By: HUB’s EB Global Benefits Team

What Is It About?

Healthcare provision for employees has historically been controlled in Argentina by unions, which own and manage healthcare service organizations called Obras Sociales (Social Work Organizations). Most of these are entities are akin to Health Maintenance Organizations (HMO’s) in the United States and provide a basket of healthcare benefits with a floor level of coverage known as Programa Medico Obligatorio (PMO) or Mandatory Medical Program.

Obras Sociales aligned with the employer’s industrial sector have been the default organizations to provide medical benefits to private sector employees and their families. There are over 300 Obras Sociales in Argentina and employees could individually choose between them subject to some restrictions such as in subscribing to the Obra Social of the employer’s industrial sector, one-year lock from changing the Obra Social when changing employers.

The healthcare costs are met by statutory contributions of 6% of pay by employers plus 3% of pay by employees. Pay for these contributions is subject to a cap (ARS 3,055,220 per month as of March 2025). The bulk of these contributions were destined to funding the Obra Social selected by the employees, with some margin set aside to meet retiree healthcare.

The service quality of Obras Sociales has been below expectations and contracting out options have existed for many years. Employees have had the choice of pre-paid healthcare providers (Empresas de Medicina Privada or EMP) in the open market, opting out of the applicable Obra Social. Under these circumstances, after completion of a prescribed process that involved notification to the Obra Social, part of the healthcare contributions were redirected to meet the cost of the EMP premiums.

The contributions to fund the EMP premiums had to be coursed through the Obra Social which retained a portion of the contributions ostensibly for administrative expenses and for high-cost and complex treatments that may not be covered by the EMP selected by the employee.

Under contracting-out situations, the employer and employee were responsible for any gaps between the premium and the portion of the statutory contributions that eventually found their way to the pre-paid service provider.

This mandatory intermediation by the Obras Sociales was perceived as inefficient and cost-additive to the contracting out option.

Impact on Occupational Pension Plans

Over the last few months, some important changes have been introduced by the government of Javier Milei.

  • Since May 2024, employees are free to choose between any Obra Social or a pre-paid medical EMP once a year or upon change of employer.
  • EMP’s must meet the Mandatory Medical Program (PMO)
  • Under Ministry of Health Resolution No. 1/2025, and DNU 70/2023 employers must now redirect the entire statutory healthcare contribution (3% employee + 6% employer) directly to the prepaid provider (EMP) for employees enrolled in private prepaid healthcare plans. This replaces the former model where funds first passed through an Obra Social, which then shared coverage responsibility with EMPs.

The above measures expose EMPs to full coverage liability, potentially prompting price adjustments to maintain actuarial balance.

If the statutory 9% contribution remains unchanged, plans may no longer be sustainable under previous pricing models.

EMPs may seek to compensate for increased risk exposure in several ways:

  • Premium hikes.
  • Tighter underwriting or changes to network access.
  • Revised cost-sharing structures that could increase employee out-of-pocket expenses.

Demand for EMP option is expected to increase since EMP service quality is generally better than the Obras Sociales, and also since the vast majority of employers completely or substantially subsidize the additional cost of the EMP choice.

The reforms are intended to streamline statutory coverage. But they also open the door to significant premium escalation and plan design and utilization reconfigurations.

Employers must act proactively to ensure compliance, continuity, and competitiveness of benefit offerings through strategic funding planning, vendor coordination, and clear stakeholder communication.

Impact on Companies

  • Premium escalation and volatility under EMP elections, especially for lower paid employees whose statutory healthcare contributions are small.
  • Additional administrative burdens in the payroll handling and remittances to the employee EMP’s. Misaligned contributions may disrupt member benefits.
  • Enhance private sector role will open up more opportunities to implement strategies around employee healthcare and differentiation in talent acquisition and retention in the market.

Suggested Employer Action

  • Audit plan premiums vs. statutory contribution levels for all EMP-based plan employee selections and ensure that contributions are directed to the EMPs selected by the employees.
  • Adjust budgets to accommodate additional costs from increases in EMP employee selection and higher premiums
  • Review its employer/employee premium cost sharing policy in order to:
    • Address cost increases
    • Promote employee engagement in the utilization and overall performance of medical plans.
  • Engage EMP partners to develop products with sustainable plan designs.
  • Implement communication programs with the employees in order to that employees understand the EMP options and their respective offerings.

If you have any questions, please contact your HUB Advisor. View more updates in our Global Benefits Directory.