18th ANNUAL AAC/MIS CONFERENCE

1. 18th ANNUAL AAC/MIS CONFERENCE The Brazilian Health Model and the Cooperative Response Dalmo Claro de Oliveira

2. HISTORY • The 1940's and 1950's: • The market for health plans begin to develop when public sector companies started using their own funds and their employees to fund health initiatives. • Later, hospital health care was included as a benefit for newly created governmental companies.

3. HISTORY • In the private sector, the automotive industry's companies were the first to implement health care systems. • The 1960's: • First agreements between employers and medical care companies. • In this model, physicians become medical service providers. With advance payment, the health plans effective operation begins.

4. HISTORY • In an unregulated market, there were several companies offering health coverage, with models that were not always satisfactory to the population. • In this scenario, Medical Care Group Companies consolidate. • Also at this time, with the creation of Private Insurance Superintendence – SUSEP (Superintendência de Seguros Privados), the first regulated sector is created – Health Insurance.

5. HISTORY • 1967 • The doctors' dissatisfaction with poor conditions offered by the public health system, and growth of companies operating at the expense of the medical work, made a group of doctors, led by Edmundo Castilho, to found the União dos Médicos – Unimed. That was the first medical cooperative in Brazil. • 1969 - Doctors in several cities of São Paulo visit the Unimed, interested in their pioneering experiment. Months later, more than 30 Unimeds were founded in São Paulo state.

6. HISTORY: MEDICAL COOPERATIVES The Cooperative Model and its relationship with Individual Cooperatives

7. HISTORY: MEDICAL COOPERATIVES Concept of Cooperative • Company formed and run by an association of persons • Its goal is to develop an economic activity or provide common services • Opposes the principle of Capital • International Cooperative Alliance - activity supporter

8. HISTORY: MEDICAL COOPERATIVES Cooperative Branches • Agriculture and Livestock • Raising • Consumption • Credit • Educational • Housing • Infrastructure • Mineral • Production • Health • Work • Transportation • Tourism and Recreation • Special

9. HISTORY: MEDICAL COOPERATIVES Cooperative Societies Classification Individual Providers • Nonprofit cooperatives or consisting of at least 20 individuals. Characterized by services provided directly to their members.

10. HISTORY: MEDICAL COOPERATIVES Managing a Work Cooperative • Bylaws • Internal Regulations • Corporate Purpose Definition

11. HISTORY: MEDICAL COOPERATIVES Managing a Work Cooperative • Funding • Democratic Management • Cooperative Action

12. HISTORY: MEDICAL COOPERATIVES Managing a Work Cooperative • Boards: • Board of Directors – BD • Boards of Auditors – BA • General Meetings: • Participation • Annual General Meeting - AGM • Extraordinary General Meeting - EGM

13. HISTORY: MEDICAL COOPERATIVES Managing a Work Cooperative Funds Required Educational and Social Assistance Fund - FATES (Fundo de Assistência Técnica Educacional e Social) - of 5% of net surpluses calculated annually in the cooperative, 5% must be allocated to the fund for technical, educational and social assistance of cooperative members and employees, provided that pursuant to bylaws.

14. HISTORY: MEDICAL COOPERATIVES Managing a Work Cooperative Funds Required Reserve Fund - of 10% of net surpluses calculated annually in the cooperative, 10% must be allocated to compensate for any damage.

15. HISTORY: MEDICAL COOPERATIVES Remuneration and Medical Work • Income from cooperative contracts shall be subjected to deduction of expenses such as: • cooperative employees' payroll and respective taxes • headquarter costs: lease, water, electricity and maintenance • communication expenses • investments • technical and legal reserves • taxes

16. Remuneration and Medical Work • The result of this transaction is the amount to be apportioned among members, according to their production: • The cooperative doctors production is calculated in number of RC (Remuneration Coefficients) based on the MRT (Medical Remuneration Table) of the Brazilian Medical Association – AMB (Associação Médica Brasileira). Every medical procedure corresponds to a certain amounts of RCs. For example, a consultation is worth 100 RCs. • Dividing the surplus by the total medical production RC, we will have the unit value, in Brazilian reals, of a WU (Work Unit for the relevant month). • After that, one just has to multiply the production of each cooperative member by the WU value to obtain the cooperative doctor remuneration.

