Bloomberg — International health insurers such as UnitedHealth Group and Bupa are preparing for a confrontation with Chile’s government after a series of new regulations and court rulings pushed the industry toward collapse.
Banmedica, a unit of Minnetonka, Minnesota-based UnitedHealth, sent a letter to the government this week warning that it would seek compensation from the state under the free trade accord between Chile and the US. A similarly ominous letter was sent in March by the British United Provident Association, or Bupa.
“We urge the Government to take the necessary action to ensure the health system works as intended and that millions of people continue to have access to the care they need”, Banmedica said in a written response to questions. “We are considering any and all actions at our disposal.”
Among their many gripes are a cap on premiums imposed by the health regulator and a decree forcing private insurers, and not the state, to pay for medical leave during the pandemic. Added to that, the Supreme Court ruled in December that insurers would have to use a single table of risk factors calculated by the state, preventing them from adjusting premiums for a person’s gender or age.
Chile’s private health insurers, known as Isapres, attend 3.2 million people, or 16% of the population. The parallel state insurance system, called Fonasa, which serves most of the population, is overwhelmed with about 2.2 million people waiting for surgeries or doctor appointments in public hospitals.
Bupa Chile declined to comment for this story, while Isapre Nueva Masvida, owned by US-based Nexus Partners, declined to confirm reports that it would also seek compensation.
December’s Supreme Court ruling not only forced the Isapres to use a single table of risk factors, it made the measure retroactive to when the table was drawn up in 2019. Regulators now have six months to design a system for the Isapres to pay back excess fees.
“That cost could be a death sentence for private health insurers,” said Hector Sanchez, a former Isapres regulator and a professor of public health at Universidad Andres Bello.
But the Isapres are also under siege from their own clients. Since 2010, Chileans have been suing them en masse to prevent increases in their premiums. The courts almost always rule in favor of clients and ask the insurers to pay the legal costs.
These payments — plus a jump in the number of paid medical leaves and the caps on price hikes — explain why the industry had losses of 128 billion pesos ($150 million) in the first nine months of 2022, according to data from the regulator.
If no agreement can be reached under the terms of the free trade accords, the next step would be to sue Chile at the World Bank’s International Centre for the Settlement of International Disputes, or ICSID.
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