Saving the ISAPRE would be one more injustice in the Chilean health system

Private health insurance companies in Chile, commonly referred to as ISAPRE, are failing to provide essential health coverage for all—and the Boric administration is looking into changing the system

March 29, 2023 by Mario Parada Lezcano
Protesters holding a banner against commercialization of healthcare in Chile, 2013. Photo: Flickr/neuropata

Chile is once again facing a moment when it can choose to advance towards social justice or, on the contrary, to move away from that goal. The for-profit insurance sector, composed of private health insurance companies collectively known as Instituciones de Salud Previsional (ISAPRE) is at risk of catastrophic bankruptcy. The choice now is to bail it out and continue as before, or make a drastic turn towards a health system that will prioritize people over profits. The Boric administration has shown signs that it is ready to move in this second direction, which could benefit millions.

The ISAPRE industry has had an unfair trajectory since its creation. One of the problems of the private for-profit insurance sector in Chile is that it charges according to risk, and not according to the principle of solidarity, as should be the case in social and health protection. Charging according to risk is a problem intrinsic to systems based on health insurance, yet ISAPRE manages to make things even more complicated. Paradoxically, ISAPRE—a network of private enterprises—counts on regular income from public sources. A contribution equivalent to 7 percent of a person’s income is transferred to ISAPRE, whose primary responsibility is profit-making, rather than the people’s wellbeing. If the contributions were to be transferred to FONASA, the public health insurance mechanism, it would build a stronger health system to benefit all.

A blatantly unfair operation

The industry’s operation is so openly unfair that in 2010 the Constitutional Court issued a ruling stating that the use of risk tables that discriminate on the basis of age and sex was unconstitutional, and that the state had to find an immediate solution to this. The Court’s decision was followed by a communication from the Superintendent of Health asking the ISAPRE to correct its behavior. But, even then, the industry did not comply, using administrative subterfuge to avoid the imposition of change by the court and health authorities. At that point, a Supreme Court ruling obliged them to make profound modifications to their way of doing business. Yet, it has to be remembered that it is not the implementation of this ruling that brought the private insurance system to the verge of bankruptcy, but its financial incapacity and high levels of inefficiency.

Chile is the only country in Latin America that has decreased financial protection for people’s health. The vertical integration between insurers and providers that exists in practice has been an important element in this process. All price increases in private clinics are quickly translated into price increases for health insurance plans and/or increases in the co-payments people must make. There is no state regulation that would limit the sale of new health insurance plans that are the same in content as the existing ones, but for higher prices. Because of this, Chile is going backwards in financial protection and making little progress in access to health care.

Beneficiaries have been complaining about abusive unilateral price increases for decades, and the courts have predominantly ruled in favor of the people, charging the costs to the industry. But instead of translating into better health and financial protection for the people, this has led to the costs of litigation being incorporated into the cost structure of the health insurance business, and they have become part of the prices of the plans. A whole labor market has been created for lawyers representing people affected by the health insurance companies’ behavior. According to an article by Daniel Matamala: “there are more than two million rulings, which represent more than 90% of the cases heard by the Courts of Appeals and the Supreme Court. And two million times, the ISAPRE have played the fool: as the rulings formally apply to one claimant alone, they continue to apply the illegal increases to the rest of their affiliates.”

Pushing the limits of what is possible

It seems that the time has come to push the limits of what is possible. All state and governmental actors are pointing out that the existing laws have not allowed means to avoid the current situation, that is, the risk of bankruptcy of the ISAPRE. In 2005, a timid attempt was made to make a transformation, but it was quickly forgotten and the improvements had to be financed in the most regressive way that exists: with a VAT increase.

The current situation is the result of the power of actors opposed to better health regulations, of the industry itself, and of the political right-wing. What the ISAPRE is going through is neither more nor less than the product of insurers’ own short-sighted and greedy behavior, which was opposed to installing the principle of solidarity in health in Chile, and to seek mechanisms to make their beneficiaries healthier and less sick. This includes the strengthening of primary health care: massive prevention programs, promotion of individual and collective healthy behaviors, and other such means.

Now, there is a need for fundamental transformation and the creation of a Single Solidarity Fund. Such a transformation must be introduced progressively, slowly but surely, in order for Chile to stop being a country that does not even reach the World Health Organization goal of having a public expenditure on health equivalent to 6 percent of GDP, a country with the highest levels of out-of-pocket spending in the region.

What the Boric administration is proposing is nothing very original, let alone ‘socialist.’  In Germany—which we can hardly call socialist—the social insurance system has a single central fund that gathers all the financing and the prices of benefits are established at the national level through public agencies, effectively creating a single-payer system. Furthermore, contrary to what the voices interested in saving the industry are claiming, FONASA is prepared to manage the great challenge of transforming the system that the whole country, not only ISAPRE beneficiaries, needs.

Such a solution does not involve the creation of a new group inside FONASA, as this would increase the inequity in the public system itself, nor the creation of a general or universal plan in the ISAPRE. The solution that Chile needs is a Single Solidarity Fund that pools the contributions of all Chileans, for the benefit of all. Social injustice must finally be left behind.

Mario Parada Lezcano is a specialist of public health and PHD in Sociology. He is a professor at the School of Medicine of the University of Valparaíso – Chile and a member of ALAMES Chile.

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