17. Remuneration and Medical Work For example: COOPERATIVE'S INCOME BRL 1,500,000.00 EXPENSES (BRL 120,000.00) FINANCIAL AND LEGAL RESERVES (BRL 65,000.00) GROSS SURPLUS BRL 1,315,000.00 PAID TO ACCREDITED DOCTORS (BRL 600,000.00) GROSS SURPLUS 2 BRL 715,000.00 TOTAL PRODUCTION IN WUs 1,700,000 WUs WU UNIT VALUE BRL 0.42 Cooperative Doctor Production Value: production X BRL 0.42.

18. HISTORY: MEDICAL COOPERATIVES • The 1970's - The Federations are created, aiming at standardizing operational procedures and encouraging information exchange. Cooperative Societies Classification Centers or Federations • Formed by at least 3 individual cooperatives. Aiming at organizing economic and welfare services for affiliates, facilitating the reciprocal use of services.

19. HISTORY: MEDICAL COOPERATIVES Federation X INDIVIDUAL A INDIVIDUAL B INDIVIDUAL C

20. 1975 - The Unimed do Brasil is organized, the first Unimed System's Confederation. HISTORY Cooperative Societies Classification Confederations • Consisting of at least three Centers or Federations of same or different modalities. Its goal is to guide and coordinate the affiliates' activities.

21. HISTORY: MEDICAL COOPERATIVES Confederation XYZ Federation X Federation Y Federation Z Individual A Individual D Individual G Individual B Individual E Individual H Individual C Individual F Individual I

22. Unimed Cooperatives CONFEDERATION BOARD Unimed do Brasil Central National Federations Institutional Action Commercial Action Individual Providers

23. HISTORY • 1977 - 60 Unimeds already existing in Brazil. • The 1980's - Consolidation and fast growth phase. About 100 new cooperatives are created.

24. INSURANCE SYSTEM IN BRAZIL The Regulatory framework used still today was the Decree Law 73/66. Article 24 provides that only Corporations and Cooperatives may operate in the private insurance market, and cooperatives shall be restricted to Agriculture, Health and Work Accident insurances.

25. INSURANCE SYSTEM IN BRAZIL • Among the segments provided for in the article: • Agriculture: agriculture cooperatives did not choose to organize insurance entities. • Work Accident: the Decree Law 73/66 defines the federal government's major interest. • Health: non-regulated market, with few insurers operating in the segment.

26. INSURANCE SYSTEM IN BRAZIL As a result, despite political efforts at the time, the national situation did not favored insurers to be organized as cooperatives. To this date, the Article 24 of Decree Law 73/66 is not regulated yet. Thus, all insurance companies existing today are organized as Corporations.

27. INSURANCE SYSTEM IN BRAZIL DETERMINATION The regulatory limitation did not prevent Medical Cooperatives from operating in the Insurance segment.

28. DETERMINATION Unimed Cooperatives Unimed do Brasil Federations Individual Providers Central National Holding UNIMED PARTICIPAÇÕES

29. DETERMINATION Holding UNIMED PARTICIPAÇÕES

30. 1989 - The Unimed System (Sistema Cooperativo Unimed) decides to operate in the Insurances Market and founds the Unimed Seguradora S/A through the Unimed Participações holding. • 1995 - Acknowledged as leader in the health cooperatives sector in the Americas. Unimed do Brasil becomes a member of ACI. • 1996 - Edmundo Castillo, Unimed's founder, is elected first vice president of IHCO and president of IHCO - Americas. • 1998 - The Act 9656, which regulates the Health Plans operation in Brazil, is enacted. HISTORY

31. HEALTH SECTOR IN BRAZIL Regulatory Framework - Act 9656/98 Until the enactment of Act 9656/98, there was no regulation in the health plans sector in Brazil, except for transactions carried out by insurance companies through the Superintendence of Private Insurances – SUSEP (Superintendência de Seguros Privados), the insurance regulatory body established by Decree Law 73/66.

32. HEALTH SECTOR IN BRAZIL Regulatory Framework Despite some points of the law requiring private plans to reimburse medical services provided by public entities, the Act 9656/98 aims at regulating the Supplemental Health System, a private enterprise. The Public Health System is the Unified Health System – SUS (Sistema Único de Saúde), funded by contributions made by companies and employees to the National Institute of Social Security – INSS (Instituto Nacional de Seguridade Social).

