Regulation of HMOs
Plans are afoot by the government for the Insurance Commission to assume regulatory authority over the country’s health maintenance organizations (HMO).
HMOs are private corporations, usually managed by doctors and other medical practitioners, that offer medical and health care to their client-members for a fixed rate or contribution.
Members can avail themselves of the services and facilities of the HMOs’ accredited medical specialists, clinics and hospitals depending on the plan they subscribed to.
The HMO concept dates back to the 1900s in the United States when some companies entered into arrangements with medical institutions for prepaid medical services to their employees.
The assurance of medical assistance in case the need arose boosted the morale of the covered employees and, as a result, improved their productivity and work output.
The beneficial effects of the program encouraged other companies to replicate the program through affiliate companies or third party service providers.
In 1973, the US Congress enacted a law that made the HMO concept an integral part of its national health system. That move spurred the growth of the HMO industry in the United States which, like other business trends there, found its way into our country.
Coverage
Through HMOs, local business establishments are able to address their employees’ medical needs without having to maintain expensive medical facilities in their premises or medical professionals in their payroll.
The economies of scale and the assurance of patronage from members enable HMOs to negotiate discounted rates from doctors and hospitals. The membership card or referral slip serves as the pass for the availment of medical services and use of hospital facilities.
At present, HMOs are in a state of regulatory limbo. The Department of Health exercises limited authority over them by way of issuance of clearance to operate.
The Securities and Exchange Commission’s responsibility is limited to seeing to it they meet the requirements for registration as corporations. Since they do not sell securities to the public as a prerequisite for enjoyment of medical services, they are not required to apply for a secondary license for that purpose.
In the absence of enabling authority, the Insurance Commission is hesitant to supervise them because, strictly speaking, they are not insurance companies although the service they provide is similar to health insurance.
If it wants to be liberal about it, however, the IC can justify the exercise of supervisory responsibility by classifying them as pre-need companies. Under the Pre-Need Code (Rep. Act 9829), pre-need companies are under its regulatory umbrella.
Trigger events
The HMO concept is a hybrid insurance and pre-need program.
In insurance, benefits are paid based on uncertain or unpredictable events, such as, death, critical illness or accident. In pre-need plans, the benefits are triggered by certain or predictable events, e.g., school enrollment, travel or retirement.
The HMO has both features: medical services can be availed of on specific (certain) times of the year, i.e. check-ups and tests, and on (uncertain) emergencies that require immediate hospital confinement.
If Finance Secretary Cesar Purisima can have his way, he wants HMOs regulated by the IC to ensure their financial strength and reliability.
Obviously, the Department of Health has more important things to do than be burdened with the responsibility of seeing to it that HMOs deliver on their promises to their members.
Since HMO plans have insurance and pre-need features, it is only logical that the IC, given its expertise on actuarial studies and provisioning of premium-based benefits, is in the best position to monitor the activities of HMOs.
It bears noting that, to date, some three million Filipinos are enrolled in various HMOs, 17 of which have good track records on the delivery of promised medical services and the rest are of doubtful credibility.
Past lessons
The legal eagles of Malacañang have to figure out a way to justify the IC’s assumption of supervisory responsibility over HMOs without having to go through the legislative process.
Congress cannot be expected to act on this matter with dispatch. There is no money involved in it that would encourage its members to put the matter in their agenda.
An opinion from the Department of Justice that the spirit and intent of the Pre-Need Code and Insurance Code authorize the designation of the IC as the overseer of HMO activities can provide the legal basis for the issuance of an executive order to that effect.
Until the Supreme Court rules otherwise, the DOJ’s interpretation of the two laws mentioned is considered valid and binding on the government.
In the event the IC takes on that role, it should take to heart the lessons from the collapse of several pre-need companies in the past, the most recent of which is Prudentialife Plan, and learn from them.
It is unfortunate that no director or manager of any of these pre-need companies was prosecuted or held responsible for the loss of millions of pesos in premium contributions. One of them even had the gall to present himself to the public as an expert on investments and financial literacy!
Thousands of families were left holding the proverbial empty bag, and their children’s education abruptly interrupted, when the owners of these pre-need companies absconded with their money.
Hopefully, the HMOs will not find themselves in a similar situation. They should not forget that, figuratively, they are engaged in life and death situations when they attend to the needs of their members.
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