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Why is the model of pre-paid health care so successful in Ecuador?

Ecuador is a country with a population of 13 million people. Although we are not an official insurance company, we call ourselves a private health insurance company because we follow a similar business model. No more than 700,000 people are insured in the country, which is a very low percentage. From that point of view, pre-paid health care has not been extremely successful, but it has been very good for our company. Currently, we have a 40% market share, and we continue to develop several other segments of the market.

What are the company’s competitive advantages against regular insurance companies?

There are similarities and differences. Our 40% market share is a result of our experience in the business; we have been in the market for 18 years, and Salud S.A. was born as a health insurance company. In the 1990s, health insurance companies only offered coverage to corporates, and our clients were companies that needed coverage for their employees. Now, we have developed a new branch of business for individuals. Even though we provide services to a large network, we give the customers the freedom to choose whatever doctor, hospital, or laboratory they wish. We offer advice, but they make their own choices.

Salud S.A. also has medical centers and doctors. How have you developed this?

We discovered that the provider business was very interesting, and that it would be profitable for us to have our own clinical centers available to customers. Sauld S.A. launched its first clinic in Quito eight years ago, and now has 10 centers. We direct about 50% of customers using ambulatory services to these centers, and when we give customers options, many choose us. In our network, there is more control in terms of medicines and examinations. In Ecuador, some doctors prescribe to patients using too many tests that are not necessary to explain symptoms such as a simple headache. Our strategy was to target the middle of the spectrum, and we answer to the needs of customers belonging to lower socio-economic levels. We have insured 300,000 people so far.

How large is your network and how is it expanding?

We have about 1,000 doctors in the country, but our network is not growing very much annually. There is certainly room for growth, which is good for the businesses in the sector. We do not seek to attract new providers and doctors to the network because there is simply not enough demand. Therefore, we are very selective and are even considering reducing the network. Approximately 80% of the patients are seen by 400 of our doctors. It our job to manage this issue.

Do you provide services countrywide?

Our clients can seek healthcare services from any location in Ecuador, and they also receive reimbursements if they are treated overseas. For example, if a patient receives medical attention in the US and the consultation fee is $300, our plan will reimburse the patient for $50. We also offer products that cover everything. In terms of income, 70% of our business comes from individuals, and 30% is sourced from companies.

How do you evaluate the evolution of the market over the past few years?

The most significant element is the Social Security Institute (IESS). Three or four years ago, people were very upset about the poor social security coverage, which opened up opportunities for us. Social security was so unsatisfactory that people began to seek private health insurance. Over time, this shifted to opportunities in hospitalization coverage, and now we are developing products that address this segment of the business. Four years ago, IESS required patients to receive treatment at specific centers, but now coverage has expanded to almost any hospital in the country. The middle and upper classes do not view IESS as an alternative to private insurance, so Salud S.A. has not lost any clients. However, in the future some individuals or companies might question how necessary it is to have private insurance, when by law the IESS provides fairly good coverage. In any case, the private sector is growing, registering a 6% increase sector wide. Our business grew by 10%, and we are seeing new hospitals and investments.

Since your model has been successful in Ecuador, do you plan to export it?

We have been analyzing businesses in different countries, and began investing in Costa Rica two years ago. However, we were tackling highly regulated and complicated markets. The investments required were too large and the returns were too small. Salud S.A. also focused efforts on Houston. We attempted to sell our model to the Hispanic community, but due to the disproportionate amount of illegal immigrants, it was nearly impossible. We have recently made the decision to launch operations in Peru, and will be opening our business geared toward the lower socio-economic segment. Our first product will cost roughly $3 per person. Through a joint venture with an Ecuadorean bank, we will test our model in Peru.