Population aging and health spending: an analysis of intergenerational and intragenerational transfers in the Brazilian private health care plans

Abstract The health insurance pricing model in Brazil prohibits large variations of monthly fees by imposing strict premium rules by age. Therefore, intergenerational transfers may occur from younger age groups, who are lower-risk, to older ones. Population aging will result in a larger share of policyholders at older ages, increasing intergenerational transfers and making the current pricing structure unsustainable in the future. The aim of this article is to estimate the magnitude of intergenerational and intragenerational transfers (within the same age group) in the Brazilian private health care plans, by examining data from a representative sample of health insurance providers. We found intergenerational transfers to occur, on average, from policy holders younger than 66 years of age to older ones. Results also show significant intragenerational transfers within two of the age groups defined by existing legislation: 0 to 18 and 59 years and older. Finally, simulations using changes in the age structure over the last 15 years confirm population aging may result in larger intergenerational transfers with increasing loss-ratio over time.