The IBA’s response to the war in Ukraine
The impacts of Covid-19 on access to private healthcare in Brazil
Luciana Mayumi Sakamoto
Pinheiro Neto Advogados, São Paulo
The whole world is facing the Covid-19 pandemic crisis from different perspectives. The only common factor is that no healthcare system has enough capacity to handle tens of thousands of cases at the same time, including universal healthcare systems. Existing failures are being exposed and magnified.
The Brazilian Federal Constitution guarantees that health is a right of all and a duty of the state. This social right is provided by the government through the Brazilian Unified Public Health System (SUS) and is led by the Brazilian Ministry of Health, according to Law No. 8,080/90. The Constitution also allows private companies to provide health assistance. The private healthcare system is coordinated by the National Regulatory Agency for Private Health Insurance and Plans (ANS), the regulatory agency that monitors the carriers that offer healthcare plans. This sector is also governed by Law No. 9,656/98.
Although all Brazilian citizens have the right to access the public healthcare system, they may also purchase a private healthcare plan. Only 22 per cent of the Brazilian population has access to private healthcare plans nowadays due to its high cost, and 67 per cent of those plans are derived from employment relationships.
In this context, both systems coexist in Brazil, even though they are segregated. The fight against Covid-19 has made this clear, along with social inequalities, inefficiencies and lack of public infrastructure in different states. This situation raises several challenging issues: the pandemic may severely affect the private healthcare system in Brazil.
The financial impact on private healthcare plans
The first impact is an outcome of the coverage offered by private healthcare plans during the Covid-19 pandemic. It is worth mentioning that private healthcare plans should not offer everything to everyone. As per the current structure of the Brazilian legal system, the obligation to offer ‘everything to everyone’ could be construed as part of SUS’s main purpose – even though this assertion can also be taken with some reservations. The private healthcare system should be complementary.
Based on the current Brazilian regulatory framework, carriers must cover at least a minimum mandatory coverage list of procedures, which is reviewed every two years. Due to the Covid-19 pandemic, ANS adopted some temporary regulatory measures to make sure that the beneficiaries of private healthcare plans would have the coverage for the disease. ANS issued Normative Resolutions No. 453/2020 and 457/2020, amending Normative Resolution No. 428/2017, to include some method testing of Covid-19. In relation to the disease itself, ANS clarified that since the treatment of such a disease is already covered by carriers, it would not be necessary to amend the list.
It is important to note that the amendment to the minimum mandatory coverage list has not triggered a review of the price of the plans offered by the carriers. This gap between all original variables may be mentioned as one of the side effects that may eventually be seen, together with the impacts on the loss ratio of the plans.
In relation to the loss ratio monitored by the carriers, which directly impacts the annual adjustment of the healthcare plans’ prices, it is also possible to verify some idleness in some medical facilities caused by the determination of some states and municipalities to suspend elective procedures. Although this measure may be responsible for the reduction of some of the carriers’ expenses, there was an increase in their expenses due to the hospitalisation of patients infected by Covid-19, which involves a significant cost either due to the kind of procedure itself or due to the volume of patients demanding treatment at the same time.
As verified by ANS, the impact on the loss ratio has not appeared to date. This could be because the payment schedule adopted by the carriers can take several weeks after the service has been rendered. It is also important to consider that this effect may persist after the Covid-19 pandemic, as many people are postponing their appointments, exams or even surgeries at this point.
This poses a complex challenge for carriers to manage the next adjustments to keep the economic balance of the contracts, while taking into consideration the economic situation of the beneficiaries in case of individual plans, or the legal entities who are the policyholders of the collective plans.
The collapse of the private healthcare market
The second impact of Covid-19 pandemic on the private healthcare market is a side effect of the economic crisis. It can be divided in two perspectives:
- the increase of default and whether the carriers may be able to terminate those contracts; and
- the decrease of beneficiaries of healthcare plans due to the dismissal of employees. This market would not exist without its beneficiaries. There needs to be a balance between expenses and revenues.
Based on the information provided by the carriers to ANS, the default rate in February, March and April of 2020 is 13 per cent. There has been no significant difference compared to 2019. One may say that the carriers have not verified a significant impact to date because many employers have applied the resources made available by the government as an attempt to reduce or avoid unemployment, or that people may be paying this bill as first priority out of fear because of their need for health assistance. However, when this benefit terminates, people may lose their jobs or decide to pay other bills instead of their healthcare plans. The increase of the default rate may affect the carriers and show a ripple effect on the service providers and the whole chain of service.
Where unemployment cannot be avoided, there is another right impacted by Covid-19. In Brazil, according to Articles 30 and 31 of Law No 9,656/98, in cases where the employer offers a healthcare plan to its employees, the employees have the right to maintain their healthcare plan after their dismissal if they contributed to the healthcare plan. This right is similar to COBRA in the US, with some differences on how it is applied.
If the employees are dismissed but they are not retired, the healthcare plan can be extended for one-third of the period of contribution to the plan, being assured a minimum of six months and a maximum of 24 months. On the other hand, if the employees are retired, they have the right to maintain the healthcare plan:
- for life if they contributed to the plan for at least ten years; or
- for the same period of contribution if they contributed to the plan for less than ten years.
