistics (frequencies, percentages) to describe the demographic and employment characteristics of the respondents. Inferential statistics, specifically correlation and regression analysis, were used to examine the relationship between employment status and NHIF retention. The Statistical Package for the Social Sciences (SPSS) version 25 was used to perform all analyses. Qualitative data from the FGDs were transcribed and analyzed thematically to capture the participants’ experiences and perspectives.

Ethical Considerations

Ethical approval was obtained from the Mount Kenya University Ethics Review Committee, and written consent was sought from all participants. The confidentiality of respondents was ensured by anonymizing the data, and participation in the study was voluntary.

RESULTS

Demographic Characteristics

The study achieved a response rate of 95%, with 363 questionnaires completed. Table 1 presents the demographic characteristics of the respondents in this study, including gender, age, employment status, education level, and marital status. The respondents were predominantly female (55%), with the majority falling within the 30-39 years age group (40%). The distribution of employment status shows that 47% of respondents were self-employed, while 53% were wage earners, reflecting the diversity of employment types in the informal sector. In terms of education, 41% had completed secondary education, and 36% had attained a college or university degree. Additionally, more than half of the respondents were married (52%). These demographic details provide a comprehensive overview of the study population, which is crucial for understanding the context in which the relationship between employment status and NHIF retention is examined.

Table 1. Demographic Characteristics of Respondents

Quantitative Findings

The study found that self-employed individuals were more likely to drop out of the NHIF scheme compared to wage earners. Specifically, 35% of self-employed respondents reported that they had lapsed in their NHIF contributions at least once in the past year, compared to 20% of wage earners.

Table 2 shows the correlation between employment status, NHIF retention, and selected demographic control variables among informal sector workers in Homa Bay County. The results indicate a statistically significant positive correlation between employment status and NHIF retention (r = .639, p < .01), suggesting that more stable employment (such as wage earning) is associated with a higher likelihood of retaining NHIF coverage.

Additionally, the analysis revealed moderate positive correlations between demographic variables and NHIF retention, with a correlation coefficient of .420 (p < .01) when considering demographic controls collectively. Employment stability appears to be the strongest factor linked to NHIF retention, though demographic factors such as age, education level, and marital status also contribute to the likelihood of consistent health insurance contributions. These findings underscore the importance of employment stability and demographic factors in shaping NHIF retention among informal sector workers.

Table 2. Correlation Between Employment Status and NHIF Retention with Demographic Controls

Note. N = 363. p < .01. Demographic controls include age, gender, education level, and marital status.

Table 3 provides the results of a linear regression analysis predicting NHIF retention based on employment status and selected demographic controls. The model showed that employment status is a significant predictor of NHIF retention, with a standardized beta coefficient (β) of 0.639 (p < .001). This result suggests that individuals with more stable employment (e.g., wage earners) are significantly more likely to retain NHIF coverage compared to their self-employed counterparts.

Other demographic variables also emerged as significant predictors of NHIF retention. Age (β = 0.210, p < .01), education level (β = 0.198, p < .01), and marital status (β = 0.145, p < .01) were all positively associated with NHIF retention, indicating that older, more educated, and married individuals are more likely to maintain their health insurance coverage. Gender, however, has a slight negative association (β = -0.125, p < .01), suggesting that females in the sample may face additional barriers to NHIF retention.

The overall model explains 80% of the variance in NHIF retention (R² = 0.80), highlighting the substantial influence of employment status and demographic characteristics on health insurance retention. These findings indicate the need for tailored NHIF retention strategies that account for employment status and demographic diversity among informal sector workers

Table 3. Regression Analysis Predicting NHIF Retention from Employment Status with Demographic Controls

Model Summary: R² = 0.80, Adjusted R² = 0.79, F (4, 358) = 125.6, p < .001.

Note. Dependent variable: NHIF Retention. Demographic controls include age, gender, education level, and marital status.

Qualitative Findings

The qualitative data from focus group discussions provided deeper insights into the challenges faced by informal sector workers in retaining NHIF coverage. Many self-employed workers cited income instability as the primary barrier to making regular NHIF contributions. Unlike their employed counterparts, who occasionally benefited from employer contributions, self-employed individuals reported struggling to prioritize NHIF payments amidst competing financial obligations such as school fees, rent, and daily subsistence.

One participant stated:

“There are months when business is good, but there are also months when we make nothing. It’s hard to pay for NHIF when I can barely pay for food.”

Another key theme that emerged from the discussions was the lack of financial literacy. Many respondents admitted that they were not fully aware of the benefits provided by NHIF, and this limited understanding contributed to their inconsistent contributions.

DISCUSSION

This study provides valuable insights into the influence of employment status on the retention of National Health Insurance Fund (NHIF) coverage among informal sector workers in Homa Bay County, Kenya. The findings reveal a strong association between employment stability and NHIF retention, underscoring the role of wage employment in facilitating consistent contributions to health insurance schemes. This supports previous research that highlights stable income as a critical factor for maintaining health insurance coverage in low-income settings, where informal employment and irregular income streams are prevalent (Barasa et al., 2017; Nsiah-Boateng et al., 2019).

