Trouble brewing at HMO firm

First of a series

Caritas Health Shield—reportedly the biggest health maintenance organization (HMO) and preneed firm “hybrid” in the Philippines—has been asked by the Insurance Commission to raise fresh capital amid allegations by former managers that the firm has a deficiency of as much as P7 billion in its actuarial reserves.

At the same time, however, the insurance regulator has downplayed the issues facing the company, whose 600,000 policyholders nationwide rely on it for their healthcare needs, calling it an “intracorporate dispute” between Caritas’ current management and the camp of its former president, Teodoro Jumamil.

Jumamil was removed by Caritas’ board in December 2016 after the lawyer and San Beda law professor got into a dispute with the firm’s other shareholders about its finances.

Jumamil, who became president of the firm in 2015, said he was “surprised” by the financial condition of the firm when he assumed office, noting that, although sales were robust, Caritas’ products were, from a financial standpoint, poorly designed from the outset.

“The products were too good to be true,” he told the Inquirer, noting that its flagship “gold plan” offered policy holders health care coverage for 10 years and, on top of that, would grant these clients a rebate of up to 70 percent of their payments at the end of the policy.

“There was no way this could be sustained, so the first thing I did when I became president was to stop the sale of this product,” he said.

Another former Caritas official interviewed by the Inquirer —its then-comptroller Mary Jenelle Palma—said she, too, had found anomalies in Caritas’ financial records, including overpriced purchases and deals with previously blacklisted contractors and service providers as well as a P7-billion deficit in its actuarial reserves as of 2016.

She said she brought these issues up with the firm’s board several times, but was ignored and eventually reassigned to another position, which forced her to resign.

Both Jumamil and Palma claimed that, due to the alleged deficit in the firm’s actuarial reserves, the benefits that Caritas was paying out to existing policy holders was being sourced from the payments of its new clients.

“It has become like a Ponzi scheme,” said Palma, who has also sued Caritas for “constructive dismissal” earlier this year. “The ones who are lucky are the clients who got in early,” she added.

Jumamil, his wife (who is also a former Caritas official) and Palma have all written insurance regulators multiple times warning about the financial condition of the firm and asking that action be taken against the current management.

Insurance Commission chief Dennis Funa told the Inquirer that Jumamil has also filed a petition for conservatorship with regulators, asking that the assets of Caritas be frozen to prevent their dissipation by the current management. The petition is pending and Caritas has been asked to reply to the petition.

The Inquirer interviewed Caritas president Ronnie Collado, who stressed that the company was financially healthy and able to meet all its obligations as they come due. He attributed payment delays being experienced by clients, business partners and other stakeholders to red tape, saying some billers would submit incomplete requirements, thus delaying the processing of their payments.

Both Funa and Collado pointed out that Jumamil has since joined another HMO and, as such, is eager to see Caritas in financial dire straights.

“That’s not true,” Jumamil said, who pointed out that he remained a shareholder in Caritas who has much to lose financially if the company collapses. “What I’ve been warning them about is the health of the company. We should not be fooling our clients this way.” (To be continued)