Teachers’ employer on the spot over medical insurance

 The Teachers Service Commission (TSC) is in the spotlight over an alleged irregular award of the Sh149 billion teachers medical insurance cover to Minet Insurance Brokers (MIBK).

Questions have also emerged over whether the contract was awarded with all the parties involved in the process completely failing to address infractions of the law despite earlier protests by the teachers that the insurance provider was offering substandard services.

And despite notifications on the procurement process violations, the TSC’s Tender Supply Chain has remained silent on the matter.

A letter by lawyer Wairegi Gatetua to the Insurance Regulatory Authority (IRA) through its Commissioner of Insurance details how Ms Minet Insurance Brokers Kenya Ltd (MIBK), a successful intermediary in a 2022-2025 tender that sought to provide teachers with comprehensive medical insurance cover illegitimately transformed itself to an underwriter thereby denying teachers the full value of the multi-billion shilling contract.

Emerging details indicate TSC has, contrary to Section 156 (2) of the Insurance Act, paid over Sh149 billion in medical insurance premiums to MIP over a period of ten years.

The TSC tender document TSC/T/01/2022-25 had sought the services of a consortium to provide comprehensive medical insurance to teachers under a three-year framework contract renewable annually.

The contract is however said to have been irregularly awarded to a registered insurance broker instead of an underwriter as specified in the tender document thereby denying teachers the full value of the contract executed by the consortium and the TSC.

In insurance parlance, a medical insurance provider works as an intermediary to place medical insurance business with insurers while risk carriers are the insurance firms or underwriters.

While MIBK, as an intermediary is supposed to remit 100 percent of the said premiums to the medical insurance providers for a commission as per Section 156 (5) of the Insurance Act, it has not, according to the returns submitted to the IRA by the underwriters concerned, been remitting the premiums and the 10 percent commissions payable under the insurance Act.

Controversy over the award of the Sh149 billion medical insurance comes in the wake of reports that the Medical Administrator Kenya Limited (MAKL) , which oversees the medical insurance schemes for teachers, National Police Service and the Kenya Prisons is yet to remit Sh 11.6 billion to hospitals for services rendered.

Accumulated funds

The teachers medical scheme is said to have accumulated Sh7.6 billion while the police and prisons owe hospitals Sh4 billion in arrears.

In a letter dated April 9, to hospitals, MKAL blamed the accumulated arrears on delayed disbursements from the National Treasury, something that is threatening to cripple provision of health services.

“This has been prompted by a delay in remittance of funds by our mutual client. In light of the above, Medical Administrator Kenya Limited (MAKL), wishes to reaffirm our commitment to making payments as of when we receive the anticipated funds from our mutual client,” MAKL stated .

TSC Chief Executive Nancy Macharia neither picked calls nor responded to short text messages sent to her phone through WhatsApp inquiring about the anomalies.

The Director-General of the Insurance Regulatory Authority (IRA) Godfrey Kiptum was also not available for comment as calls to his phone went unanswered.

In the latest deal, Gatetua claims that only a meagre 2.68 percent of the premium is remitted to the risk carriers in the consortium as the concerned insurers and the insurance regulator strikingly watch on silently in a scheme that is manifestly illegal as it is dumbfounding.

Further, the lawyer, in the document claims that TSC has no clear policy document that it has been operating on to determine the benefits due to the teachers if the premiums payable to the insurers remain unremitted whilst the law prescribes insurance as a cash and delivery service.

Lost tax revenue

It has also emerged that the Kenya Revenue Authority (KRA) has equally lost premium tax of a gross premium of over Sh 149 million since the said amount was never received by the concerned insurance firms.

“Whereas at the core of any tender process is the requirement to ensure value for taxpayers money, it is common ground that any contract entered into by a procuring entity and the successful bidder must be in line with the law and the requirements of the tender document itself. A proper analysis of the tender in issue clearly shows that it was a brokerage insurance procurement tender that involved a consortium of underwriters who were the ultimate beneficiaries of the premiums.

How the contract prescribed payment of such astronomical premiums to an intermediary flies in the face of the law and the tender requirement.

“Suffice it to state, it remains to be seen what nature of supervision, if any, is carried out by the TSC and IRA to ensure that the contract achieves the substance of the tender in the aforesaid circumstances,” Gatetua stated in the document seen by People Daily.

In the foregoing the law firm which has previously put TSC on notice on several occasions regarding a number of infractions of the law in the captioned tenders demanded that the IRA, within seven days, formally confirm what percentage of the premium was remitted to the risk carriers per year over the last ten years.

“We further request you to establish how the risk carriers provided cover, if indeed they did, without receipt of the attendant premiums in full and also confirm what sort of supervision, if any you have carried out over Ms. Minet Insurance Brokers Kenya Ltd as a medical insurance provider bearing in mind their role in this matter,” Gatetua states.

The insurance industry regulator has also been tasked to confirm if the policy document issued an Insurance Contract by the successful consortium is in conformity to the tender and the contract entered into between the consortium and the procuring entity.

“We also want you to confirm that the insurance underwriters/risk carriers in the consortium are liable to pay the Kenya Revenue Authority a premium tax, income tax and any other statutory taxes for the Sh 149 billion paid and retained by Minet Insurance brokers over a period of ten years,” demanded Gatetua.

Failure to avail the information sought, the law firm indicated it would not shy away from instituting appropriate legal proceedings without any further reference to IRA at its risk of legal costs and other incidental consequences.

Among the officials addressed in the letter headlined Unlawful/illegal contract for provision of teachers medical insurance cover (three years framework contract) is the head of procurement at TSC, Director-General in charge of Public Procurement Regulatory Authority, the Auditor General, the head of Public Service Felix Koskei, Attorney General, Principal Secretary in charge of the Ministry of Financing and National Treasury alongside his counterpart at the Ministry of Public Service, Gender and Affirmative Action.