By Vince Moscoso
I’m sorry I missed Friday’s meeting down at the Social Security office. Sounds like it was blast.
What I haven’t missed is the veritable deluge of comments about the meeting and changes to Social Security membership fees that have appeared on this website. There were 335 at last count and I understand that there were at least 100 more on various other social media frequented by expats.
I haven’t read all of them but I’ve read enough to come to a couple of conclusions. First, that a sizeable number of gringos have brought their inbred North American sense of entitlement with them to Ecuador and, second, that many of those who have become voluntary members of Ecuador’s Social Security system know very little about it.
I should add that, in the heat of the discussion that followed Friday’s annoucement, a great deal of misinformation has been disseminated. Although some participants in the conversation have attempted to make corrections, they have been hard-pressed to get their points across.
To get the facts, I talked Monday to a representative of the local Social Security office, two attorneys who handle legal and relocation issues for new expats, and to a private insurance agent. Like 300 or 400 of my fellow expats in Cuenca, I am member of the Social Security system — officially the Instituto Ecuatoriano de Seguridad Social, or IESS for short — and need to understand the changes that take effect in July.
This is what I found.
The Social Security system is not a health insurance or health care program, although health care is one of its services. Just like Social Security in the U.S., its primary function is to provide retirement pensions, but it also offers micro loans, mortgages, and burial benefits, among other things. Everyone who is a member, voluntary or not, is entitled to these.
So no, the system is not a health care program for gringos.
The increase in the voluntary contribution to the system is not aimed specifically at gringos. In fact, the English-speaking foreign residents who are voluntary members of Social Security are statistically insignificant, less than one percent of the total.
Voluntary membership was greatly expanded in 2013 to offer services to those who work for themselves — taxi drivers, for example — and who had not previously paid into the system. The expansion was also intended to offer services to the millions of Ecuadorians who live, or have lived, overseas, mostly in North America and Europe. Other groups, including housewives, were also invited to join. The statistics of how many joined the system under the expansion are fuzzy (as are many things in Ecuador) but the Social Security rep told me it was in the “many hundreds of thousands.”
When voluntary membership was expanded, IESS administrators chose the national minimum monthly salary as the basis for contributions. Today, the basic salary is about $375. At the time, they said that the financial calculation would be adjusted as they gathered data on the new members as well as the cost of those members to the system.
Hence, Friday’s announcement that most voluntary members will pay 17.6 percent on their real income. In effect, system administrators were following through on their original plan and doing their job to keep the system solvent.
The new calculation may make Social Security membership financially impractical for some foreign residents since our main interest is health care. I may be in that boat and that’s why I visited an insurance agent.
As with the reasons and motivation behind the price increase, the discussion about private health insurance has produced vast amounts of erroneous information. Namely, that private health insurance does not cover people over 65 or those with preexisting conditions, and that it is outrageously expensive.
Late last year, Ecuador’s National Assembly passed a law mandating that private health insurers remove age and preexisting condition restrictions from their coverage criteria. The law also limited price increases on policies based on the new rules. After at first claiming that the mandates would put them out of business, most insurers have found that they can work with the new requirements.
Needless-to-say, insurers now expect a big uptick in business as a result of higher voluntary membership costs at IESS.
In terms of pricing, I found rates to be surprisingly inexpensive, 20% to 30% of what I would expect pay in the U.S. for comparable coverage, and sometimes less. One policy for a single man in late 60s was $195 while another for a couple, same age, was under $300.
The attorneys I talked to believe that at least half of IESS voluntary members in the Cuenca area also have private health insurance coverage. One told me she believes there are probably less than 200 expats here who rely solely on IESS for health care.
Will there be a mass exodus of gringos as a result of the price increase? Probably not.
So no, Ecuador did not “entice” or “woo” gringos here with the promise of cheap health care. And no, there was never an “implied” contract with the government of Ecuador that once it began offering cheap IESS membership that it would continue the practice ad infinitum. These are gringo fantasies, pure and simple.
Sometimes it makes sense to check the facts.
Vince Moscoso is a retired manager of a health maintenance organization (HMO) in Maryland who later worked for the state hospital regulatory board of Maryland. He has lived in Cuenca for three years.