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Analysis

Bespoke Insurace Policies for Chronic Diseases

Sat, 09/05/2015 - 20:22

Obesity is becoming a rising health concern in Mexico, with 73% of adults over the age of 20 obese or overweight according to IMCO. The country has already overtaken the US and is one of the most obese countries in the world, only surpassed by several small island nations in the Pacific and a number of Middle Eastern countries. As a result, the prevalence of chronic diseases such as heart conditions and diabetes is steadily rising. It is estimated that chronic obesity related diseases cost the Mexican government approximately US$3.5 billion annually. A person with diabetes spends approximately a third of their income on medical costs in Mexico. As part of the Seguro Popular program for Mexican citizens there is access to treatment for chronic obesity related diseases at the Diabetes and Obesity Clinic in the Hospital de Especialidades of the Centro Medical Nacional Siglo XXI. However, providing this care is a massive strain for government resources, especially as the number of people living with diabetes is expected to increase by 175% to 11.9 million patients by 2030, according to CENETEC. As the government struggles to cope with demand, a private healthcare market is emerging, targeted at those living with chronic diseases like diabetes.

Typically, after being diagnosed with a chronic disease, it is difficult for patients to find comprehensive, affordable healthcare due to the continual need for expensive medical procedures and medication, as well as the predisposition to developing further chronic degenerative health issues. In 2012, AXA Seguros launched the first health insurance package in Mexico designed especially for those with diabetes called Vida DBTS. The benefits of the package are two-fold: not only is it designed as a life insurance policy, but it also helps to cover lifelong health costs. Moreover, if the patient’s condition is declared terminal, they can expect to receive a payout of 30% of the value of the policy. The cost of the insurance fluctuates depending on the type, age and personal circumstances of the patient. However, someone of the age of 40 would generally expect to pay MX$1,000 per month. A man aged between 35 and 40 years old can receive a guaranteed payout of MX$1 million with a policy costing MX$986 per month, depending on other factors. GNP Seguros offers the program GNP Cuida tu Salud to generate positive changes in general health by evaluating the risk for developing several diseases and providing recommendations to promote a healthy lifestyle. It targets six chronic and degenerative diseases such as diabetes, obesity, dyslipidemia, hypertension, breast cancer, and prostate cancer, and covers 15,000 employees at ten different companies. A study conducted among 2,000 people participating in the program showed it reduced the

risk of hypertension by 21%, diabetes 26.3%, breast cancer 22.41%, prostate cancer 44.67%, dyslipidemia 9.63%, and metabolic syndrome 4.68%. Similarly BBVA Bancomer offers a popular health insurance package designed for those with cancer, called RespaldoSeguro Contra Cáncer. If a patient holds this product, the policy will pay out upon receiving a cancer diagnosis. The product is currently owned by around 50,000 people and the price starts at MX$150 per month depending on individual circumstances. The policy is paid to the beneficiaries upon death of the holder. Seguros Monterrey New York Life (SMNYL) has sold 2.9 million of their Afronta policy, which is designed to be taken out after diagnosis with a chronic or terminal disease such as Parkinson’s disease, multiple sclerosis, and cancer. The policy works in a similar way to BBVA Bancomer’s RespaldoSalud cover and contains an identical 180-day cooling off period.

These are welcome developments given the strain that diseases like diabetes put on the government-funded Seguro Popular program. It is also a large market since it is estimated that ten million Mexican citizens have diabetes, but is it an effective business model for companies to offer such a service to chronic patients? The answer is that the insurance policies have extremely strict requirements for payouts, while there are certain exclusions for payment, such as contraction of skin cancer and melanoma, cancer related to AIDS or HIV, and lung cancer as a consequence of smoke inhalation, among others. In cases such as obesity, companies are beginning to see untapped markets which may not initially seem to be profitable. However, for the AXA policy alone, no similar product exists on the market, meaning that the company has a monopoly position in a market consisting of ten million customers. Although the policy may not at first make business sense to the untrained eye, the list of restrictions and payout limits greatly reduces the cost to the company. Such products are in great demand because people with chronic diseases have no other viable, comprehensive option for healthcare coverage and therefore are generally willing to pay higher premiums.

The question of treatment over prevention is still a challenging issue for the Mexican government. Currently, public spending on treatment of illnesses is 11 times greater than that on education aimed at prevention. The government seems to be making an attempt at restrospective treatment rather than preventing initial development of chronic diseases. The private health insurances offered by companies such as AXA and BBVA Bancomer may help to alleviate some of the strain on the Seguro Popular system so that the government can redirect funds to education campaigns, in turn mitigating the need for such insurance products.