Operators reported operating loss of R$18bn between 2021 and September 2023

04/15/2024

Paulo Rebello — Foto: Silvia Zamboni/Valor

Medical insurance plans are deteriorating, with a smaller network, higher co-payment charges, a drop in reimbursement, and record increases. The number of complaints to Brazil’s National Supplementary Health Agency (ANS) has more than doubled in the last three years. This scenario is a reflection of the crisis facing operators, who have accumulated an operating loss of R$18 billion between 2021 and 2023 (until September).

The sharp slowdown in the sector began in 2021 with the resumption of medical procedures not carried out during the first year of the pandemic. In 2020, when there was social isolation and patients canceled medical procedures, operators had a record result, with an operating profit of R$18.7 billion, three times more than that recorded in 2019, of R$5.7 billion.

This year, there is an expectation of financial improvement and a lower readjustment. However, medical insurance plans are unlikely to return to the same reality as before the pandemic. In the “new normal,” medical insurance tends to be even more restrictive, especially in the adhesion and SME (small and medium-sized enterprises) modalities, products usually purchased by individuals.

In corporate medical insurance, which accounts for 60% of the market, there is still room for further downgrading and benefits, such as reimbursement covering a large part of the cost of the medical procedure and an extensive list of accredited hospitals, which should be limited to large corporate contracts or for a high-income public.

“This product model, with an extensive network, high reimbursements, and no co-payment, is not going to be long-term for retail [membership and SMEs]. You will have that in large corporate contracts, where there is a dilution of mutuality [of risk] in the same contract,” said Mauricio Lopes, CEO of Qualicorp, during a conference call with investors.

Operators are already designing and marketing leaner medical insurance plans. Last year, SulAmérica, which caters to the middle and upper classes, launched 23 types of medical insurance with reimbursement limited to the product profile. At Hapvida, aimed at the bottom of the pyramid, one of the priorities is to increase verticalization, especially in places like São Paulo and Rio, where there is a smaller network of hospitals.

“These products are being offered because this is the current demand. Medical insurance with all those benefits has become very expensive, and there’s no way of paying for them; there’s no demand. Today, the health sector has a different level of costs,” said Marcos Novais, executive superintendent of ABRAMGE, the sector’s representative body.

Since 2020, the monthly fee for corporate medical insurance has risen by almost 55%—practically double the IPCA, according to data from the consultancy Arquitetos da Saúde. Even so, medical insurance plans have been downgraded to mitigate the increase, which could be even higher, according to representatives of the sector.

This significant increase is explained by some atypical factors that occurred after the pandemic, in addition to medical inflation itself, which is historically much higher than the IPCA (Broad National Consumer Price Index). These include regulatory changes that have allowed new medical coverage to be included at shorter intervals and an unlimited number of therapy sessions. The cost of ASD (Autism Spectrum Therapy) at medical insurance companies is already higher than oncology sessions due to the high volume of treatments.

Another change was the increase in the sale of SME plans with up to five users, which soared by 75% between 2020 and 2023. This product, known as false individual, is marketed at lower prices than membership (both compete for the same audience), with strong commercial incentives for brokers to sell this modality. However, “people bought the plan to cover certain treatments. There was no dilution of risk,” said ABRAMGE’s superintendent. In an attempt to correct this distortion, operators began to apply high increases, with the average last year being 25%.

“This strategy of encouraging the SME plan at a lower cost was a shot in the foot,” said Luiz Feitoza, a partner at Arquitetos da Saúde, one of the first to criticize the operators’ policy. They were interested in switching from adhesion to SME because they gave up the cost of the loading fee from the benefits administrators.

With the depreciation of medical insurance, the number of complaints has skyrocketed. In 2020, the IGR (general complaints index) with the ANS was 21.8. Last year, it jumped to 55.3 and is now at 58.2. Many of the complaints concern the accredited network and the reimbursement amount—both of which are getting smaller and smaller.

In the last year, the most affected benefit has been the claim for reimbursement of medical care paid for by users due to the increase in the number of doctors, hospitals, and laboratories that have been de-accredited. However, there have been reports of fraud. Between 2019 and 2022, the volume of reimbursements increased by 90% to R$11.4 billion. Considering that, in the same period, medical procedures rose by 19.5% and, therefore, reimbursements should increase by a similar proportion, there is a “gap” of around R$7.4 billion that is reported by operators as fraud.

Given this scenario, Paulo Rebello, president of the ANS, believes that the current trend of medical insurance with restricted benefits is here to stay and is unlikely to return to its pre-pandemic format. “The changes have really taken place in very short timeframes and, therefore, it is understandable that users are complaining. Operators, for their part, are resizing the network in order to reduce costs, but this movement needs to be done while respecting the rules,” he said. “The sector’s model needs to be revised, with monitoring of clinical outcomes and improvement in the relationship between operators and hospitals,” added the president of the regulatory agency.

But this reality is still a long way off. “Operators are adopting an aggressive strategy of de-accreditation. They now authorize surgery but not rehabilitation. It goes against the premise that the best thing, both medically and financially, is to maintain an integrated line of care with the same medical team,” said Lígia Bahia, an associate professor at the Federal University of Rio de Janeiro (UFRJ).

Last year, 60% of medical insurance plans had some kind of co-payment or deductible, which represents an increase of 4.58 percentage points when compared to 2019. There has also been a gradual increase in plans with regional coverage (group of cities), which are cheaper and now account for 43.5% of the market. The product with national coverage, on the other hand, has been falling.

“Medical insurance has already undergone a major downgrade, the Individual Microentrepreneur (MEI) market is practically all exploited, and there is no longer any way to make adjustments justifying the pandemic. We already have a significant number of plans with co-participation, lower and lower reimbursement, and an increase in regional products to the detriment of national ones. How far are we going to go?” asked Mr. Feitoza.

Discussions about the sustainability of the sector are recurring due to the high prices charged. There are questions about how long there will be demand for a product that represents the second largest expense in a company, behind payroll, and has become inaccessible to individuals. “The performance of the medical insurance market is closely linked to the General Register of Employed and Unemployed People (CAGED)—if employment increases, it grows. However, the current model is facing major challenges, with tight margins and high adjustments. It’s not sustainable,” said Leandro Bastos, an analyst at Citi.

Antônio Britto, president of ANAHP, the association of the country’s leading hospitals, also complains that the path has been one of disqualification, pressure to extend payment deadlines, and not an effective change in the current healthcare model.

*Por Beth Koike — São Paulo

Source: Valor International