Health plan reforms
Brazil is the largest private health insurance market in Latin America and the recent promulgation of Law No. 9,656 and Provisional Measure No. 1,665 will significantly change this market’s rules.
Latin America’s health markets have been undergoing a regulatory revolution. In some countries, this change has taken the form of decentralization of the health component of the national social security system. Led by Chile, Colombia and Peru have also implemented social security reforms and Venezuela should soon follow suit. In Argentina, the public system of health finance and delivery represented by the Obra Social is undergoing significant change with the participation of the World Bank, and regulation of the private prepaid medical system is expected soon. Brazil has taken a different approach.
Brazil is the largest private health insurance market in Latin America and the recent promulgation of Law No. 9,656 and Provisional Measure No. 1,665 will significantly change this market’s rules. Prior to the passage of the new legislation, only health insurers were subject to financial regulation and approval of plans and products by regulators. Now, the significantly larger health plan market will come under a similar type of regulation.
The legislation was the subject of intense national debate, and the outcome has been eagerly watched by foreign investors with interest in the sector. As the legislation is implemented, this international interest should prove to have been wellplaced. For the first time, health plan operators will have to meet capital and reserve requirements, and it can be anticipated that these financial pressures will spur a surge of consolidation in the industry among national concerns as well as joint ventures, strategic alliances and acquisitions involving international participants.
The principal entities servicing the private health financing needs of the Brazilian public are licensed health insurers and operators of health plans, as well as what are called self-administered plans. Health insurance has traditionally been characterized by fee-for-service indemnity plans, under which the insured retains the ability to select the medical provider of his or her choice. The health plan operator offers services either directly through its own facilities or through financial arrangements with other providers. In general terms, selfadministered plans permit consumers to benefit from network discounts that the operators can offer directly to the public. The operator generally does not bear risk, but might offer related benefits either directly or through insurers or other health plan operators. Under the new legislation, each preserves its identity, but their onceseparate functions are expected to converge.
Rather than creating a new regulatory structure for the health plan industry, the legislation adapts the existing structure to the special needs of entities that assume health risk. Private insurance in Brazil is regulated by the National Private Insurance Council and the Superintendency of Private Insurance. In general terms, the council enacts regulations if authorized to do so by legislation, and the superintendency enforces the law and the resulting regulation. In actual application, there are some exceptions in which the council delegates limited rule-making authority to the superintendency.
The new legislation brings health plan operators and their products under this regulatory umbrella and also introduces some important changes in the regulatory structure for health insurers. With the enactment of the new legislation, the activities of the Insurance Council will be supplemented by a newly formed National Supplemental Health Council, and a Supplemental Health Chamber will advise the Insurance Council on health-related regulations.
Perhaps the three most important aspects of the new legislation are: the imposition of capital and reserve requirements on health plan operators; the opening of the health plan sector to foreign capital; and the requirement that all health insurers and health plan operators offer a basic, minimum-benefits plan. Important measures have also been taken to stabilize the health plan market during the transition from a nonregulated environment to a closelyregulated industry. For example, the prerogative of a health plan operator to change the terms of its contract with consumers and to make price adjustments has been sharply curtailed as of June 3, 1998, the date on which the legislation passed.
The legislation appears to have something for everyone. The relationship of the provider to the health plan and the health insurer will be regulated, pharmaceuticals will also be affected, as will the needs of managed care and other automated systems and procedures. In addition, health plan operators and insurers will have to, for the first time, give special treatment to the unemployed and the retired, and will have to reimburse public hospitals for use of their facilities by health plan members and insureds. As the new legislation makes its mark, additional opportunities should emerge.
Copyright Risk Management Society Publishing, Inc. Oct 1998
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