In brief

Effective 7 July, Decree no. 438/2021 (“Decree“) establishes some modifications to the option regime that employees have in relation to medical coverage assigned, specifically in relation to the terms to exercise said option.

Currently, employee medical coverage is either related with the relevant union depending on the employer’s activity, or one that is for employees in management. Likewise, the right of option grants the employees the opportunity to choose a different medical coverage than the one assigned to them.

Regardless of the medical coverage assigned or chosen by the employee, in many cases companies offer better medical coverage through a private provider and derive the withholdings and contributions paid to the assigned medical coverage. Eventually the companies pay the major cost in order to cover the private health coverage.

Under the Decree, the right of option will be limited according to the following terms:

  1. In the case of new employees, they must remain for at least one year in their assigned medical coverage before being able to exercise the right of exchange option.
  2. The exchange option may be exercised only once a year within the calendar year and will be effective as of the first day of the following month of the formalization of the request.

This could trigger the inconvenience of not being able, during the first year of the employment relationship, to derive the withholdings and contributions to the private provider. In such case, an employer who wants to maintain the benefit of private coverage will have to cover the full payment of the coverage, without the possibility of deriving the withholdings and contributions made.

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