Major medical insurance in Mexico continues to experience strong demand and premium growth, but rising medical costs are eroding technical profitability and putting pressure on long-term sustainability.
This article was originally published in Spanish in Aon.
Major medical insurance in Mexico is facing a paradox: Demand has never been stronger, yet technical profitability has narrowed to its lowest level since the market disruption of 2021.
Premiums increased from MXN$49.7 billion in 2014 to MXN$158.3 billion in 2024, a nominal growth of 218% that raised the segment¡¯s share of the Mexican insurance market from 14.2% to 17.4% of total written premiums.1 Put another way, one out of every six premium dollars written in Mexico today comes from major medical insurance. The segment now generates more premium volume than the entire property insurance business and trails only life and auto insurance.
Demand, therefore, is not the issue.
The real challenge is that claims costs are increasing faster than insurers can offset through pricing and underwriting adjustments. In 2024, the technical contribution margin ¨C the amount remaining after claims costs, acquisition expenses, and reserve strengthening ¨C declined to 2.4% of direct premiums, compared with 5.8% just two years earlier. Meanwhile, operating expenses stood at 4.5%.1
The implication is significant: For the first time in recent years, technical margins were insufficient to cover the cost of operating the business. As a result, the combined ratio rose above 101%, meaning the segment paid more than it collected in premiums.
In this environment, selling more policies does not improve the equation. If every additional premium dollar is accompanied by more than a dollar of cost, growth alone only deepens the profitability challenge.
The challenges facing Mexico¡¯s private health insurance market cannot be understood in isolation from the structure of the country¡¯s healthcare system. Mexico relies on a combination of social security institutions, public healthcare services, private medical providers, out-of-pocket spending, and private insurance coverage. Yet these components remain insufficiently integrated across financing, prevention, primary care, referral pathways, and cost management.
As a result, many private health insurance policies function not as a coordinated complement to the public system, but rather as an alternative channel for accessing specialized private healthcare. This places insurers at the center of rising hospital costs, physician fees, and increasingly expensive medical technologies.
This fragmentation is not unique to Mexico. Across Latin America and the Caribbean, total healthcare spending averaged 6.6% of GDP in 2023, equivalent to approximately US$778 per capita, with more than half of these resources financed by the public sector.2 Even so, public investment in health remains below the regional target of 6% of GDP. In fact, public healthcare expenditure declined to 3.7% of GDP in 2023, returning to the same level observed before the pandemic.2
The statistic that best illustrates the region¡¯s protection gap is a different one: Nearly one-third of all healthcare spending is paid directly out of pocket by households, well above the recommended threshold of 20%.2
Wherever public healthcare systems fall short and out-of-pocket costs place increasing pressure on families, private health insurance steps in to fill the gap. In doing so, however, it also inherits the underlying cost pressures that the broader healthcare system has been unable to absorb.
This is where the regulatory asymmetry at the heart of Mexico¡¯s healthcare debate becomes evident. The price of insurance ¨C the premium ¨C is visible, closely monitored, and increasingly subject to political scrutiny. The costs that ultimately drive claims, including hospital charges, specialist fees, medical supplies, and high-cost technologies, operate with far less transparency and without comparable mechanisms for systemic oversight.
Focusing on premium regulation without addressing the underlying drivers of medical costs risks treating the symptom rather than the cause. Debating insurance prices while leaving healthcare cost inflation unchecked is, ultimately, like arguing over the thermometer instead of addressing the fever.
The figures presented in the Asociaci¨®n Mexicana de Instituciones de Seguros (AMIS) 2024 Executive Report highlight the extent of the compression margin affecting the major medical insurance segment. It reveals a sustained trend in which rising claims costs, acquisition expenses, and reserve strengthening requirements have steadily eroded technical profitability, pushing the technical contribution margin below the level required to cover the day-to-day cost of operating the business.
This remains the single most significant driver of claims inflation. A joint study by Mexico¡¯s Ministry of Finance and the National Insurance and Surety Commission (CNSF) found that, since 2018, loss experience across the Mexican insurance sector has increased as a result of a combination of economic, social, demographic, and public health factors, most notably the impact of the COVID-19 pandemic.3
From a global perspective, Aon projects a worldwide medical trend rate of 9.8% for 2026, marking a return to single-digit growth for the first time since 2023. For Latin America and the Caribbean, the projected trend is 10.3%, below the estimate reported a year earlier.4
Mexico presents a more pronounced challenge. According to estimates from international consulting firms cited by AMIS before the Chamber of Deputies, private healthcare costs in Mexico are rising 14%-16% annually, compared with general inflation of approximately 4%.5 This gap lies at the heart of the issue: When medical costs increase at three times the rate of overall inflation, health insurance becomes simultaneously more expensive for policyholders and less profitable for insurers.
The structure of claims spending helps explain why cost management levels have become so critical. In 2024, hospital-related services accounted for 84% of covered medical expenses, including 58 percentage points attributable to hospitalization itself and 26 percentage points to physicians¡¯ fees, while outpatient prescription drugs represented just 9% of total spending.1 The challenge extends beyond frequency of claims. The largest share of healthcare costs is concentrated in services characterized by limited price transparency, significant clinical variability, and little opportunity for policyholders to compare costs or quality before receiving care.
This is precisely where hospital contracting strategies, alternative reimbursement models, preferred provider networks, and medical management programs become essential tools for controlling costs and improving long-term sustainability.
The insured population is aging in a measurable way. Between 2002 and 2024, the share of insured individuals aged 41 to 60 increased from 20% to 29% of the total portfolio, while the proportion of those over age 60 rose from 3% to 8%. Over the same period, the average age of insured members increased from 28 to 35 years.1
This is not inherently a problem. After all, health insurance exists precisely to protect individuals against health risks throughout the different stages of life.
