ILO for Essalud: 7 scenarios it proposes for social health insurance

International Labor Organization (ILO) performed an actuarial financial study – EsSalud 2021, updated for the years 2022 and 2023. This document seeks to give social health insurance elements for making strategic decisions that allow it to be strengthened in terms of sustainability, coverage and quality of services provided. Furthermore, based on the basic scenario, the ILO evaluated and issued recommendations for seven scenarios that correspond to possible institutional political decisions that could be taken to improve the financial situation of social insurance. What does Essalud have on the table?

The necessary changes for Essalud arise in a challenging scenario, which the ILO itself summarizes in three points: the labor market (informal and with high variability in the amount of remuneration), the social environment (increasing poverty) and demographic aspects (increasing poverty). population and declining fertility and mortality)

Actuarial Financial Study – EsSalud 2021, updated for 2022 and 2023. Source: ILO – Essalud.

In 2021, Essalud registered 7 million members and 11.7 million insured. In addition, the coverage rate reached 35.6% and an estimated 1 in 3 Peruvians use social health insurance. By 2032, the numbers will not stop increasing: 9.1 million holders and 15.3 million insured are expected, the annual growth rate of EsSalud holders will be higher than the growth of the labor force, and the insured group that will grow the most will be those over 65 years old.

Coverage by type of insurance. Regular insurance (retarded growth), Agricultural insurance (Dynamic growth: lower contribution rates create perverse incentives that take advantage of invulnerable companies and people), Potestative insurance (declining membership: its commercial nature forces it to compete with other options in the market; its voluntary membership leads to the joining of those who are more likely to use medical services), the ILO report states.

The ILO analysis also assesses Essalud’s financial situation. Among other things, it is emphasized that the deficit that will appear from 2023 is due to an increase in medical and economic benefits, a decrease in other income and an increase in spending from this year on infrastructure. With that, in the short and medium term, the fragile financial situation of the basic scenario is observed (see graph).

Actuarial Financial Study – EsSalud 2021, updated for 2022 and 2023. Source: ILO – Essalud.

For all these indicators, seven scenarios with recommendations are proposed with the task of strengthening insurance in terms of sustainability, coverage and service quality.

Stages

In scenario 1 contribution standardization is proposed (Administrative conclusion of service contracts, Ministry of Health and Ministry of Education) and the restoration of contributions to premiums and tips The study proposes five sub-scenarios. The summary details the impact of using two of them.

For example, the ILO report states that the impact of removing the contribution caps for CAS, Mineda and Minsa would generate 7% more annual income for Essalud. And the impact of resuming Social Health Insurance contributions on bonuses and tips for public holidays and Christmas would mean a 14.3% increase in annual income.

In scenario 2 is considered to be determining the minimum contribution base for all pensioners and stopping the provisional transfers of the Pension Normalization Office (ONP). In this case, five sub-scenarios are established.

In the sub-scenario, a minimum pension of 500 S/500 is considered as the minimum assessment basis for pensioners. This would affect Essalud’s 0.4% higher annual income.

In addition, the impact of removing the transfer of liabilities from EsSalud to ONP would represent a 2.3% cost reduction for Essalud.

Conversely, applying 4.5% of the minimum pension value of S500/500 for those who choose to withdraw 95.5% of their Individual Capitalization Account (CIC) would represent an annual loss of ordinary income of 3.8%.

An increase in proportional pensions from S250 and S350/350 to a minimum pension of S500/500 for contributory purposes would result in an annual loss of ordinary income of 0.01%.

“The impact of all these sub-scenarios at the same time is a 7% higher annual income of EsSalud”the report states.

In scenario 3 An evaluation of the impact of the loan on the part of healthcare entities is proposed (EPS). Three sub-scenarios are proposed that analyze the sensitivity of the regime to a change (30%, 40% and 50%) in the ratios of the premium transferred to EPS and the premium transferred to EsSalud (70%, 60% and 50%). %, respectively) for groups that are associated with one of these entities. Revenues are estimated to be reduced by up to 5.4%.

Scenario 4 considers an impact assessment Law No. 31041, medical emergency for early detection and comprehensive care of cancer in children and adolescents. This means an additional cost of 0.07% on average. “These additional costs do not significantly change the results compared to the baseline scenario”comments on the message.

Other scenarios evaluate the impact of the abolition of the rules for the accreditation of maternity benefits and the extension of the period of provision of economic maternity benefits; and the impact of increases in breastfeeding and burial subsidies.

Finally, last scenario, seven, puts on the table at least six measures that are applied simultaneously. These measures are:

1) Impact of contribution renewal on premiums and premiums (12 to 14 months contribution).

2) The impact of determining the minimum assessment base for all pensioners (private pension system and proportional pension) and stopping pension transfers to ONP.

3) The impact of the EPS credit, if we take into account the share of 30% of the premium transferred to EPS for the insured in this modality and 70% of the premium to EsSalud.

4) The effect of the application of Act No. 31041 on medical emergency for early detection and comprehensive care of cancer in children and adolescents.

5) The impact of the cancellation of the accreditation rules for cash assistance in maternity and the extension of the period of payment of the economic benefit in maternity.

6) The impact of increasing the subsidy on breastfeeding and burial, consider a 100% increase.

“This scenario represents a theoretical example of a comprehensive strategy that shows a set of measures improving the financial balance. A clear change in trend is evident, with a surplus observed during 2024 and 2025 compared to the baseline scenario and lower deficits for the remainder of the projection. Surpluses start at S/911 million in 2022, S/651 million in 2024 and S/57 million in 2025 and then build deficits to reach -S/957 million in 2032.refers to.

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