Reformed Venezuelan Insurance Law to Combat Health Insurance Abuses

Some Venezuelan insurance companies are resisting Venezuela’s reformed Insurance Activity Law, which attempts to address social exclusion in private health insurance, better protect the rights of insurance benefiters, and obliges companies to cover pre-existing conditions, among other things.


Merida, September 1st, 2010 ( – Some Venezuelan insurance companies are resisting Venezuela’s reformed Insurance Activity Law, which attempts to address social exclusion in private health insurance, better protect the rights of insurance benefiters, and obliges companies to cover pre-existing conditions, among other things.

The National Assembly passed the law on 25 May this year, and it became applicable at the end of July. The law now applies to companies supplying prepaid medicine and to insurance cooperatives, and signifies that insurance companies are now subject to greater regulation by the state.

One key change is article 40, which requires emergency cases in private clinics be treated straight away, rather than waiting for authorisation by the insurance company.

“This article establishes some social justice, because no one can understand how a third person, without any medical training, can decide if a patient arriving at an emergency clinic, is treated or not,” said legislator Tirso Silva.

Pre-existing or acquired illnesses, such as congenital defects, must now be included in hospital, surgery and maternity insurance contracts.

This means, “patients with cleft lip or cleft palate, or morbid obesity, for example, could receive surgery without it being considered aesthetic,” Silva explained.

Before, it was very difficult for patients to claim their insurance, with many companies applying a “contractual limbo” in order to not have to explain why they were rejecting the request. Now the law states they must provide facts and legal reasons as to why they have rejected the request.

“When you go to the barrios, you realise that people don’t have any insurance. Even though they can count on the [health] Mission Barrio Adentro and the Integral Diagnostic Centres, only people who work in the formal economy enjoy insurance,” said Tomas Sanchez, the new president of Previsora Insurance, a recently nationalised insurance company.

Hipolito Garcia, president of the Venezuelan Society of Hospitals and Clinics, said that 12 million people out of Venezuela’s 28 million are currently covered by some kind of private health insurance.

Article 134 establishes the obligation of insurance companies to provide plans for retired people, pensions, the elderly, people with disabilities and for people with physical or mental illnesses.

Also, it is now obligatory to provide insurance coverage to those who earn less than 25 tax units per month; currently Bs 1,625 (US$ 377). “The aim of this coverage, known as the health solidarity plan, is to guarantee patients with chronic illness such as cancer, continued medical assistance,” Silva said.

Through article 13, those who feel that their rights have been violated can go to their communal council, which is then obligated to investigate and refer the complaint to the Superintendency of Insurance Activity

Finally, article 31 authorises state owned companies to function like insurance companies, in order to be able to provide medical protection to their employees and their families.

Since the law took effect on 29 July when it was published in the official gazette, some businesses have objected. The Chamber of Insurers of Venezuela (CAV) complained that emergency cases have “never been denied”, despite AVN reporting many accusations to the contrary by patients and their families.

The regional newspaper Nueva Prensa reported that many companies, especially in the centre of Venezuela were “reluctant” to comply with the reformed law.

An unnamed “expert” told Nueva Prensa that there was an unconstitutional aspect to the law, in that the Superintendency of Insurance Activity now has access to companies’ information systems. The Superintendency of Insurance Activity is the body that monitors insurance companies, and can apply substantial fines if the companies don’t comply with the law.

Also, two weeks ago the National Assembly announced that it would conduct a study of the real costs of private health care clinics. Legislator German Ferrer said the assembly considered the increased tariff rates, some of which were increased in response to the law, were an “exaggeration”.

Last month the government forcefully expropriated the insurance company La Previsora.  The company was linked to three banks that were nationalised at the end of last year for violating banking regulations. La Previsora was also generating losses, fraud, and was two months behind on its payments for contracts with public institutions.

La Previsora is now run by the government and forms part of the new National Socialist Network of Insurance and Mixed Social Assistance.

In response to the situation with La Previsora, the reformed law also prohibits financial links between insurance and banking sectors. Banks can not now oblige their clients to take out insurance with a connected company or sell policies through bank tellers.

The change is also in response to the 1994 financial crisis in Venezuela, when banks that had shares in insurance companies pulled down those companies and clients could not receive benefits.

Responding to the inaccessibility of insurance for poorer sectors, Sanchez said that now La Previsora Insurance, as a state company, would offer “solidarity” policies for the excluded sectors of society, including organised sectors such as the communal councils.

Sanchez also said in the long term, the system of insurance should be absorbed by the national health system, but in the meantime, “in the period of transition, we’re going to provide the service through companies and through these solidarity policies.”

Regarding the future of health in Venezuela, “There’ll be a growth in the socialist mentality of the [government trained] doctors, who are starting to graduate and who guarantee that medicine won’t continue to be a business, something for profit,” Sanchez concluded.