However, an aging portfolio requires actuarial assumptions, medical management strategies, and benefit designs to evolve in line with a population that is expected to experience both higher claim frequency and greater claim severity. In 2024, neoplasms (cancer-related conditions) generated the highest volume of claims, totaling approximately MXN$25 billion, followed by musculoskeletal disorders at roughly MXN$21 billion and digestive system diseases at nearly MXN$13 billion.1
A reactive model focused primarily on hospitalization rather than prevention does little to address these underlying trends and ultimately perpetuates cost pressure across the system.
When premiums rise faster than household income or corporate healthcare budgets, healthier individuals are more likely to reduce coverage or drop out altogether, while those expecting greater healthcare use tend to remain insured. This imbalance increases the average cost of the risk pool and can trigger a self-reinforcing cycle of premium increases.
Affordability, therefore, is not merely a commercial concern; it is an actuarial one, because the sustainability of risk pooling depends on it.
Adding to this pressure are fraud and abuse, whose financial impact remains largely unquantified. AMIS¡¯s chief executive officer has publicly acknowledged that the association does not currently maintain comprehensive statistics on losses attributable to fraud.6 This lack of measurement creates a noteworthy blind spot. It is hard to know if rising costs come from avoidable waste or real medical inflation.
Without that clarity, any plan to cut costs is just a guess.
Legislative initiatives currently under discussion in Mexico seek to place limits on premium increases for major medical insurance policies. The proposal that has gained the most traction would cap annual premium increases for policyholders aged 60 and older who have maintained coverage for at least 20 years at the previous year¡¯s inflation rate plus five percentage points.7
The underlying concern, namely that older adults may be priced out of the market, is both legitimate and understandable. However, imposing premium caps without addressing the underlying drivers of healthcare costs ¨C including hospital charges, use patterns, fraud, and benefit design ¨C risks undermining the technical sustainability of the product itself.
The industry has not denied the existence of the problem; rather, it has challenged the proposed solution. AMIS argues that the issue is structural in nature and that some of the proposed measures could weaken the principles of risk pooling and mutualization. In response, the association submitted its own reform proposal to the Chamber of Deputies.5
From an insurance perspective, the issue is straightforward: Capping premiums without addressing the underlying cost of care compresses margins against a claims base that continues to rise. If medical costs keep increasing while premium growth is constrained, the financial pressure on insurers inevitably intensifies.
Mexico¡¯s challenge is shaped by a combination of healthcare system fragmentation, significant reliance on private care among key population segments, and rapidly escalating medical costs. In Central America and the Caribbean, the issue takes a different form: smaller insurance markets, lower insurance penetration, and greater dependence on out-of-pocket spending within public health systems that often face funding constraints. Limited market scale also reduces negotiating leverage with healthcare providers, increasing the cost of accessing complex treatments.
South America, meanwhile, presents a more diverse picture. Countries with relatively mature public, private, or mixed healthcare systems coexist alongside others that remain heavily dependent on direct household spending. Despite these differences, the region shares the same three fundamental challenges: financial sustainability, system fragmentation, and timely access to care.8
For insurers, the lesson is consistent across Latin America: Market growth remains attractive, but long-term profitability depends on the ability to manage medical costs effectively, negotiate provider networks, prevent or better manage chronic conditions, and design products that align with consumers¡¯ purchasing power.
The solution does not lie in continuously raising premiums or reducing coverage but in bending the trajectory of medical costs. Achieving this requires insurers to evolve from claims payers into health managers, leveraging four coordinated strategies.
PAHO has consistently emphasized that more resilient healthcare systems, built on strong primary care foundations and integrated service delivery, are essential for reducing inequities and improving outcomes.2 For private health insurers, that principle translates into claims analytics, case management, telemedicine, treatment adherence programs, and second-opinion services, all designed to improve health outcomes while helping contain long-term medical costs.
Government also has a role to play, one that does not replace actuarial discipline but enables it. Strengthening public primary care, promoting interoperability of health information, improving transparency in hospital pricing, establishing quality and patient safety standards, and fostering greater coordination with the private sector are all essential components of a more sustainable healthcare ecosystem. Public policy would benefit from recognizing that private health insurance is an integral part of the broader healthcare system. However, it cannot, on its own, solve the structural shortcomings that drive inefficiencies and cost pressures across the sector.
For insurers, the next phase will be defined by technical discipline: more sophisticated pricing, sound underwriting practices, effective network management, clinical auditing, advanced claims analytics, and proactive chronic disease management. For corporate clients, the annual renewal process is evolving from a negotiation focused on discounts to a broader strategic question ¨C not how much premiums will increase, but which actions can meaningfully alter the trajectory of healthcare costs.
For brokers and consultants, the strategic challenge will be to translate actuarial and medical insights into business decisions, determining how much cost should be absorbed, how much should be transferred, which benefits should be redesigned, and which health risks should be addressed before they escalate.
The market continues to grow because the underlying need is real. Limitations in public healthcare systems, high levels of out-of-pocket spending, and the demand for timely access to care will continue to drive demand for private health insurance.
Yet premium growth alone does not guarantee sustainability. Mexico must move from a model in which insurance simply pays for medical events to one in which it actively manages health. Achieving that transformation will require the participation of every stakeholder in the ecosystem, including insurers, hospitals, physicians, employers, brokers, regulators, and policyholders. Only through this collective effort can the sector remain simultaneously relevant, affordable, and technically sustainable over the long term.
Learn more about »»ÆÞ¾ãÀÖ²¿¡¯s Latin American team and contact us today to discuss partnership opportunities in the region.
