By Brazil Stock Guide – Litigation in Brazil’s private healthcare sector — often referred to locally as “judicialization,” where patients sue insurers to obtain treatments — is accelerating rapidly and beginning to reshape the industry’s cost structure, even as operational indicators improve.
Legal expenses rose from roughly R$500 million ($100 million) in the pre-pandemic period in 2019 to approximately R$4.6 billion ($900 million) in 2025 — an increase of nearly 800% — highlighting growing pressure that escapes the traditional control mechanisms of health insurers, according to data from the National Supplementary Health Agency (ANS), Brazil’s private health insurance regulator.
This trend comes despite years of efforts to curb disputes, including revisions to the list of covered procedures, greater regulatory transparency and investments in network management and anti-fraud measures. Even so, the volume of lawsuits and associated costs continues to rise, suggesting that current tools have limited reach given the system’s dynamics.
Recent ANS data show that the impact is already visible in financial statements. Civil judicial deposits reached around R$3.3 billion in the fourth quarter of 2025, while provisions climbed to approximately R$7.6 billion, reflecting rising risk and higher capital requirements to absorb legal disputes. At some operators, these amounts already represent between 2.5% and 2.8% of revenue.
The surge in litigation contrasts with improving operating performance. The medical loss ratio — the share of premiums spent on healthcare costs — fell from levels near 89% in 2022 to about 82% in 2025, reflecting stronger pricing discipline and utilization control. Over the same period, net income reached roughly R$6.6 billion in the fourth quarter, up 170% year-on-year, lifting return on equity (ROE) to 17%, the highest level since 2021.
This performance comes alongside continued expansion in the number of beneficiaries, albeit with a strong price reset in recent years following the pandemic-driven cost shock. The combination of base growth and premium adjustments helped restore margins — but failed to contain the rise in litigation.
However, the quality of this recovery is increasingly questioned due to a shift in the nature of costs. A growing share of legal expenses is tied to procedures not covered by contracts, suggesting that court rulings are, in practice, expanding the scope of coverage.
This shift creates a structural misalignment. While insurers’ actuarial models rely on predictability — with costs linked to utilization and medical inflation — litigation introduces an unpredictable component that is difficult to price and pass through. Unlike medical loss ratios, these costs do not respond directly to management tools such as premium adjustments or network controls.
Moreover, the effects are beginning to show in working capital. Receivables have remained elevated at between 30% and 35% of revenue in recent years, while a meaningful portion — around 15% to 20% — is not directly linked to health plans, adding financial complexity and reducing cash flow predictability.
The impact is not uniform across operators. Companies with greater exposure to mass-market plans, such as Hapvida, a major low-cost health insurer, are already reporting judicial provisions close to 2.8% of revenue, while operators with a more corporate profile or hospital verticalization, such as Rede D’Or, Brazil’s largest private hospital group, and some Unimeds, tend to show lower levels — though not immune to the upward trend, according to a report by BTG Pactual.
Costs Beyond Contracts
More than just rising expenses, the surge in litigation points to a structural shift in the sector. A meaningful portion of costs is no longer tied to contractual rules or regulation, but to case-by-case court decisions. In practice, this suggests that the economic balance of Brazil’s private healthcare system may be moving away from contracts — and into the hands of the judiciary.