Loss ratio of the capitation payment unit of the health-promoting entities in Colombia between 2017 and 2021: a financial–actuarial approach

Introduction Colombia’s General System of Social Security in Health (GSSSH) was created by Law 100 of 1993 [1], and defines health insurance in article 14 of Law 1122 of 2007 as: (…) financial risk management, health risk management, articulation of services that guarantee effective access, quality assurance in the provision of health services and the representation of the member before the provider and other actors without prejudice to the autonomy of the user [2]. In Colombia, the companies in charge of these functions are called Health Benefit Plan Administration Entities, and, within these, the Health-Promoting Entities (HPEs) stand out. These are the companies in charge of assuming the risk transferred by the user, guaranteeing the fundamental right to health [3], complying with all the legal provisions of the respective insurance, and having as their ultimate goal the constant improvement of the health of the entire affiliated population.1 Currently, there are two main mechanisms for the financing of the GSSSH and the operation of the HPEs, one ex-ante2 and the other ex-post. The former refers to the Capitation Payment Unit (CPU), an insurance premium that is defined annually by the Ministry of Health and Social Protection on the basis of the age, sex, and region of residence of each affiliate to the HPE, through a pricing method called the loss ratio [4]. This monetary amount is the amount that the GSSSH resource administrator gives to each HPE to guarantee the provision of health services and technologies (HSTs) financed by the CPU to its entire pool of risks [5]—all GSSSH affiliates are entitled to the same set of HSTs, regardless of their HPE. The ex-post mechanism is a zero-sum adjustment according to the results of the HPE risk management for the following health conditions: chronic kidney disease, arterial hypertension, diabetes mellitus, HIV, and cancer. This is done by the High Cost Account, which is the entity responsible for the calculation and application of this resource redistribution mechanism [6].3 By 2022, the HST charged to the CPU represented more than 84% of the total expenditure in the GSSSH, approximately 62.4 billion Colombian pesos [7]. Likewise, it is important to highlight that 96.9% of health procedures and 93.7% of medicines approved and available for use in the country are currently fully financed with CPU resources [5]. Within the framework of social health insurance, if the CPU is conceived of as an insurance premium, its financial sufficiency is vital for the sustainability of the GSSSH in the short, medium, and long term (given the aging of the population, the increase in life expectancy, pharmacological innovations, the updating of health benefit plans, etc.). Therefore, each year the Ministry of Health and Social Protection must estimate a rate consistent with the future demand for HST that allows, in a supportive and comprehensive manner, the fundamental right to health of all affiliates to be guaranteed. According to article 23 of Law 1438 of 2011, an HPE’s administration expenses cannot exceed 8% or 10% of the CPU for subsidized4 (SS) or contributory5 (CS) schemes, respectively. Therefore, the loss ratio, actuarially conceptualized as the cost of the set of events that have already materialized and that are covered by the insurance, cannot be less than 92% in the SS and 90% in the CS [8]. Although having a claim rate close to or greater than 100% is not adequate for financial solvency, neither is having a very low claim rate, since health insurers must invest part of their premium in the promotion of the health and prevention of illness of their members, as well as improving the efficiency and quality of care [9]. This investment fosters a positive result from two perspectives: (i) the maintenance of the health of the population of interest, and (ii) the reduction of future avoidable health conditions, especially in the medium and long term. In recent decades at the international level, the calculation methodology and the regulatory aspects of health loss ratios for insurers have been a topic of priority interest in public supervision policy [10, 11]. The region with the greatest scientific production in this regard is North America [9, 12–16], although work has also been done for European [17], Asian [18, 19], and African [20] nations. In countries like the United States, Israel, the Netherlands, Vietnam, South Africa, Germany, Denmark, and Spain, among others, the medical loss ratio is between 49% and 92%. These values represent a wide range, since most of the health insurance in these countries is private, differing from the conceptual framework for the CPU in Colombia of social insurance. 1 The results obtained in this research are the sole responsibility of the authors and not of the institutions with which they are linked. 2 There is another ex-ante mechanism called maximum budgets, through which health services and technologies not covered by the CPU are financed. However, in terms of health expenses for 2022, these represented less than 5% of the total GSSSH. 3 The transfers received by the High Cost Account from the HPEs originate in the CPU, and the HPEs that benefit from these resources reco