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Insurance cancellation could be costly for MetLife. Insurance cancellation could be costly for MetLife.

New administration’s austerity plan will mean a big hit for Metlife

Government pays 6.5 billion pesos for three-year employee premiums

The incoming federal government’s plan to eliminate private medical insurance for employees will deal a heavy blow to global insurance company MetLife, reinsurance broking firm THB México predicted yesterday.

Around 695,000 federal employees are currently covered by three-year medical insurance policies, for which the government pays the Mexican subsidiary of the New York-based company a combined premium of 6.5 billion pesos (US $339.5 million).

MetLife acquired state-owned insurance company Hidalgo in 2002, which gave it a long-term contract with the government.

THB Méxics CEO Octavio Careaga told a press conference that the government’s contract with MetLife is the largest single insurance agreement in the country and that its cancellation would have a significant impact on the company.

Under the new scenario, MetLife and other insurers will compete to provide personal medical coverage to employees, he added.

“Damage due to the loss of the premiums has not yet been calculated because insurance companies are taking measures [to combat it] such as the creation of products that could give continuity to the coverage of medical expenses,” Careaga said.

“But half of [Metlife’s] premium could be lost, close to 3.25 billion pesos [US $169.2 million] in the first year although it’s not a certain fact because you have to consider salaries and [staff] cuts,” he added.

Cancelling government-paid private medical insurance policies for federal officials is one of several austerity measures president-elect Andrés Manuel López Obrador has said his government intends to adopt.

Large wage cuts for lawmakers and officials, a slashing of the bureaucracy, the cancelation of existing life insurance policies and the elimination of pensions for past presidents are among other cost-cutting measures on the agenda.

Careaga said insurance companies will look to lure government employees by offering individual medical insurance policies that maintain their accumulated benefits.

“What’s going to happen is that the federal government will cancel Policy II, as the [private medical insurance policy] was known and . . . federal government employees will have to purchase a personal policy if they don’t want to be attended to at ISSSTE [a clinic or hospital operated by the State Workers’ Social Security Institute],” he said.

“It’s going to be an opportunity for the rest of the insurance companies . . . to sell en masse a competitive product that [government] employees are interested in buying . . . A massive opportunity will open up for the sale of these [medical] insurance policies and they will no longer be concentrated with just one insurance company.”

However, Careaga said that in an optimistic scenario only half of all officials currently covered would buy personal medical insurance due to high long-term costs.

He explained that the government is currently paying less than 4,000 pesos (US $207) annually for an employee’s medical insurance, adding that while insurers could maintain that price for one year, they would have to raise premiums for their policies to be financially viable.

Source: El Financiero (sp)

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