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MANAGED CARE MAKES INROADS IN LATIN AMERICA

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Some of the world's largest employers with Mexico City operations have formed a consortium to try to help shepherd managed care into the country.

Their ranks include International Business Machines Corp., Johnson & Johnson Inc., Bristol-Myers Squibb Co. and Hewlett-Packard Co. Ideas under consideration range from establishing a purchaser group for prescription drugs to lobbying the government to allow them to implement cafeteria-style benefit plans, said Kathryn E. Lane, director of finance for Johnson & Johnson S.A. de C.V. in Mexico City.

"We're not really into managed care yet," she said. "We are moving that way. That is the objective, but right now we are still gathering information."

Their endeavor represents one of many efforts that could advance the spread of managed-care type health systems throughout Latin America as employers, insurers and health care providers develop replacements for deteriorating social security systems or take advantage of market opportunities.

Those efforts are nascent in Mexico. But in Brazil, observers point out, preferred provider organizations and other providers similar to health maintenance organizations have existed for years.

Chile began reforming its health care system in the early 1980s and created prepaid health insurance plans that often are held up as managed care models other countries might copy.

Representatives for Grupo Nacional Provincial S.A., one of Mexico's largest insurance companies, recently have been traveling to the United States and Chile to learn more about the managed care systems in those nations and to find a suitable joint venture partner for the development of a managed care unit in Mexico, said Felipe Lopez, president of sales and marketing in Mexico City for Grupo Nacional's health insurance products.

For about three months, Grupo Nacional has made health maintenance organization-type arrangements available to Mexico City employers, Mr. Lopez said. There are currently 1,700 employees enrolled in the plans.

So far, few large insurers around Mexico City offer managed care products, though there are pioneering exceptions, such as Meximed, a managed care unit of insurer Seguros Monterrey Aetna S.A., Mr. Lopez added. But Mr. Lopez expects increased competition as Mexico contemplates privatizing its government-run health system.

"HMOs will have a big opportunity in Mexico because of the financial situation of the government, which can no longer provide Social Security coverage," he said. "In a short time, we will provide this service to the public."

Grupo Nacional expects eventually to provide managed care throughout Mexico but has been eyeing the border with the United States in particular as a large potential market for managed care products. The government's social security system has not been able to keep pace with the rapid economic growth in that region, Mr. Lopez noted.

The border region is putting the most pressure on Mexico to allow privatized health care in place of now-mandatory social security, some observers say.

Border assembly plants have boomed as investments stream in from parent companies in the United States, Japan, South Korea and Taiwan. The boom has resulted from Mexico's cheap labor in combination with a North American Free Trade Agreement provision allowing companies to send products duty-free into the United States, Mexico or Canada if the products are made in any of those countries.

As plants expand along the border, they are finding government medical facilities inadequate and overextended, several benefit managers said.

Workers often miss several workdays waiting in line to see a doctor. To counter some of the inadequacies, many employers purchase private medical coverage for managers in addition to contributing to the social security system as mandated by law.

Alternatives to indemnity-type medical plans and social security are beginning to spring up along the border, particularly near California.

Several months ago, Tijuana-based Servicios Medicos Internacionales approached Sony de Tijuana, which buys major medical coverage for about 600 professional-level employees from Grupo Nacional Provincial. SMI operates a staff model HMO and offers employers a variety of arrangements.

Sony passed on buying coverage from SMI in part because the concept was too new, said Mauricio Arellano, human resources manager for the Sony unit. Yet Mr. Arellano said that he is willing to consider buying from SMI in the future. In fact, he thinks managed care has a strong future in the region, especially if a major company like Sony, with 6,300 employees in the Tijuana area, purchases such coverage.

"Once you get a Sony in there, it will be talked of as 'before and after Sony, " he said. "Sony is considered the human resource management leader, the trend-setter in Tijuana."

Other border companies already are buying SMI's services. A year ago, Hitachi Consumer Products de Mexico S.A. de C.V., with about 2,000 employees in Tijuana, signed up with SMI for coverage of about 150 managers, supervisors and engineers, said Sandra Juarez, deputy manager for Hitachi's Tijuana unit.

Dissatisfaction with employee health care under the social security system also is driving the Mexico City companies that have established the health care consortium to explore managed care options.

