Top Insurer to Leave Colombia’s Public System Amid Petro Squeeze

(Bloomberg) -- One of Colombia’s biggest health insurers will gradually cease operations in the country’s public system to avoid further deterioration in its finances.  

Grupo de Inversiones Suramericana SA’s public insurance unit, which is known as EPS Sura and serves more than 5 million people, announced its decision in a statement Tuesday, noting it still requires approval from Colombia’s health watchdog. The company will continue to serve clients in the private system. 

The insurer posted $94 million in net losses in 2023 and forecasts that could increase to $130 million this year, which wouldn’t make it viable under current conditions. “Although health is a fundamental right and what has been done constitutes a great social achievement for the country, unlimited coverage and services contrast with an insufficient budget,” EPS Sura said. 

President Gustavo Petro’s government moved last month to take over another big player, EPS Sanitas, after the unit of health group Keralty SAS failed to meet financial reserve requirements. Experts warned at the time that the state’s intervention set a dangerous precedent.

Juana Francisca Llano, chief executive officer of Suramericana SA, said at a press conference that EPS Sura was in danger of meeting a similar fate given its financial metrics.

The decision to leave the public system doesn’t risk Suramericana’s solvency or liquidity given EPS Sura doesn’t generate dividends or cash flow for the company, it said.

Preferred shares in Grupo Sura fell as much as 3.1% in Bogota trading before paring some of the losses. 

With his push to transform Colombia’s conservative economic model facing increasing resistance, Petro has turned to direct intervention in private industry. The leftist president wants to see the government play a bigger role in an array of sectors, but in April lawmakers shelved his health care bill. 

The health insurers, known as entidades promotoras de salud, had warned that delays in payments and insufficient government transfers had put their financial viability at risk. 

Ana Maria Vesga, who leads the industry group that represents private health insurer, said damage to the nation’s health system is “irreversible.”

“We are witnessing the destruction of the country’s greatest social advance in its entire history,” Vesga said in a post on her X account.  

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