Health collapse

Chile’s private health insurance companies face bankruptcy at the hands of government legislation.

Chile’s Private Health Insurance Companies (“ISAPREs”) are currently at the centre of the country’s economic and political debate as their precarious financial situation is putting at risk 3.2 million people or 16% of Chile’s population. Created during the totalitarian regime of General Augusto Pinochet in the 1980s, ISAPREs thrived under a favourable regulatory framework which allowed insurers to discriminate their clients by sex and age while unilaterally increasing premiums.

A former public official with detailed knowledge of the situation explained, “The problem dates back to 2010 when a ruling by the Constitutional Court declared the factor tables of each of the ISAPREs to be illegal. The ISAPREs ignored this and the regulation was not changed so they continued to operate in the same way until 2019, when a decree was issued stating that the factor tables would be unified from April 2020 and that the ISAPREs would have to apply these tables.”

Following multiple litigation cases against ISAPREs, in 2019 the Health Superintendency of Chile established a single premium price which reduced future profits for private insurance companies. In 2022 a Supreme Court ruling validated the measure, allowing retrospective claims against high premiums, which has left ISAPREs with an accumulated USD 1 billion debt that endangers their financial viability.

The official continued, “The result of all this is that the ISAPREs do not want to make retrospective payments or the co-payments that they are proposing. Some ISAPREs are taking drastic measures, for example, Cruz Blanca fired the entire sales team and does not want to sell new health plans anytime soon. This is nothing new, it is something that should have been resolved in 2010 with the first ruling that was not made, but all the governments since then have looked the other way and have not resolved the situation.  The changes have never been made and the system exploded.”

“This is nothing new, it is something that should have been resolved in 2010 with the first ruling that was not made, but all the governments since then have looked the other way.”

Former public official, healthcare, Chile

After the ruling, Gonzalo Simón, president of the Association of ISAPREs, called on President Gabriel Boric to assist the sector to prevent ISAPREs collapsing under their debts. Simón affirmed that ISAPREs will comply with the Supreme Court ruling but accused the government of not putting forward a plan to restructure the debt accumulated by these private insurers.

In a meeting with Simón last week, Ximena Aguilera, Minister of Health, affirmed that the government was considering options to assist ISAPREs by analysing the proposals from Congress. She also claimed that the government would not allow ISAPREs to collapse and that it is planning to pass a law to extend the compensation period. An advisor to private sector health companies wasn’t sure that any help would ever arrive, “President Boric, the Frente Amplio and the Partido Comunista (“PC”) have historically sought the end of the ISAPREs. It is not clear if the government would prefer to do nothing and just left the ISAPREs go bankrupt. The only challenge to this is that it would put an additional 3,000,000 people straight into the public healthcare system which probably couldn’t cope. Unfortunately, this is a scenario that looks more likely every day.”

“It is not clear if the government would prefer to do nothing and just left the ISAPREs go bankrupt. Unfortunately, this is a scenario that looks more likely every day.”

Advisor to private sector healthcare companies, Chile

A Chilean asset manager was also expecting ISAPREs to start going bankrupt, “When the ISAPREs start to collapse there will be many effects: waiting lists will grow rapidly, treatment of serious illnesses will worsen, anyone with pre-existing conditions will not be taken on by the surviving ISAPREs so they will end up in the public system costing the government an additional and permanent expense of USD 2 billion. To prevent this, the government needs to do anything it can to relieve the cash flows of the ISAPREs but ideologically, I think the government actually wants the ISAPREs to collapse. It’s also worth remembering that the government doesn’t have the backing of Congress so will find any reforms challenging, perhaps bankruptcy is the easiest way out.”

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