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This is the true story of private health insurance ("prepagas") and the middle class - Infobae
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Esta es la verdadera historia de las prepagas y la clase media
Si abrís una olla a presión con semejante presión acumulada, los fideos van a quedar pegados en el techo. Que es lo que pasó con el precio de las prepagas
www.infobae.com
April 10, 2024
If you open a pressure cooker with that much built-up pressure, the noodles will stick to the ceiling. What happened to the price of private medical health plans?
By Jorge Colina
With the 145% increase that occurred in the first 3 months of 2024, private medical insurance prices are equaling the pre-pandemic level (EFE/ Juan Ignacio Roncoroni)
The Minister of Economy Luis Caputo said that the private healthcare companies are declaring war on the middle class and that the government will defend the middle class. The reason for the outburst was obviously the fact that, after 20 years of price controls, they were given freedom and the minister understood that they abused their freedom. The liberation of prices in the economy caused inflation of 53% quarterly in the first 3 months of 2024, when the adjustment of prepaid payments was around 145% quarterly.
What happens is that the minister puts the magnifying glass on his 3 months in office when in reality he has to look at the entire movie, which was already well underway when he took office.
The story is like this.
In the '90s, private healthcare companies did not have controlled prices. But there was no inflation. So, prepaid companies could not increase prices because people, without inflation, can make their decision with more information. This is the good thing about not having inflation.
Convertibility was left and inflation returned. In 2006, it began to grow, so the then Secretary of Commerce, Guillermo Moreno , put the magnifying glass on private healthcare companies and began to defend the middle class from the adjustments that companies made due to inflation. There was no regulation so the controls were not carried out with legal means but with threats and bravado.
In 2011, the regulatory framework for private healthcare companies was sanctioned and price control was legalized here. Private companies, to increase their prices, have to ask permission.
The “technique” says that in health insurance there should be price controls. The reason is that the person does not have perfect information to evaluate whether the health plan price increase is relevant or not or if it is convenient for them. Hence, the State regulatory entity must authorize increases based on a technical actuarial analysis that justifies the increase and give all possible information to the person so that they can exercise their free choice in an informed manner.
Sure, but when there is inflation (and high inflation at that), price increases are not “increases” in prices. They are cost updates. But in Argentina, the technical tools that in serious countries are applied to the transparency of the system are used to carry out demagoguery, taking advantage of inflation. The politician in charge of the State uses the technical tool of price control to freeze the prices of prepaid cards with high inflation and thus defend the middle class and hear the cheers of gratitude.
Going back to the story. When Covid began, the population is locked up and the price of policies was frozen. When the partial opening returns in the first half of 2021, the government denied private healthcare companies the recovery from the 2020 freeze. In June 2021, prepaid prices were 30% lower in real terms than in March 2020 when the population was locked up due to Covid. Here, the companies present a judicial protection that a judge granted.
The government, after the judicial action, began to make some adjustments, some to recover some of what was lost, others due to inflation, an issue that prices stabilize at 20% below March 2020, before Covid. It doesn't recover 30%, but it's something.
In the second half of 2022, the Health Superintendency began to apply a formula for automatic adjustment of prepaid prices based on the costs of medical care. This was good because it gave predictability to prepaid price adjustments.
But in 2023, inflation accelerates. When inflation accelerates, there is no automatic adjustment formula that beats it. You will be able to recover later, when inflation drops, but not when it spikes.
In August 2023, with accelerated inflation, the price of policies was once again 30% below March 2020. The official candidate Sergio Massa , having his political party come 3rd in the primaries, launches – obviously – to defend the class media and freezes the price of private plans once again.
In December 2023, the price of private policies was 40% lower in real terms than in March 2020. That is, a greater drop than that which occurred during the Covid freeze. The reason is that the Covid freeze was with inflation of 36% in 2020 and Massa's freeze in 2023 was with inflation of 211%.
President Javier Milei's first measure towards private companies: release prices, which were 40% lower than before the pandemic.
If you open a pressure cooker with that much built-up pressure, the noodles will stick to the ceiling. Which is what happened to the price of private plans.
With the increase of 145% (approximate because each company charges the increase it wants) that occurred in the first 3 months of 2024, prices are equaling the level they had just before the pandemic began.
Message to the Minister of Economy: private companies are not declaring war on the middle class; They are bringing it to the reality that, in 20 years of demagogic policies, populism used the middle class to make them believe that private healthcare could be cheap.
Message to the middle class: if the private companies declare war on you, take refuge in the public hospital, which is free and has its doors open.
