Addressing Financial Hardship Through Custom Plans

Healthcare evolves in every society through new care trends, therapies and devices. Habits also transform and adapt to these innovative care approaches that, in later times, have been propelled by technology. This evolution in care also demands changes in financing options to truly address the personal situation of a patient.

According to AMIS, the average out-of-pocket expenditure of the country is of MX$4,388 (US$183) a year to treat diseases and maintain personal health. The lack of an insurance culture is widely known, as these products are considered a premium service. To date, the penetration of insurance companies stands at 8 percent. Mexico offers considerably public health coverage, which is used by 52 percent of the population, while 48 percent pay for any illness, accident or health complication through private insurance or out-of-pocket. Spending on health (public and private) in Mexico represents 5.8 percent of the national GDP. The country ranks second in private spending on health, only behind the US which lacks of a public healthcare system.

Out-of-pocket spending imposes very high social costs on Mexico. The resources that families allocate to health could be used to achieve a higher level of education or to increase their wealth. In aggregate terms, this can have an important impact on personal economy. In the most conservative scenario, where affected households report a 20 percent out-of-pocket expenditure for chronic diseases, income losses could reach 1 percent of GDP. Expenditure on chronic diseases, however, is inevitable when at least 8.7 million people in Mexico suffer from diabetes and approximately 12 million living with it without a diagnosis.

At Mexico Health Summit, David Kershenobich, Director General of INCMNSZ, said the average cost of diabetes treatment is MX$1,500 (US$74) a month. He pointed out that 85 percent of Mexican diabetes patients receive treatment. For renal insufficiency, the cost of treatment, which can include dialysis and medications, varies between MX$8,000 (US$394) and MX$15,000 (US$739) per month. Arterial hypertension, a condition that affects an estimated 31.5 percent of Mexicans, is estimated to cost between MX$1,000 (US$49) and MX$3,000 (US$148) a month. About 70 percent of Mexicans with hypertension are said to receive treatment in some way for this condition.

Financing in Mexico

Despite Mexico’s need for health financing, insurance rates fall short. Why is Mexico facing this scenario? During an interview with MBN, Eduardo Lara, Vice President, Head of Health Latin America at RGA, said that the success of private health insurers depends on the public health system. Lara explained that the US, for instance, has the largest private health insurance market in the world as public healthcare is non-existent. However, in countries like Mexico, private health insurance is 100 percent voluntary. Private insurers do not participate in Mexico’s public health system, which is why their participation and penetration is pretty low.

According to Lara, beyond designing a product, a crucial point for health insurance is how to finance it. In Mexico, the typical customer is used to having either everything covered or nothing. “We should look at medical insurance as a financial instrument that serves to avoid a financial catastrophe when medical attention is required,” he said. People should think about what they can actually afford. Lara explained that deductibles can go from MX$5,000 (US$250) to MX$50,000 (US$2,500) depending on the cost of the premium.

Alejandro Sancen, Director General of MASZ, told MBN that the problem is that private insurance only focuses on accidents and major medical expenses but not on primary conditions. “Moreover, the private insurance sector does not have the policies to cover the low-income segment of the population because there would not be enough budget to bear this cost burden.”

Sancen explained that the Mexican population needs new healthcare coverage packages, with innovative policies for minor medical expenses, indemnity policies and dental programs, among others, to ensure that the population’s basic needs are covered. In terms of specific afflictions, developing coverage products for infarction, cancer and diabetes is also a priority because these are common needs of the population. “We are breaking the mold in coverage services for cancer and diabetes, basing products on preventive healthcare,” said Sancen.

“It is the industry’s task to offer creative policies and health coverage plans,” said Salvador Arceo, Director General of Plan Seguro, to MBN, who explained that with a wider offer, people would find a solution that fits them best and really be able to pay for something they will use. “Today, people prefer to insure their car rather than themselves,” he said.

How Are Companies Addressing This?

MASZ, for example, runs an evaluation with cancer patients around their case and the status of their disease to offer a certain level of coverage. When the patient starts showing recovery, the insured sum increases. “If someone has a case of severe diabetes, their coverage sum is going to be very low,” Sancen explains. “But when the patient starts leveling their glucose levels and getting better, coverage goes up.”

RGA, meanwhile, is adapting its products to what younger generations are looking for, while addressing true health hurdles of the population, like chronic diseases. RGA combined these two ideas and introduced a new digital product for patients with a chronic disease. Lara shared that this model builds an ecosystem for the user through ally companies. Strategic partners include insurance and tech companies, laboratories, doctors and medical associations, such as the Mexican Society of Nutrition and Endocrinology. “Beyond being an insurance product, this is an integral solution for patients with Type 2 diabetes to offer advice, nutritional plans, media guidance, medical appointments and support from different actors interacting on the same platform,” said Lara. With this product, RGA offers insurance coverage if the patient were to present a severe complication. However, the target of this product is to nurture better habits and a culture of prevention. Lara stressed that this change came from the realization of users paying for a full coverage but using a limited part of the service. “It is becoming more logical to offer what the user wants and actually uses while still having enough coverage in case of an unexpected health event.”

Moving Forward on a Post-Pandemic Scenario

“Since March, the challenge for the insurance industry, and for the health insurance sector in particular, has been to make plans available to customers that offer broader, more inclusive and accessible coverage,” explained Arceo. “The goal is to offer plans that allow access to timely healthcare and maintenance and, where appropriate, recovery, as well as disease prevention and detection services.”

At Mexico Health Summit, Javier Potes, Director General of Consorcio Mexicano de Hospitales (CMH), stated the pandemic had definitely increased public consciousness regarding the need for health insurance. He said that schemes need to be redesigned to include minor medical expenses. Potes pointed at Colombia and Chile, where minor medical expenses policies have been successfully implemented. This represents an immense market for the private sector but it remains very disorganized. Collaboration between insurers and hospitals, doctors and laboratories is very important, he added. For this reason, CMH and AXA Keralty recently announced a collaboration to address some serious diseases, such as diabetes or cancer, which can be stopped at early stages with adequate detection. The collaboration will contribute to amplifying the scope of the health services covered by the AXA Keralty alliance, through an infrastructure of 45 hospitals located in 43 cities of the country. “Our efforts are focused on prevention and seek to reduce out-of-pocket spending on health,” shared Alejandro Pérez Galindo, CEO of AXA Keralty, through an official release.

Involving technology is also a cornerstone to ensure proper health financing. “We need to create schemes that use existing tech, bringing together financial engineering with technology, such as data analysis and artificial intelligence. This without a doubt, can reduce costs for schemes and also make treatment more effective,” Lara said. If insurance companies fail to join the digital transformation, however, tech giants are ready to take over. “These companies collect behavioral and predictive data from their users’ preferences on a daily basis. This provides a clear panorama of what users want,” said Lara. He reflected on the sector’s practice of considering predictive models based on mortality rates from previous years. “Now, we have to migrate to a prospective methodology to predict outcomes based on the information we gather from people’s behavior.”