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UnitedHealth Group executives look at Latin America and see the U.S. healthcare market of the early 1990s before private health insurers were involved much at all in the management of Americans’ government subsidized health benefits.
Private insurers like UnitedHealth, Aetna, Humana, Cigna and others began to take a far greater role following the Balanced Budget Act of 1997, which slowed the growth of Medicare spending amid a booming population of aging baby boomers. The budget law and the subsequent move away from fee-for-service Medicare set the stage for what today are known as private Medicare Advantage plans, which contract with the federal government to provide benefits to seniors. By 2003, the Medicare Modernization Act opened the door to Medicare Part D drug benefits admitted by private insurers. More states in the last 20 years have also turned to private administration of Medicaid benefits for poor Americans.
UnitedHealth executives see history repeating itself in South America.
“The growth opportunities apparent in these South American markets are reminiscent of the opportunities in healthcare markets in the US two decades ago, when consumers and benefits sponsors were seeking better managed benefits and access at lower cost, Medicare advantage plans and managed Medicaid were nascent and Part D did not exist,” UnitedHealthcare CEO Steve Nelson told analysts during UnitedHealth Group’s fourth quarter earnings call last week. “We expect opportunities for growth in these markets to advance as we have in the past two decades or more in the US.”
UnitedHealth is banking on emerging markets in Latin American, opening the door to a potential bonanza of business for an insurance company that for the first time last year eclipsed $200 billion in annual revenues.
The Latin American push fits in the global category of the four growth areas UniteHealth is targeting. Aside from global, the other four areas are: healthcare delivery, pharmacy care services, “consumer centric benefits,” and digital healthcare, executives said.
Already, UnitedHealth operates Amil, which is Brazil’s largest healthcare company, serving more than 4 million people . Amil offers both health insurance and medical care services. UnitedHealth Group bought Amil in 2012.
And last year, UnitedHealth disclosed a tender offer of $2.8 billion for Chile-based Empresas Banmédica , which provides healthcare service and insurance to 2.1 million people in Chile, Columbia and Peru. Banmedica operates 13 hospitals with 1,900 beds and 143 medical centers, executives said.
“We’ve long indicated that we have an interest in measured investments in global and Banmédica allowed us to get into three additional South American markets, we have been studying those markets for about five years and that allowed us to advance our position there,” UnitedHealth Group CEO Dave Wichmann said.
Banmedica’s businesses are akin to UnitedHealth Group’s U.S. offerings in insurance with UnitedHealthcare and in medical care delivery through its fast-growing Optum unit. “They’re a market leader across Chile, Colombia and Peru in both healthcare benefits and medical delivery and they have a really strong local management team with a proven track record in delivering very consistent high-margin growth across both lines of their business and across all three of those countries.” Molly Joseph, UnitedHealth’s executive vice president of global business told analysts during the earnings call.
“Similar to Brazil, we see a opportunity to create value by combining that strong local team and that strong platform with our enterprise capabilities, again, across clinical, technology, and data and analytics,” Joseph added. “Collectively, these countries have a population roughly equal to that of the U.S., but perhaps more growth opportunity in these emerging private healthcare markets, as well as a broader, longer-term opportunity to serve the systems more holistically by also serving public markets. So, we think we’re really well positioned for value creation over the long horizon and we are focused on bringing value to those markets.”
