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24 March 2024

New 'Mega-Decree' Reforms Employee Health Benefits

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Employers in Argentina should look closely at cost increases resulting from sweeping reforms that allow healthcare providers to adjust plans' premiums on their own terms.
Argentina Employment and HR
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Employers in Argentina should look closely at cost increases resulting from sweeping reforms that allow healthcare providers to adjust plans' premiums on their own terms. Previously, they were subject to statutory limits.

Employer Action Code: Act

President Javier Milei's new administration issued a Decree of Necessity and Urgency (DNU) No. 70/2023, introducing sweeping reforms to loosen rules governing the country's economy. Among other changes, the decree amends the legal framework for employee health benefits by enabling healthcare providers to join the regime for compulsory health entities (obras sociales). Employees receive medical care via membership in either a unionized or a non-unionized obra social (for unionized or non-unionized employees, respectively). Health coverage can be supplemented under private medical plans, via private healthcare providers.

Key details

The main healthcare-related changes under the DNU, effective December 29, 2023, include:

  • All new employees covered by collective bargaining agreements (CBAs) can change their healthcare provider from the start of employment. Under previous rules (effective July 2021), employees covered by CBAs were assigned to an obra social for their work activity sector and had to wait one year before being allowed to change it; during this time, the compulsory employee and employer healthcare contributions were designated only for their assigned obra social.
  • Prepaid Medicine Enterprises (Empresas de Medicina Prepaga – EMPs), which are private health providers offering voluntary prepaid insurance plans, may now join the obras sociales regime. In the event an EMP decides to do so, insured employees may designate that their compulsory employee and employer healthcare contributions are paid directly to the EMP. Previously, all healthcare contributions had to go through an obra social first, with the obra social serving as an intermediary between employees and EMPs, providing coverage for high-cost and complex treatments while retaining a portion of the contributions.
  • Premium amounts for private medical plans can now be freely established by EMPs and obras sociales. The government can no longer review or invalidate premium increases.
  • EMPs that choose to join the obras sociales regime and receive healthcare contributions directly must divert 20% of the compulsory employer and employee healthcare contributions to the Solidarity Redistribution Fund, which helps finance the healthcare system. Obras sociales are already required to divert a portion of the compulsory contributions they receive (i.e., 15% and 20%, for unionized and non-unionized obras sociales, respectively) to the fund.
  • Additionally, it appears that EMPs that join the obras sociales regime must divert a further 20% of the difference between total premiums they receive and the compulsory contributions they receive (as obras sociales do).

The decree also includes amendments to the labor law that in general weaken workers' rights. However, a labor court has indefinitely suspended these changes after ruling they must be approved by Congress before they can take effect (which appears unlikely). The government is appealing the ruling to the Supreme Court.

Employer implications

In principle, the healthcare changes are aimed at improving competitiveness among healthcare providers and tackling the inflationary issues that afflict the healthcare sector and the economy as a whole. However, joining the obras sociales regime comes with increased costs for EMPs; few, if any, appear to be doing so. Nearly 90% of companies surveyed offer healthcare coverage above the statutory minimum, with care provided by a mixture of the EMP and obras sociales (54%) or EMP only (45%). Employers are encouraged to review their health plans and assess increases in costs with their healthcare providers, as EMPs moved quickly to raise premiums after the DNU went into effect. In the event of a contracted EMP joining the regime for obras sociales, employers must ensure that medical services and benefits covered by their private medical plans include all services and benefits currently covered by the obra social.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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