Suspension of Health Plan Increases in 2020 May Cause Price Explosion in 2021

RIO DE JANEIRO, BRAZIL – The ANS (National Agency of Supplementary Health) on Wednesday published new regulations for the readjustments of health plans. Last Friday, the agency had ordered that health plan readjustments be suspended for the next 120 days. But some points were left undefined and were clarified by the agency.

Among the questions was how will readjustments stand after the deadline. According to the ANS, the readjustment and age group change charges will be resumed again as of January 2021. The agency further says that the readjustment of amounts not applied this year will be performed next year.

According to attorney Marcos Patullo, partner of Vilhena Silva Attorneys, specialized in health law, readjustments in 2021 are expected to be much higher, which could cause serious problems to consumers next year.

“The agency has made it clear that there will be a retroactive charge next year. The concern is knowing if this difference to be charged later will be monitored, to prevent any undue charge. I see a Trojan horse; consumers won’t be charged now, but they will be surprised later on,” he says.

Another question concerns plans that had already made readjustment this year. The agency has defined that, in these cases, the monthly fee should be charged without the readjustment for the next 120 days.

The exception is for group business plans with 30 persons covered. In these cases, if the readjustment has already been defined, the monthly fees will be maintained as agreed between the parties and the readjustment will not be suspended.

For cases where the percentages have not been defined, the readjustment may not be enforced between September and December. In such cases, the contracting company may also choose not to have the readjustment suspended.

ANS points out that for group plans covering 30 or more people, with contractual terms starting in September 2020, negotiations for the definition of the readjustment percentages must be maintained, and the collection of readjusted monthly fees will be effective as of January 2021.

Understanding readjustment suspension

The suspension of health plan readjustments came after a statement by the Chamber of Deputies President Rodrigo Maia, who criticized the increase in monthly fees and said that if the ANS did not take action, the Chamber would vote on a bill on the matter.

Among the reasons for the suspension are the high profits earned by major health plan operators in recent months. With deferred elective procedures and the population afraid to leave home, the demand for medical services has dropped, reducing these companies’ costs.

Hapvida, a health plan operator, had a profit of R$278.6 million in Q2, an increase of 25 percent over the same period last year. Notredame Intermédica reported a profit of R$223.6 million in the period, more than double the amount reported for the same period in 2019. For SulAmérica, the profit in the period was R$498.3 million, an increase of 91 percent compared to 2019.

However, beneficiaries began to receive reports of readjustments well above inflation (as is customary in this market). At Vilhena Silva Attorneys, the highest readjustment recorded in 2020 amounted to 16 percent. The Chamber president mentioned readjustments of 25 percent. In stark contrast, the accumulated IPCA (National Wide Consumer Price Index) rise in the 12 months to July 2020 stood at only 2.31 percent.

These readjustments are only applicable to corporate or group contracts by subscription. In individual or family contracts the maximum readjustment percentage is set by the ANS. This year, as a result of the pandemic, the agency has not set a percentage, thereby suspending the year’s readjustment. With last Friday’s decision, the ANS has also blocked group and corporate plan readjustments until December 2020.

The measure raises the question of defining the readjustment of these plans, which historically are far above the general inflation rate or even the readjustment allowed by the ANS for individual plans.

According to those who monitor the sector, the ANS has been slow to act. Sector organizations, such as the ANAB (National Association of Benefit Administrators), had already requested the suspension of readjustments to collective plans by subscription in April.

In a note, Fenasaúde, an organization that represents 16 of the leading plan operators, says it will take steps to comply with the determinations regarding the suspension of readjustments for 120 days and that its operators had already suspended readjustments between May and July.

The organization further states that readjustments recently applied to some contracts “reflected the variation in costs observed throughout 2019” and had “no relation whatsoever with the behavior of supply and demand for medical procedures observed in recent months.”

Source: Exame