Understand the Health Plan Monthly Fee Adjustments

Understand the Monthly Fee Adjustments for Health Plans

First, health plan premiums are adjusted annually. This adjustment aims to maintain the provision of contracted services. This is necessary because the costs of medical and hospital procedures fluctuate.

Therefore, if the adjustment did not happen, it would be impossible for operators to keep services available to their customers.

So, to help you better understand how this process works, we'll explain everything about the adjustments for each plan type.

How do adjustments work?

The body that regulates this process is the National Supplementary Health Agency (ANS) and it is important that you know that there are two possible types of monthly fee increases: annual adjustment and adjustment based on the beneficiary's age range.

But there are some rules for this to happen and they will differ according to:

• Plan contracting date: before or after the law regulating the sector comes into effect
• Type of coverage: medical-hospital or exclusively dental
• Type of contract: individual/family or collective plans (corporate or membership)
• Portfolio size: group plans with fewer than 30 beneficiaries or group plans with 30 or more beneficiaries

Therefore, we separate how adjustments occur for each plan type.

Annual adjustment of individual or family plans

The ANS determines the maximum annual adjustment percentage for individual or family plans contracted after January 1, 1999, or adapted to Law No. 9,656/98.

Therefore, it is important that you know when the contract was made to ensure that the adjustment is being applied starting this month – it can never be before.

Also, be aware that only carriers authorized by the ANS can adjust monthly contract fees. So, check the ANS website to see if your carrier is part of this group.

Calculation Methodology

The calculation methodology is based on studies and research carried out over several years, and is based on the variation in medical expenses recorded in the operators' financial statements and an inflation index, bringing greater transparency and predictability to the adjustment index.

The calculation combines two indexes, which are:

• Healthcare Expense Value Index (IVDA): This index has a weight of 80% and reflects the variation in expenses for healthcare beneficiaries. It also includes the Variation in Healthcare Expenses (VDA), the Efficiency Gains Factor (FGE), and the Variation in Revenue by Age Group (VFE).
• Broad Consumer Price Index (IPCA): Has a weight of 20% and applies to costs of other nature, such as administrative expenses.

Formula components

Thus, the components of the formula for the adjustment are:

• Variation in Healthcare Expenses (VDA) of individual/family medical-hospital plans contracted from January 1, 1999 or adapted to Law 9,656/98 and represents the variation in medical healthcare expenses per beneficiary from one year to the following year.
• Efficiency Gains Factor (FGE), which establishes the transfer of an average efficiency index from health plan operators to beneficiaries.
• Variation in Assistance Expenses (VFE), which deducts the portion of the variation in expenses already recomposed by adjustments due to changes in age group.
• Broad Consumer Price Index (IPCA), index for adjusting the portion relating to expenses not related to healthcare, such as administrative expenses.

Understand the calculation

The formula for calculation is:

After calculating the VDA for each operator's new individual/family plans, a single VDA is calculated for the market, using the weighted average based on the number of beneficiaries for each operator.

The Efficiency Gains Factor (EGF) is deducted from the VDA, a component that prevents the adjustment from representing a mere pass-through of past cost variations. Another deduction from the VDA is the VFE, which deducts the portion of the expense variation already compensated for by adjustments due to age group changes.

Where to find the data that makes up the formula

All data used for the calculation is public and available for consultation.

• VDA and FGE

Healthcare expenses;

Average number of beneficiaries for calculating VDA

• VFE

Average number of beneficiaries for calculating VFE;

Statistics on adjustments by age group change

• IPCA

Monthly variations and weights of IPCA groups

Furthermore, ANS annually makes available the documents that support the results.

Price adjustments for old health plans

However, if your plan was contracted before January 1, 1999 or is not adapted to Law No. 9,656/98, which regulated the health plan sector, the adjustment follows the rules that were established in each contract.

There are also those in which the clauses are silent regarding the criteria for determining and demonstrating the variations considered in calculating the adjustment.

In these cases, the applied index is limited to that determined by the ANS and cannot exceed the maximum percentage authorized for new or adapted individual/family health plans. However, ANS authorization is not required.

Furthermore, there are operators that have signed a Commitment Agreement with ANS to establish the method for calculating the readjustment percentage to be applied to contracts signed before January 1, 1999, and not adapted to Law No. 9,656/98. Thus, the authorized percentages for the annual readjustment due to cost variations are differentiated by operator type and are available on the ANS website.

Annual adjustment of collective plans

Whether corporate or membership-based, group health plans are those purchased by legal entities. Thus, the contracting party can be the company offering the plan as a benefit, an individual entrepreneur, or professional, trade, or sectoral entities.

However, the adjustment will differ depending on the number of beneficiaries in the plans. Therefore, the rules for applying the annual adjustment percentage to group plans work as follows:

Less than 30 beneficiaries

A measure called Contract Grouping is applied, in which operators bring together all their collective contracts with fewer than 30 beneficiaries into a single group to apply the same adjustment percentage.

Here, the objective is to dilute the risk of these contracts so that when the index is calculated, there will be greater balance due to the greater number of beneficiaries.

However, there are some exceptions, meaning that the contract is not part of the Contract Grouping:

• Contracts signed before January 1, 1999 and not adapted to Law No. 9,656/1998;
• Exclusively dental plan contracts;
• Exclusive plan contracts for former employees who were dismissed or released without just cause or retired;
• Plan contracts with post-established price formation;
• Contracts signed before January 1, 2013 and not amended to include the rules introduced by RN No. 309/2012, at the option of the contracting legal entity.

30 or more beneficiaries

For companies with contracts with 30 or more beneficiaries, adjustments are determined through negotiations with the health plan provider. Therefore, the adjustment percentage may be higher than the maximum limit established by the ANS.

However, the operator must justify the proposed percentage, and the calculations must be freely available to the contracting legal entity, making them available at least 30 days before the adjustment. Thus, with the company's active participation, through access to its beneficiaries' income and expense information, it can secure better terms.

Furthermore, it is necessary that:

• The percentage applied must be stated on the payment slip and invoice;
• After the adjustment, consumers can formally request the calculation and methodology of the adjustment from the benefits administrator or operator, who will have a maximum period of 10 days to deliver it;
• The negotiated percentages must be reported by the operators to the ANS every quarter.

Annual adjustment of exclusively dental plans

Now, when it comes to dental plans, regardless of whether they are individual or family, corporate collective or membership-based, the annual adjustment percentage must be clearly stated in the contracts and its application must be made in the contract's anniversary month.

However, if the clauses are not clear or are not present in the contract, the operator must offer the holder an addendum, which will include a forecast of the price index that will come into effect as the annual adjustment criterion.

Adjustment due to change in age group

As the name suggests, the age-related adjustment occurs as the beneficiary ages. This is because, generally speaking, the risk of developing diseases or having an accident increases with age.

Therefore, the health plan contract must include a clause that provides for a percentage increase for each change in age range, although the ranges may vary depending on the date of contracting.

However, it can only be applied in authorized lanes.

The application rules are valid for individual or family plans and corporate or membership collective plans and are in the following table: