Colombia Intervenes in Major Health Insurers Amid Crisis

Only 24 hours after announcing the public intervention of Sanitas, the second largest private health company (EPS) in Colombia, the state has decided to intervene in Nueva EPS, the leading health insurer in the country with eleven million affiliates.

The context is one of crisis in the health sector, amid the debate to defeat the reform project presented by the government and the accusations of the EPSs, which denounce the state’s non-compliance with its financial obligations to them. It is worth remembering that in Colombia, health spending is essentially the responsibility of the State, which sends significant economic remittances to private companies, which, as intermediaries, manage the payment to the entities that finally attend to patients, in hospitals or primary care centers.

With this week’s two intervention measures, the government takes over the direct management of the 16.7 million users who belong to the two main companies in the country. Of these, 9.11 million are members of the contributory regime, making a monthly payment directly to the companies, while 7.63 million are members of the subsidized regime, i.e., belonging to social segments without the capacity to pay and which were already managed by the State.

Particularities of Nueva EPS

Nueva EPS is not a normal insurance company. In addition to being by far the largest by volume of users, Nueva EPS is a mixed-systems company, owned by the state and a private manager. Of its almost 11 million users, 4.7 million are affiliated to the contributory scheme and 6.1 million belong to the state-subsidized scheme.

Born in 2008 from the former Social Security, a public entity that exclusively managed the health sector until 1993, when the current system was set up by private companies, Nueva EPS was to be the main beneficiary of the project, which now failed, which the government was processing in Congress, in favor of an eminently public management.

The future of the two companies that have been intervened in today is uncertain. At present, there are only 18 private health companies left with autonomous operations. In the past, the intervention was the first step towards dissolution, but the significant volume of users of the two EPSs now in the hands of the state makes such a decisive step difficult, at least in the immediate future.

The reality, at this moment, is that Nueva EPS closed 2023 with losses of more than 411,000 million pesos. As in the case of Sanitas, the government blames this situation on the alleged mismanagement of the company, but the company defends itself by pointing to the Ministry of Health, which it accuses of not transferring on time and in sufficient quantity the necessary economic resources to be able to continue operating and balance the books.

In 2021, the EPS had revenues of $12.32 billion and in 2022, it grew even more, with revenues of $14.7 billion, more than 90% of which came from public transfers.

Social unrest

Despite the government’s repeated calls for calm, social unrest is evident among the population. A few days ago, Nueva EPS changed its president, with the appointment of Aldo Cadena, a person very close to President Gustavo Petro, as its head. Cadena had been the Secretary of Health of Bogota, during the mayoralty of the current president of Colombia, ten years ago.

The public intervention measure is ordered for one year and is based “on the non-compliance with the financial requirements for authorization and other factors analyzed in the special measures committee” developed by the state, as reported by the Ministry of Health.

The most worrying aspect of the situation, according to health management experts, is that in Colombia, other companies, like Sanitas and Nueva EPS, are in a financial situation that would justify their intervention by the state.

The Ministry of Health has repeated its message of reassurance from April 2, when the first EPS was intervened in. “17 million Colombians can have peace of mind because they will continue to be provided with health services; these interventions that are being carried out are for prevention, to avoid future damages that may occur,” said the minister.

Political controversy

As was to be expected, the announcement of the intervention of these two private health companies has generated enormous political controversy in the country. The opposition, just on the day it managed to defeat the government’s proposal for reform of the sector, has described the decision to intervene in both EPS as a “reprisal”.

This was stated by the senator of this right-wing party, Miguel Uribe, who went so far as to compare the ways of the Colombian government “to the style of Maduro”. The senator warned that “this is the beginning of the end of health and democracy.”

For his part, President Petro has justified the actions against the EPS, assuring that they were necessary to guarantee the survival of these entities. In a confrontation on social networks, Petro replied to former minister Alejandro Gaviria, who called the measure “improvised.” The president replied that “all the intervention processes that you made (about interventions of past conservative governments) failed you liquidated companies to make EPSs bigger and bigger, and they remained in the hands of politicians where tens of billions of pesos have been lost”.

These statements would seem to confirm that the government’s intention is not to end up liquidating the two now intervened entities, but to guarantee their viability, thanks to a different management. This, together with a future broad and consensual reform of the whole sector, will be the biggest challenge for the government since the current situation calls for forceful actions to guarantee the sustainability of the Colombian health system.