33. HEALTH SECTOR IN BRAZIL The purpose of regulation is to ensure a support to the end user, who suffered from lack of standardization in coverage, one-sided contracts and non-controlled prices. The first step was creating the National Health Agency – ANS (Agência Nacional de Saúde), to understand, segment, and regulate the existing operations. The regulation stipulated that all Health operations should be regulated by the ANS.

34. HEALTH SECTOR IN BRAZIL SUSEP Superintendência de Seguros Privados General Insurances (Life and Non-Life) HEALTH INSURANCE ANS Agência Nacional de Saúde HEALTH INSURANCE

35. HEALTH SECTOR IN BRAZIL The ANS divided health operations into five segments: Group Medicine Medical Cooperatives Insurance Companies Specialized in Health Insurances Self-Management Philanthropic Entities (Santas Casas)

36. HEALTH SECTOR IN BRAZIL Among the principal measures is understanding that the health operation, similar to insurance, is a risk operation and, therefore, should have its operation ensured by mandatory minimum reserves. This action alone made hundreds of operators to close their doors, as they didn't have the minimum financial conditions to keep operating. The next step was to regulate the operators' solvency

37. HEALTH SECTOR IN BRAZIL • Cover • Policlinic Plans • Hospital Plans • Hospital Plans with Obstetrics • Complete Plans • Policlinics + Hospital with Obstetrics • All modalities are allowed to include Deductibles or Co-Participation

38. HEALTH SECTOR IN BRAZIL • Forms of Contract • Individual • Corporation • Collective by Adherence • Financing • Individual or Collective Plans by Adherence – • full payment by User • Corporate Plans - Company, with or without the employee's participation

39. Today, the Unimed System consists of 377 medicalcooperatives 108 thousand doctors

40. UNIMED IS PRESENT IN 4263 cities 83 % of the Brazilian territory • 100 own hospitals • 3244 accredited hospitals • 89 own emergency hospitals • 54 own laboratories • 456 own ambulances • 3286 own beds • 327 thousand accredited bed • 20 thousand accredited resources

41. Unimed is also present in the lives of millions of Brazilians • 34% participation (Datafolha 09) in the national market of health plans with 16 million customers • 73 thousand contracting companies • 69 million medical visits per year • 2 million hospitalizations per year • 138 million exams per year • 5.33 medical vists / users / year • 10.66 exams user per year • 11 thousand beds occupied permanently • 50 thousand direct jobs(Unimed 2008) • 290 thousand indirect jobs(Unimed 2008) 

42. Unimed received the "Oscar" of human resources: theTop of Mind - HR Suppliers of the Year 2009 for the 10th time According to BrandFinance, the Unimed brand occupies, in 2008, the 27th position among the most valuable brands in Brazil Unimed is Top of Mind brandin Health Planfor the 16th consecutive time Awarded for the 22nd consecutive time The Retail Merit Awardas the preferred health plan among the members of the National Retailers Association

43. Elected in2009, for the eighth consecutive time, , the health care brand on which the Brazilians rely most according to a Brands Reliability Research, Revista Seleções/Instituto Marplan Unimed receives, for thefourth consecutive year,the Superbrands certificate Named one of the most prestigious companiesin the health sector in Brazil, according to the Grupo Troiano forÉpoca Negócios magazine, 2008 and 2009 editions The most recalled brand by the Internet users, winning the first Top of Mind Internet

44. WE ALWAYS DO IT TOGETHER Unimed, besides being present in 83% of the country, has complete synergyamong its units, in the big cities and small towns that we serve. The communion of interests and forces that makes the activities grow in possibilities. He always brings a new and different vision of things, making all involved to grow together.

45. HEALTH SECTOR IN BRAZIL Some Figures

46. HEALTH SECTOR IN BRAZIL Medical care with or without dental care Medical care with or without dental care

47. HEALTH SECTOR IN BRAZIL NUMBER OF USERS

48. HEALTH SECTOR IN BRAZIL NUMBER OF USERS Specialist Health Insurer Self-Management Medical Cooperative Group Medicine Philanthropy

49. HEALTH SECTOR IN BRAZIL

50. HEALTH SECTOR IN BRAZIL