The study’s regression analysis showed that wage earners are significantly more likely to retain NHIF coverage compared to self-employed individuals, with employment status explaining a large proportion (80%) of the variance in NHIF retention (see Table 4). This result suggests that stable employment in the form of wage earning, even within the informal sector, contributes positively to the likelihood of retaining health insurance. Wage earners benefit from occasional employer contributions, which alleviate the financial burden of consistent premium payments, in contrast to self-employed workers who must manage these payments independently amidst fluctuating income (Barasa et al., 2021; Mhere, 2013). The regression results reinforce the hypothesis that income stability, facilitated by employment status, plays a decisive role in health insurance retention, aligning with Rational Choice Theory. According to Rational Choice Theory, individuals assess costs and benefits when making decisions; hence, those with irregular income may opt to forgo health insurance payments in favor of immediate necessities such as food, rent, and education (Sen, 2004; Nyman, 2001).

Demographic Factors Affecting NHIF Retention

Beyond employment status, demographic factors such as age, education, and marital status were found to significantly affect NHIF retention. Older, more educated, and married individuals exhibited higher retention rates, suggesting that life stage, financial literacy, and family responsibilities may contribute to the prioritization of health insurance coverage. The positive association between age and NHIF retention may reflect a heightened awareness of health risks and the importance of health coverage as individuals age (Adebayo et al., 2015). Similarly, education level correlated positively with NHIF retention, indicating that individuals with higher education are potentially more financially literate and better able to appreciate the benefits of sustained health insurance coverage. This finding aligns with existing literature that links education with improved health literacy and insurance uptake (Munge et al., 2017; Ghosh, 2013).

Marital status also emerged as a significant predictor of NHIF retention, with married individuals showing higher retention rates than their single or divorced counterparts. This trend may reflect the tendency of married individuals to prioritize financial stability and healthcare security for their families, thus viewing health insurance as a necessary and beneficial investment. These demographic insights suggest that NHIF retention is influenced by multiple factors beyond employment status, highlighting the complex nature of health insurance decisions among informal sector workers.

Barriers to NHIF Retention among Self-Employed Workers

The qualitative findings from the focus group discussions provide additional context, particularly regarding the challenges self-employed workers face in retaining NHIF coverage. Self-employed participants frequently cited income instability as a primary barrier, with many expressing difficulties in consistently meeting NHIF payments during periods of low business income. The participants’ experiences align with broader studies on the informal sector, which indicate that fluctuating income and competing financial obligations hinder regular insurance contributions (Dalaba et al., 2012; Wang et al., 2012). These findings are also consistent with the Expected Utility Theory, which posits that individuals with irregular income streams may perceive health insurance as a luxury rather than a necessity until faced with an immediate healthcare need.

Another major theme emerging from the focus group discussions was the lack of financial literacy among self-employed workers. Many respondents reported limited understanding of NHIF benefits, which likely contributed to their inconsistent contributions. This aligns with studies showing that financial literacy and awareness of health insurance benefits are key determinants of insurance retention and uptake, especially in resource-limited settings (Mhere, 2013; Munge et al., 2017). Addressing these informational gaps through targeted financial literacy programs could be crucial in improving NHIF retention among self-employed individuals.

Limitations and External Validity

While this study offers significant insights, it is important to acknowledge its limitations. The sample was limited to three areas within Homa Bay County—Homa Bay, Mbita, and Oyugis—which may restrict the generalizability of the findings to other regions. Variations in economic activities and access to NHIF facilities across different areas could affect health insurance retention rates, posing a risk to external validity. Future studies should consider a more diverse sample covering additional locations within Homa Bay County and other counties in Kenya to improve the generalizability of the results.

CONCLUSION

This study highlights the critical influence of employment status on NHIF retention among informal sector workers in Homa Bay County, with wage earners displaying significantly higher retention rates than self-employed individuals. The regression and correlation analyses confirm the importance of stable employment in health insurance retention, while demographic factors like age, education, and marital status further shape insurance decisions. These findings advocate for targeted NHIF policies that address the unique challenges faced by self-employed workers, ultimately contributing to broader efforts towards achieving Universal Health Coverage in Kenya.

POLICY IMPLICATIONS AND RECOMMENDATIONS

The findings of this study highlight the need for NHIF policies tailored to the unique circumstances of informal sector workers, especially those who are self-employed. Policy interventions could include flexible payment plans, such as quarterly or semi-annual contributions, which align with the income patterns of self-employed workers. Additionally, targeted outreach programs to increase awareness of NHIF benefits could help improve retention rates, especially among those with limited financial literacy. The government should also consider subsidies or premium discounts for low-income workers to reduce the financial burden and promote sustained NHIF participation.

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