By Norberto Montani Martins, Carlos Ocké-Reis and Daniel Drach

The covid-19 pandemic is showing how important universal health systems are. As the virus continues to devastate communities and economies, many governments have started to look at them with different lens. Investing in public health systems should be mandatory, but austerity policies in peripheral countries are still the priority. Moreover, the increasing financialisation of the health sector produces conflicts that constraint the achievement of a truly universal and comprehensive public healthcare. This is what we address in our recent paper, where we argue that lead firms in the provision of healthcare plans seem to have become platforms for the accumulation of wealth by financial investors, a process that is making shareholder value the main guiding principle of firm behaviour.

A good example of such contradictions is Brazil. A universal health system called the Unified Health System (Sistema Único de Saúde, or SUS) was established in the 1988 Constitution. However, it would be misleading to affirm it has provided universal access and comprehensive care: since its inception, SUS faced an inadequate low level of public spending that jeopardized its mission. In the 2000s, the Brazilian government eventually increased public spending in healthcare, but a kind of paradox emerged as it also set up many policies to foster private healthcare and private accumulation in that sector (e.g., health-related tax expenditures).

The idea of a takeover of social policy by financialisation in this period helps to understand this paradox. Financialisation in such a context can be characterized, among other things, by the “unchecked advance of the commodification of health services, care and education in particular, via private provision which grew out of the vacuum left over by public provision”.

Further, the state’s decision to provide a platform for private accumulation can only be understood in the context of the growing influence of financial actors, institutions and, markets on social and fiscal policies. Such influence not only shape the way governments act but also changes the ways modern corporations behave, with the emergence of shareholder value as the most relevant guideline for corporate behaviour.

In this sense, it is the interplay between two dimensions that characterises modern financialisation. That is, in Brazil, the state paves the way for private accumulation, while private firms align themselves to the needs of financial markets and actors, and, as a result, there is an amalgam of interests to provide new opportunities for capital accumulation.

With this background in mind, our paper explores how financialisation has affected the organisation and behaviour of private health insurance plans involved in the financing of the provision of healthcare in Brazil (third-party payer). This task is relevant because it would allow us to understand if the process described above is indeed a process of healthcare financialisation or just a process of privatization of public services de-linked of financial motives.

Private Health Insurance Behaviour: Financialization or Simply Privatization?

The first task is to understand how financialisation could affect the behaviour of private health insurance firms. The existing literature on financialization highlights a few stylized facts in firm behaviour: an increased share of financial assets in the firm’s portfolios and an increasing share of financial revenues on total revenues; an increasing indebtedness; and a redefinition of corporate governance in shareholder value contours, with an increasing orientation towards capital markets and the adoption of practices such as equity buybacks. One limitation of this literature is that it is mainly focused on firms in the Global North, especially US firms, but we assume that such stylized facts may hold when analysing peripheral economies.

Now, the key question is: can we observe those trends in the behaviour of private health plans and insurance in Brazil? We devote our attention to the firms that are leaders in the provision of healthcare insurance plans in Brazil. Such firms have been well-known for their political influence in the healthcare arena, such as price formation in the marketplace. We could have focused on hospitals, diagnostic support services or elsewhere, but choose such firms due to the comprehensive and consistent information provided by Brazil’s National Agency of Supplementary Health (ANS). It is worth saying that the main goal of the ANS is to promote competition and consumer protection, seeking to restructure the market to reduce oligopolistic practices and elimination of economic abuses.

Eight leader firms were selected: Amil, Bradesco Saúde, Hapvida, Notre Dame Intermédica, Qualicorp, Sulamérica, Unimed-BH and Unimed Central Nacional. Together they provide 34.4% of healthcare plans in Brazil – 19.2 million users – and represent 43% of the total assets of firms involved in the provision of healthcare plans. Conceptually, in our point of view, the leader firms are the ones that can influence the configuration and dynamics of the market, seeking extraordinary profits and dictating organizational and operational standards in that environment.

We gathered information on the eight firms’ financial statements and balance sheets from 2007 to 2019 in the ANS database and developed indicators on (i) the weight of financial assets and revenues on total assets and revenues respectively; (ii) the weight of indebtedness and leverage on total obligations; and (iii) stocks issuances, capital concentration and share buybacks.

Our analysis shows a small increase in the share of financial assets in those firms’ portfolios over more than a decade and a very small weight of financial revenues on total revenues, with no clear trend. Regarding indebtedness, a process of de-leveraging is going on and we cannot say whether such firms became more dependent on the moods of banks or lenders or not. In this context, one might be asking: Was there a decrease in the financialisation of such firms?

We show that this is not the case because we can see clearly their increasing reliance on stock markets and the reorientation of their corporate governance practices to shareholder value. It seems that leader firms engaged in a long journey accumulating profits and doing mergers and acquisitions to achieve the size needed to access capital markets in Brazil.

Many of them opened capital in the Brazilian stock exchange, B3, during this period and made deep adjustments in corporate governance standards towards shareholder-value-oriented practices. Anecdotal evidence of this process is the announcement of share buyback programs by Notre Dame and Hapvida in 2020 during the covid-19 pandemic as we can observe recently in newspapers’ headlines – while lobbying against expenditures with testing of their clients before ANS, they were ‘investing’ in delivering profits for their shareholders.

Patterns of Financialization in the Global South

Based on the findings above, we can conclude that when the Brazilian government paved the way for the expansion in the provision of private health care, such leader firms probably became platforms for the accumulation of wealth by financial investors. Our results are preliminary, but we believe they illuminated relevant issues for future research on financialisation and on financialisation of health.

First, we believe we need to concentrate research efforts in understanding the process of capital concentration – merger and acquisitions – as well as in the fundamental role which has been performed by the financial capital in the organisation of the healthcare sector.

Second, we need to keep track of the indicators we developed in our research to check out if those firms can engage in new portfolio strategies in the future, with growing weight of financial assets, or in new financing patterns with a growing indebtedness, reproducing the general stylized facts registered in the literature (Is there a long way forward for financialisation in this sector?).

Finally, from our results, we started to question if firms in the Global South can engage in financialisation patterns that are different from the Global North. Of course, we need to replicate and refine our methodology to other groups of firms and sectors to accurately assess this possibility, but this can be a fruitful field for future research.

* The paper was written in Portuguese, but we are working in an English version for the second part of 2021.

Norberto Montani Martins is professor in the Institute of Economics at the Federal University of Rio de Janeiro.

Carlos Ocké-Reis is economist and researcher at Brazil’s Institute for Applied Economic Research (Ipea).

Daniel Drach was research assistant at Brazil’s Institute for Applied Economic Research (Ipea).

Photo: Pan American Health Organization.