"When (government clinics) take tests, the results take several weeks to get back, and if you're critically ill, you may not make it," Johnson & Johnson's Ms. Lane said. "The government system has a lot of flaws; that is the reason the timing is very good for this consortium to start having an impact on things such as managed care."

Because of longstanding leftist influences, Mexico's laws governing employee benefits have attempted to ensure that everyone receive similar health care benefits. Although that has not really worked in practice, one effect has been to prohibit companies from offering cafeteria plans, Ms. Lane said.

A crucial first step for the consortium would be to successfully encourage the government-which is weighing reforms-to allow cafeteria benefit plans, she added. The companies see that as a first step toward implementing managed care.

Mexico could look to Chile, which began the process many years ago. Employees there now can choose the state health system or prepaid, private health plans known as ISAPREs. Employees contribute 7% of their wages for a minimum basket of coverage established by the government under both systems. Employers do not contribute for the ISAPRE coverage. The government also sets premiums.

The ISAPRES tend to market to specific clientele. For instance, some will shape their services to attract blue-collar workers while others will target white-collar workers, said Edmund Goodhue, president and chief executive officer of Avandel Healthcare Inc., a Lynnwood, Wash., company that provides catastrophic care coverage for provider groups that assume risk.

"Each of these health plans establishes a different style of care in order to differentiate itself," said Mr. Goodhue, who evaluated Chile's health care market for a former employer. "Some are staff model HMOs. Some might be called indemnity plans here in the United States. Some might be called PPOs."

Most employees working for large and international employers in Chile receive coverage through one of the private ISAPRES, said Waldo Mayorga, general manager for Mercer Chile in Santiago, Chile. In addition to the minimum basket of coverage, many of these employers buy additional coverage for their employees.

Rates for the supplemental care vary depending on the additional benefits purchased and the level of ISAPRE coverage an employee can buy with the 7% salary contribution.

But while Chile's managed care arrangements sometimes are held out as a model for other Latin American countries, employer costs are rising as health care costs increase, Mr. Mayorga said.

Other observers say managed care has advanced even further in Brazil.

"You talk to most people who are working in international managed care outside the United States, and they will tell you Brazil is probably the most advanced and sophisticated," said Greg Arms, senior vp and director of American International Group Inc.'s Group Management Division.

AIG in 1996 acquired GAMA, a Brazilian PPO and third-party administrator, and shortly after that acquired a second PPO group and TPA, Mr. Arms said. Tens of millions of people in Brazil, with a population of about 158 million, are covered under PPO or HMO plans, he estimated.

However, health companies called HMOs in Brazil look more like PPOs in the United States, said Basilio Pugatchenko, senior vp for Latin America for CIGNA International in Miami. Doctors still dominate Brazil's health care delivery system, so broader cost containment as known in the United States has yet to emerge in Brazil, he said.

"They call themselves HMOs, but they are a lot more open than what we normally call managed care in the U.S.," he said.

CIGNA since 1991 has owned a health plan in Chile named CIGNA ISAPRE and is analyzing market opportunities in Brazil as well as looking into Argentina and Mexico, Mr. Pugatchenko said. CIGNA ISAPRE looks somewhat like a U.S. PPO, he said.In Brazil, employers and employees contribute for private health plans, and Brazilian employers have more influence than employers in most other Latin American countries over the type of plan they provide, Mr. Pugatchenko said. There are indemnity plans, self-insured plans administered by third-party administrators and their HMOs, although the government is jut now weighing regulation of existing HMOs. So far there are no capital or solvency requirements, he added.

With neighboring Argentina weighing privatization of its union-controlled health funds, called obra sociales, Mr. Arms and others expect opportunities will arise there as well for managed care companies.

"So we have been looking very closely to see what the opportunity might be for private managed care arrangements that can have a PPO approach or an HMO approach," he said.

AIG and CIGNA are not the only U.S. insurers evaluating Latin America opportunities for the export of managed care expertise.

"I know there are many others now looking to Latin America," said Maria T. Currier, a partner who represents health care clients for the Miami firm of Steel Hecto & Davis and who now lives in Caracas, Venezuela. "They haven't passed the point of actually setting up operations, but they are looking at the market.'