Employer Action Code: Act

Update: The president signed the measure into law in late November. Mandatory employer contributions to the new fund will begin in 2017 as anticipated.

On September 23, the Kazakh Parliament approved the first reading of draft legislation to establish a single-payer national health insurance fund (HIF) in 2016. The legislation is one of a series of 100 measures announced by President Nazarbayev in May to transform the nation by 2050. The HIF is expected to boost total spending on health care (presently equal to 4.3% of GDP ([World Bank data]) and would become the central financing mechanism for paying for public health services by requiring contributions from both employers and employees.

Health care services are currently arranged at the state (oblast) level, with financing from the federal budget distributed between the health departments of the 14 oblasts to fund public facilities and services. In practice, the provision and quality of services are uneven due in large part to the disparities between the states in terms of size, population and wealth, among other factors. Supplementary health care is a common and popular benefit for employees as a means of avoiding use of the state system.

Key Details

The legislation would divide health care services into two baskets based on the source of funding and the nature of the benefit provided. Financing would be used to pay for care from authorized public or private service providers. The general framework would be as follows:

  • The first basket of services would be financed from general revenue and would cover the cost of care for certain diseases, emergency care, transportation (including medical aviation services) and certain types of preventive care.
  • The second basket would be financed by employer and employee contributions, and would cover consultations, inpatient and outpatient care, surgery, hospitalization, laboratory services and prescription drugs.
  • Employers would be required to contribute 2% of pay beginning in 2017, rising to 3% in 2018, 4% in 2019 and then 5% in 2020 (although contributions would be tax-deductible).
  • Employees would be required to contribute 1% of pay starting in 2019, increasing to 2% in 2020.
  • All citizens and residents would be required to participate, but no contribution would be required for 15 different categories of vulnerable persons including children under age 18, persons receiving an old-age or disability pension, the unemployed and individuals on parental leave. Financing would instead be provided by the state budget on their behalf at a rate of 4% starting in 2017, increasing to 5% in 2018, 6% in 2023 and 7% in 2024.

Employer Implications

Total spending on health care in Kazakhstan is less than half the Organization for Economic Co-operation and Development average of 9.3% of GDP. The creation of an explicit funding mechanism for health care as well as the establishment of a central body to oversee and administer the provision and payment of health care services nationally should have a positive impact on the quality and availability of services nationwide, but it comes at an additional cost to employers (as well as their employees). If the bill is passed, we would not expect the development of the HIF to have a significant impact on the market for supplementary health care services in the near term.

It should be noted that other measures currently under development include passage of a new labor code and the creation of a new notional defined contribution benefit within the individual retirement accounts via social security (both of which are being addressed in separate Global News Briefs). Taken together, these changes would have a pretty significant impact on the business and labor environment in Kazakhstan and may merit closer attention in due course.