Healthcare Growth in Brazil
Supplementary Health Market in Brazil
What is and how does Supplementary Health work in Brazil
The private healthcare sector is composed by hospital medical service providers, insurance companies and plan distributors. Healthcare providers includes hospitals, physicians, medical clinics, independent clinical analysis laboratories.
HMOs are classified into the following categories: medical cooperatives, dental cooperatives, self-management, group medicine, group dentistry and philanthropic institutions. Operators play an important role in the private health sector, collectively generating a cumulative total gross revenue, also known as a premium of R$237.6 billion as of December 31, 2022, according to the Supplementary Health Information Notebook published in early 2023. Distributors of health care plans includes brokers, benefit consultants, and benefit administrators, such as Qualicorp.
The private health care market in Brazil is regulated by the National Agency for Supplementary Health (ANS), which dictates specific rules for Health Plans: individual or family and collective, which includes Affinity and others segments (Corporative, SME and Gama). Individual (or family) plans are subject to stricter regulatory controls and Operators in this market are subject to strong controls in price adjustments submitted by the ANS. Consequently, it has been increasingly difficult for a large part of the Brazilian population, especially those who do not have private health care through an employer, to have access to health plans or to afford them.
During the pandemic we had a drop in the loss ratio to less than 75% due to people’s fear of attending hospitals and laboratories. After this moment there was an impoundment of this frequency and therefore an increase in network use, so loss ratio reached the highest historical level of the century in 2022, with 89.1%.
Source: ANS
Brazilian economy is recovering in recent years after the challenging results of 2015 and 2016, but affected by the COVID-19 Pandemic, the year of 2020 had the smallest change in GDP in the last 10 years. In 2021, after the partial or total shutdown of several economic activities, we see GDP recovering to 4.6%. Already in 2022, even a fall of 0.2%, in 4Q GDP advanced 2.9%.
Source: IBGE
In 2022 the number of private healthcare plans’ beneficiaries in Brazil increased 59.2%, from 31.7 million to 50.5 million, while the Brazilian population grew just 19.6% during the same period. Thus, enrollment in private healthcare plans increased from 18.3% in 2002 to 24.3% at the end of 2022, still down from a peak of 26% in 2015.
Source: ANS
Group health care plans growth
The demand for group health care plans has been growing faster than the overall health care plan market due to increasing benefits provided to employees and migration from individual plans to Affinity plans. Group plans rates are not subject to strict controls as in the case of individual plans, being negotiated directly between the operators and the contractor. Thus, HMOs are increasing the focus on those plans and the lives covered by group health care plans had 11.1% growth between December 2016 and December 31, 2022, while individual or family plans had around -4.8% in the same period, according to ANS data.
Qualicorp operates in the healthcare market through private healthcare plans, mainly in the segments: Affinity and other segments (Corporate, SME and Gama).
ANS regulation for health plans in Affinity segment
In 1998, the Federal Government sanctioned Law No. 9,656, which implemented a new regulatory framework applicable to the supplementary health sector. Subsequently, in 2000, the Federal Government created the ANS, the agency responsible for the regulation, standardization, control and supervision of this sector in Brazil. On July 14, 2009, ANS issued Normative Resolutions 195 and 196, which are correlated with the activities regarding the offer and administration of private collective corporate and Affinity contracts with operators, as well as the delimitation of the activities that can be developed by Benefit Administrators.
These resolutions directly affected the process of contracting health care plans in the affinity segment and defined regulations of the Benefit Administrators. These provisions include the definition of “collective private health care plans by affinity”, which offer coverage to the following legal entities:
- organizations and Professional Associations who need registration to carry out their respective activities;
- unions and their respective federations and confederations;
- legally constituted professional associations;
- cooperatives representing regulated professions members;
- assistance funds and private law foundations correspondent to this resolution requirements;
- entities foreseen in Law No. 7,395, of October 31, 1985, and in Law No. 7,398, of November 4, 1985.
The new regulation also compels Professional Associations and/or Class Entities that act directly with HMOs, without the intermediation of a Benefits Administrator (such as Qualicorp Administradora de Benefícios), to comply with the administrative, financial and operational obligations of responsibility of a Benefit Administrator. Although these regulations were only formally issued in 2009, we followed these guidelines which are now part of our own regulations, causing minimal impact on our operations.
We believe that these new regulations regarding Affinity plans will enhace our Company since they explicitly define the market in which we operate, as well as the requirements for the type of Professional Associations and/or Class Entities that contracts Affinity plans and allow HMOs to compete directly with Benefit Administrators, concerning independence requirements. Regarding other companies operating in the Affinity segment, we believe that we are well positioned, considering our extensive experience with Professional Associations and/or Class Entities even before Affinities’ legal formalization.
Factors that influence the private health sector plans in Brazil
Beneficiaries by age group (Brazil – December 2022)
Source: ANS
About 29% of individual plans beneficiaries are senior (over 60 years old). On the other hand, considering collective plans beneficiaries, only 11% of them are seniors. Based on the chart above, collective segment members are younger, therefore the loss ratio is expected to be lower.
Health plans channels distribution
The number of private insurance brokerage companies in Brazil already exceeds 57,700 in April 2023, according to the Superintendence of Private Insurance (“SUSEP”). If we also count the brokers registered as individuals, this number grows 71.3 thousand, reaching 128.9 thousand active distributors in Brazil. Brokerage companies operating in the Southeast region represents 62.8% of the country.
We believe there is a significant opportunity for brokerage market to grow in other geographic regions of Brazil, such as the Northeast and South regions, and the Company has this vision aligned with its growth strategy. We believe we are the leaders in Affinity segment and our scale, brand, solid financial situation and operational ability enables us to be a leader in the consolidation process of this fragmented health care plan brokerage market in which we operate. In addition, it is important to mention that there no legal obligation for brokerage agencies to intermediate the health care plans sales.
Last update: September 19, 2023