New capital rules could close down HMOs

PHOTOS: Judgefloro via WikiMedia Commons and STOCK

The increased minimum capitalization requirements for health maintenance organizations (HMOs) might force smaller providers to shut down, but larger providers will not be affected as they already meet the new standards, Insurance Commision (IC) Commissioner Reynaldo Regalado said on Tuesday.

This, after the IC released the draft circular on the proposed revision in the minimum capitalization, financial capacity and other regulatory requirements of HMOs.

“We have already closed at least two. I think we’re closing even two more. I cannot compromise our risk management on health. So it’s really necessary that we have to have this kind of.. you don’t really need them to be really big,” Regalado said.

READ: IC: HMOs profitable again in first quarter

He said that there are about seven HMO providers who will be affected by the planned adjustment.

Regalado stressed that the current P10 million minimum paid-up capital is too small to be able to improve their health insurance service.

“I think it’s high time that we really look at it seriously. Because our government is very serious about providing health,” he added.

The IC will raise the minimum capital requirements to P50 million for existing HMOs and P100 million for new entrants by the end of the year. By the end of 2025, this requirement will be increased to P100 million for both existing and new HMOs.

Subsequent increases will occur every three years, with the minimum paid-up capital reaching P200 million by 2028, P350 million by 2031, and P500 million by 2034.

Meanwhile, community-based and cooperative HMOs will maintain a paid-up capital equivalent to 50 percent of that required for regular HMOs.

To prevent HMOs from entering conservatorship or managing their own finances, Regalado mentioned they are considering limiting the number of those with lower capitalization.

Regaldo expressed optimism as a lot of HMO providers have already achieved the minimum capital requirement.

“So we have a lot of big ones. In fact, life insurance companies, a great number of them already have their own HMOs,” he said.

The IC is also exploring additional options to assist HMOs that struggle to comply.

“There are many ways we can help them on this, maybe they can merge, those are the options that we would like. We’re very open because there are existing coverages, we have to take care of the public so the adjustment has to be clearly set out,” he added.