Close supervision of HMOs

The financial troubles that Caritas Health Shield Inc., one of the country’s biggest health maintenance organizations (HMO), is reportedly going through are causing jitters to its 600,000 or so policyholders.

Two of its former presidents claim Caritas does not have sufficient funds to meet its contractual obligations to its policyholders. They have asked the Insurance Commission (IC) to take action against its present officers.

The incumbent president has denied this allegation and assured its policyholders that the company has enough funds to meet its financial requirements. He criticized though his predecessors for blocking the company’s recapitalization efforts.

Commenting on this issue, Insurance Commissioner Dennis Funa said the company had to raise at least P150 million in fresh capital to enable it to comply with the IC’s funding standards.

Caritas is in a tight fix. It wants to increase its authorized capital stock but it cannot get the required stockholder approval for that purpose because a former president who owns substantial stocks has withheld his vote until after he is fully apprised of the company’s financial condition.

Meanwhile, the company has to fulfill its obligations to its policyholders from its available resources without violating the IC’s regulation on the number of policies it can sell to the public in relation to its paid-up capital.

As the regulator of HMOs, a responsibility it was ordered to assume by virtue of an executive order by then President Benigno Aquino III, the IC cannot let the corporate dispute play itself out or wait for the contending parties to come to their senses and agree to an amicable settlement of their differences.

Neither would it make good business sense for the IC to ask them to go to court to resolve their intra-corporate dispute considering the slow pace of justice in our country.

Thus, the IC should enter the picture and take an active hand in finding a solution to the corporate deadlock in Caritas to protect the interests of its policyholders.

It cannot and should not allow a repeat of the events in the early 2000s when College Assurance Plan and other preneed companies that issued education, pension and internment plans went under due to mismanagement and unsound business practices.

Some 400,000 policyholders, many of whom were overseas Filipinos workers who endured harsh working conditions to pay the premiums of the plans, were left holding the proverbial empty bag.

Contrary to the position taken by the IC, it does not need an enabling law to enable it to protect the interests of thousands of Caritas’ policyholders who invested in its policies so they can avail of adequate medical care when the need arises.

The Pre-Need Code of the Philippines (Republic Act 9829) provides the legal basis for the IC to crack the whip on Caritas to ensure that it lives up to its commitments to its policyholders.

The subject policies fall squarely within the definition of preneed plans as “contracts, agreements, deeds or plans for the benefit of the planholders which provide for the performance of future service/s, payment of monetary considerations or delivery of other benefits as the time of actual need or agreed maturity date, as specified therein, … and includes life, pension, education, interment and other plans, instruments, contracts or deeds as may in the future be determined by the Commission.” Learning from the lessons of mismanaged preneed companies, the law grants the IC the power to regulate, supervise and monitor the operations and management of preneed companies to ensure their compliance with the Code and other related laws.

Where necessary, or if all good housekeeping measures fail, the IC can takeover the operations of ailing preneed companies, through the appointment of a conservator, receiver or liquidator, to ensure that the rights of the planholders are properly protected.

The IC should take a leaf from the experience of the failed preneed companies in the past. After one preneed company floundered, others followed suit. That situation should not be reprised for HMOs.