In all cases, the former employees must assume the full cost of the plan.
This right might be an issue for some former employers because the employees will have to assume the full cost of the plan to exercise the right. However, due to the high cost of the healthcare plans and because of the complex calculation criteria to identify the amount to be paid by the employees, many former employees file lawsuits against the former employers or carriers to discuss such payment. It might be a significant liability to the former employers because there are some court decisions that determine a smaller price regardless of any actuarial criteria to be paid by the beneficiary. The former employers may subsidise this cost to comply with the court decision.
Depending on how significant this liability is, the burden assumed by employers to keep the economic balance of this contract may affect the entire group of beneficiaries, as well as the competitiveness of the company in the market. It also raises a social issue: if those beneficiaries cannot afford their corporate healthcare plans post-employment or if the benefit is terminated by the former employers as a whole, they may have to use the public system, which may eventually overload SUS. The challenge here is that this issue can be intensified during the Covid-19 pandemic.
Restricting benefits under private healthcare plans
Another impact of Covid-19 can be seen with the interference of public authorities in the management of the number of beds in private hospitals. Due to the lack of beds in SUS, the government is trying to create a ‘single line’ for public and private intensive care unit (ICU) beds to treat Covid-19 patients. The issue is that people who purchased private healthcare plans and who are paying for them may not be able to receive treatment from the private hospitals if and when required, based on the order of the single line.
According to the Brazilian Association of Intensive Medicine (AMIB), there were 45,848 ICU beds in Brazil in January 2020: 22,844 belonged to SUS, and 23,004 belonged to the private sector. It was verified that SUS presents an average of 1.4 ICU beds per 10,000 citizens, in comparison to the private healthcare system that presents 4.9 beds.
There are several discussions in Congress to allow the government to require the use of private ICU beds when available, regardless of previous service contracting. The National Health Council (CNS) issued a recommendation to require public administrators to request the use of those private ICU beds when needed, encouraging the establishment of a single line. On the other hand, in order to avoid a massive filing of lawsuits or even the chaos in the private healthcare system, several institutions are trying to encourage government to negotiate with the private service providers for the use of those private beds. Ultimately, if private hospitals are not interested in contracting the use of those available beds with the government, then the government should use the administrative request as a last resource to use those private resources regardless of the private hospital’s authorisation.
Despite the discussion surrounding ICU beds, the matter raised here is the potential denial of access to the private service providers for beneficiaries of private healthcare plans who have been paying a significant monthly price. When they most need it, they may not have the right to use the network due to the single line implemented without previous negotiation. There is no discussion that every life is unique and must be treated as equally important. However, what should be discussed is the philosophical segregation and limits, if any, between public and private healthcare systems, their purpose as well as their differences in terms of infrastructure, and whether the government could adopt different solutions to mitigate the side effects or even the implementation of a single line.
In all situations mentioned in this article, the beneficiaries of private healthcare plans may lose their benefits, either due to the economic problems or due to governments attempts to compensate for the lack of public infrastructure without previous negotiations.
Overloading the limited resources of the public healthcare system will not help in managing the Covid-19 pandemic. Both public and private systems should work together, trying to make the best of both resources to benefit the entire population. The private sector may have its own challenges, but it is much more efficient and better structured than the public.
Finally, the carriers (and ANS) should continue negotiating the payment of the healthcare plans to the fullest extent possible as well as discussing, from a regulatory perspective, every alternative to protect the sustainability of this sector.
 www.ans.gov.br/aans/noticias-ans/numeros-do-setor/5500-planos-de-saude-ans-divulga-numeros-de-marco(accessed on 30 May 2020).
 In Brazil, there are two categories of healthcare plans: (i) individual private health insurance contract; and (ii) collective plans, which are divided into (a) employer-based private health insurance contract; and (b) private health insurance contract by association.
 www.ans.gov.br/component/legislacao/?view=legislacao&task=PDFAtualizado&format=raw&id=Mzg2MQ==(accessed on 30 May 2020).
 www.ans.gov.br/component/legislacao/?view=legislacao&task=PDFAtualizado&format=raw&id=MzkwOQ==(accessed on 30 May 2020).
 www.ans.gov.br/component/legislacao/?view=legislacao&task=PDFAtualizado&format=raw&id=MzUwMg==(accessed on 30 May 2020).
 www.ans.gov.br/images/stories/noticias/pdf/covid_19/Boletim_Covid-19_ANS.pdf(accessed on 30 May 2020).
 www.amib.org.br/fileadmin/user_upload/amib/2020/abril/28/dados_uti_amib.pdf(accessed on 30 May 2020).
 www.ans.gov.br/aans/noticias-ans/sobre-a-ans/5553-reuniao-extraordinaria-da-dicol-2(accessed on 29 May 2020).
 https://mcusercontent.com/4911ce1e520f5bf26dd891c79/files/600e155b-5a19-4327-8949-f90f95db0a7c/Conselho_Nacional_de_Justic_a.pdf?utm_source=JOTA+Full+List&utm_campaign=f575917a9f-EMAIL_CAMPAIGN_2019_02_15_01_58_COPY_02&utm_medium=email&utm_term=0_5e71fd639b-f575917a9f-381383489(accessed on 30 May 2020).