In Test for Gabriel Boric, Chile’s Private Healthcare System Is on Verge of Collapse

Bloomberg — Fresh off a bruising defeat in Congress, Chilean President Gabriel Boric is now coming under intense pressure to solve the country’s next political crisis, a private health-care system that’s on the verge of collapse.

Insurers known as Isapres are falling further behind on payments to medical providers and warning of bankruptcy as they stare down a court order demanding they compensate clients for years of overcharges, which they say would wipe out the entire industry’s net income over the past 33 years. Doctors are warning of the dire consequences, saying care could soon be disrupted for millions of Chileans.

The means Boric, a leftist who swept to power on vows to tackle inequality and strengthen public services, now finds himself in the awkward position of having to shore up a private health-care system that caters to the rich.

Government officials this week proposed an extended payback schedule for the overcharges and a gradual adoption of more restrictive rules for setting rates. But they need lawmakers’ approval for the plan, which looks increasingly uncertain after Congress rejected a key tax bill March 8, an embarrassing blow to Boric’s administration.

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UnitedHealth attacks Chile over new rules that fuel insurance crisis

Chile’s private health insurers, known as Isapres, attend 3.2 million people, or 16% of the population

“There’s no room for mistakes now,” said Patricio Meza, the president of Chile’s most prominent medical professionals’ association, Colegio Medico. “What’s important is the sense of urgency. We have to solve this problem as quickly as possible.”

Supporting the private companies is a difficult concession for Boric at the end of a first year in power that was tainted by high disapproval ratings and slow progress on policy proposals. His government doesn’t want to come off as the rescuer of a for-profit system with its roots in the Augusto Pinochet dictatorship and ties to global firms such as UnitedHealth Group Inc. and British United Provident Association Ltd. Still, shifting 3.1 million users — equal to 16% of the population — to public health care would cripple a system that’s already overwhelmed.

National Health Care

Strengthening health care is a challenge facing governments across the globe as they grapple with the aftermath of the Covid-19 pandemic and aging populations. In February, Prime Minister Justin Trudeau committed C$46.2 billion ($33.4 billion) to prop up Canada’s struggling system. Britain’s National Health Service is in crisis with a lack of money, staff and beds.

It’s also a flash point in Colombia, where President Gustavo Petro sent legislation to congress last month seeking to curtail private insurers and make the government the main manager of the $15 billion-a-year health system. Two weeks later, a key aide who opposed the proposal left the administration.

Chile’s mixed health care dates back to 1981, when Pinochet paved the way for a private system that, for those willing to pay for it, often comes with nicer facilities, shorter wait times and at least the perception of higher quality care than in public facilities. Over the years, as Chile grew into one of the wealthiest countries in Latin America, the insurance companies expanded their client base to include many middle-class professionals seeking better service.

Insurance Coverage

The solution can’t come soon enough for people like Cristina Rivera, a professor at a technical college and mother of two in Santiago. She’s heard rumors that her private insurer is one of the worst-off financially.

Rivera says pre-existing conditions would make changing to another provider difficult. She has a child who was born premature and has since suffered chronic health issues.

“My hands are tied,” she said. “I am condemned to wait and see what happens. There’s not much that I can do, and that’s what makes me very afraid.”

Private insurers say they’ve been driven to the verge of insolvency by higher costs amid the global surge in inflation and the combination of a temporary freeze on premiums and increased demand for care during the pandemic.

The Isapres posted losses of 128 billion pesos ($160 million) in the first nine months of last year, according to the most recent data from Chile’s health regulator. The amount of money that private insurers owed to private clinics rose to 567 billion pesos in November, up from 307 billion pesos in March 2022.

That was before a Nov. 30 Supreme Court ruling that found the way the firms had set premiums based on gender and age was unconstitutional. Furthermore, it said insurers couldn’t charge at all for covering children younger than 2, given that their care falls under a set of laws that provide specific guarantees to all citizens.

Insurance Overcharges

It ordered the Isapres to reimburse users for overcharges starting in 2020, when the government enforced its own table of risk factors to set prices that the private insurers should have adopted. Regulators now have until May to design a system for the companies to pay back excess fees that the Health Ministry estimates may total as high as $1.4 billion.

More broadly, Chile also risks undermining foreign business confidence and investment, according to Gonzalo Simon, the president of Asociacion de Isapres, the Isapre industry group.

“The country needs to cover gaps that exist in infrastructure, beds and technology,” he said. “That is done with investment.”

Indeed, Banmedica, a unit of Minnesota-based UnitedHealth, and UK-based Bupa have warned they may seek compensation for their businesses in Chile under international agreements with the South American country. They hold that Chile’s government has changed the rules around health care so drastically that it has undermined the value of their investments.

Health Care Delays

While campaigning in 2021, Boric laid out plans to move toward a unified national health-care system under which the Isapres wouldn’t exist. Still, the reality is that Chile’s public health care, which is known as Fonasa and serves the vast majority of the nation’s 19 million people, fails miserably at keeping up with demand.

Roughly 2 million public health-care users are on waiting lists for specialized doctor visits, while 300,000 are waiting for surgeries, according to a report from Clinicas de Chile, an umbrella group of private health providers.

Given the potential fallout if the Isapres go bankrupt, it’s critical they keep operating, according to Senator Javier Macaya, who’s also president of the opposition Union Democrata Independiente party.

“There are big foreign investors who have complied with instructions from the regulator when they made investments in Chile, and now the government of Chile is saying that they did it all wrong,” Macaya told the senate health committee this week. “We have to be concerned about the state’s role in this matter.”

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