Health maintenance organisations (HMOs) are becoming an increasingly important part of the health care system in the Philippines, providing insurance plans to help people, particularly those employed in the private sector, to cover health-related costs. Until recently, the industry was subject to only the most cursory of regulation and was the responsibility of the Department of Health (DoH). However, following an executive order from then-President Benigno Aquino III, the Insurance Commission (IC) took over supervision of HMOs in 2015, with new guidelines introduced in September 2016.
New Rules
Carlos da Silva, executive director of the Association of HMOs of the Philippines (AHMOPI), expects the change to have a positive effect. “We wanted to be regulated,” da Silva told OBG. “The interest and confidence in the HMOs will be there now.”
The AHMOPI is the only recognised trade organisation for the industry in the Philippines and has nine members. By November 2016 there were 16 HMOs with certificates of authority (CoA) issued by the IC. There are other HMOs that have been granted clearance to operate by the DoH, which will expire at the end of 2017 and will be honoured as part of the regulatory transfer. Altogether there are 28 HMOs in operation. At the end of 2016 the IC began issuing a series of advisory letters, laying down a supervisory framework for the industry to ensure a minimum standard of performance.
Under new rules issued in 2016, the IC requires existing HMOs to have a minimum paid-up capital of P10m ($212,000), which increases to P100m ($2.1m) for new applicants. HMOs will also be required to provide a deposit to the IC equivalent to at least 20% of their paid-up capital in cash, Treasury bills or bonds. The deposit is intended to protect the interests of HMO members, and if placed under a trust or investment management account, the IC must receive quarterly statements. Foreign HMOs planning to set up a branch in the Philippines will also be required to make a statutory deposit of P100m ($2.1m) in cash or securities.
Licensing
The insurance watchdog has also set out requirements for securing a licence to operate as an HMO in the country. Companies must be registered with the Securities and Exchange Commission or the Cooperative Development Authority, provide a list of the members of the board of directors, allow the IC to verify the existence of capital deposits and/or provide a pre-operational balance sheet. Firms will then need to go through an on-site, pre-licensing examination and, if successful, will pay a licence fee of P151,500 ($3200) to receive a CoA. Each CoA is valid for three years and renewable every three years thereafter. The new legislation also gives the IC the right to suspend or revoke a licence if it is dissatisfied with the company’s performance or there are compliance issues related to requirements such as financial risk, net worth and liquidity. Emmanuel F Dooc, the insurance commissioner, told local press in April 2016 that the IC will need to address the number of insurance firms involved in the segment, suggesting that operators may need to set up separate entities and apply for HMO licences if they want to continue in the managed care business.
Long History
HMOs first rose to prominence in the US in the wake of the HMO Act of 1973. They act as a middleman between doctor and patient, providing access to medical services through pre-paid health plans and a network of doctors, clinics and hospitals. These health professionals and organisations agree to a contract with the HMO and provide treatment to patients, who pay different premiums according to the coverage they want, in line with the terms laid out by the HMO. In the Philippines, HMOs often have primary care facilities at their central offices, while affiliated hospitals will have an HMO-affiliated medical coordinator, usually a doctor, to provide primary care and handle referrals to specialists. In the Philippines HMOs began to appear in the 1980s and were mostly attached to insurance companies. There are few individual members and it is mostly employed Filipinos who are covered, as insurance is provided under employer-funded schemes. According to the AHMOPI, at least 95% of the country’s 6m HMO members are on corporate plans, but these are almost always integrated into the National Health Insurance Programme (PhilHealth), with employers contributing to premiums for their employees. That means the bill for treatment is paid first by PhilHealth, with the HMO settling the remainder. There are relatively few individual members, as individual and family HMO plans are significantly more expensive than corporate ones. Most existing packages are also more standardised in terms of scope and benefits, and first-year waivers are typically not offered for pre-existing conditions, as in most company HMO programmes. Christian Argos, president and CEO of Maxicare, told OBG, “The corporate market continues to grow at a fast rate, driven by almost 700,000 new graduates entering the workforce each year. However, HMOs can no longer rely solely on this segment if we intend to maintain our mid- to long-term growth targets. HMOs will have to enter the consumer market by developing new individual plans that offer more focused, relevant benefits at lower price points.”
Universal
As the government renews its commitment to extend health care to all through its universal health care programme – coverage is currently about 92%, according to government figures – the HMO industry is also pondering ways to extend services beyond the middle and upper classes, who are either covered through employment or able to pay a premium on their own. The government has indicated it is open to public-private partnerships that will help the working poor. The insurance industry launched the MicroHealth scheme in 2006, which targets low-income workers and gives them access to private health care. In 2016 the IC and DoH signed a preliminary agreement to collaborate on enabling MicroHealth providers, including HMOs, to offer complementary and supplementary services.
Different Strategy
The industry is also looking to draw up micro-HMO plans that would offer cheaper premiums to those with a lower income while maintaining quality of care. Da Silva estimates coverage for this population could cost as little as P36 ($0.76) a day. “While these products are envisioned to bridge health care gaps across our society’s labour force, it may not minimise out-of-pocket expenses,” he told OBG. “But at least the marginalised would have the means to see a doctor in any of their HMO’s affiliated hospitals nationwide, hopefully staying within the limits of his or her policy.” Under HMOs, accredited doctors are not allowed to charge private rates when a patient exceeds the annual limit on his or her benefits.
Health and wellness packages are another area where HMOs are extending coverage. HMOs provide regular updates on diet and exercise and sometimes send mobile clinics to offices to conduct annual checkups for corporate clients. They also offer advice on seasonal health conditions such as dengue, for which the risk increases during the rainy season. HMOs are still a relatively small part of the overall system, but regulatory changes in 2016 have put them on firmer footing.
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