Free choice of health insurance is restricted for 650,00 people yearly - IDESA

Report Nº: 92112/08/2021

Free choice of health insurance is restricted for 650,00 people yearly

A new norm establishes that those who start a new job will have to contribute compulsorily to the health insurance of their activity during one year. This means that to maintain health insurance, pocket payments must be done. Another inefficiency in the health system and discouragement in the salaried jobs.     

Originally, in the national social security system, affiliation was compulsory according to the worker’s branch of economic activity. In 1993, the freedom to choose social security health insurance was sanctioned and became effective in 1996. With this option, the so-called “contribution derivation” was implemented. That is, the worker chooses a different health insurance from the one that would correspond according to the branch of activity and the chosen health insurance refers the contribution to a prepaid medicine company of the worker’s choice. Thanks to this mechanism, more than 2 million of the 6.5 million workers covered by the national social security health system currently pay their contributions to a prepaid medical insurance company.

In 1998, when the freedom of choice had just begun, it was stipulated that whoever started an employment relationship had to remain for one year in the health insurance that corresponded to him/her according to the branch of activity. This restriction was lifted in 2001. The main objective was to prevent people to transfer their contribution to a prepaid medical company during the first year in the job. The government’s decision now was to reinstate this restriction on free choice.

One way of measuring the number of people affected by this decision is by looking at the seniority in registered salaried employment. According to data from the Ministry of Labor and the INDEC household survey, it is observed that:

  • 60% of workers have seniority of more than 5 years in employment.
  • 30% of the workers have between 1 and 5 years of seniority in their jobs.
  • 10% –representing some 650,000 workers– have less than 1 year of seniority.

These data show that there is an influx of about 650 thousand people per year starting a new employment relationship. Some are new entrants to formal salaried employment, but most are workers who change jobs. With the new provision, they will no longer be affiliated to the health insurance they chose in their previous job, but to the health insurance of their activity. If the person made a “contribution derivation” to a prepaid medical insurance company, he/she will have to pay out of pocket the total premium during the first year in the new job to keep the coverage, since the salary contribution will be directed to the health insurance of the activity. The fact that an entity receives contributions without providing services is an involution detrimental to the workers and a waste of resources in the health system.

The provision will also be a source of complicated administrative problems. For example, the coverage of people with prolonged treatments or chronic conditions. Currently, the receiving health insurance can bill the original one for the medical services provided during the first 9 months. This rule applies in the event that the affiliate has made the choice. However, under the new regulations, the affiliate did not make the choice but was forced to migrate to the health insurance of activity. This contradiction will be a source of conflict.

The obligation to contribute during the first year to the health insurance company of activity adds another distortion to the health care financing system. Private medical companies were authorized only a 26% price increase from December 2019, when the general inflation was 71% and many of their costs increased above the average. Restricting free choice in the first year of the employment relationship adds another source of defunding since people will have to make a double health expenditure when they change jobs if they want to keep their prepaid medical company. The worst thing is that this greater effort on the part of families will not imply more resources for private medical providers.

On the other hand, since 2012 there has been no growth in registered jobs in private companies. It has been almost a decade that the only type of formal private employment that has increased is as self-employed in the simplified tax regime (Monotributo). Restricting free choice in the social security health insurance system adds incentives to disguise a salaried relationship under the figure of the Monotributo. In short, in order to benefit spuriously the unions (owner of the health insurances in the social security system), a regulation discouraging salaried jobs creation is imposed.


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