No premium hike seen on higher capital for HMOs - IC
July 29, 2016 | 4:17pm
MANILA, Philippines — There is no premium hike expected from higher paid-up capital requirements for health maintenance organizations (HMOs) issued by the Insurance Commission (IC) on Friday.
"I think based on the current profile of the industry, it will not be hard for them to adjust so I don't think we should worry (about higher costs)," Deputy Commissioner Ferdinand Florendo said in a phone interview.
In a briefing, Insurance Commissioner Emmanuel Dooc signed Circular Letter 2016-41 which laid out maiden capital rules for HMOs such as Intellicare, Medicard Philippines and Maxicare Healthcare Corp.
New rules will take effect 15 days after publication.
The circular mandated that new HMO applicants should have at least P100 million paid-up capital while existing ones should maintain at least P10 million.
"The higher capital will not be applied to existing ones. We will respect their licenses and once those expire and they re-apply, that's the time it will be effected to them," Dooc told reporters.
But there should be no problem, he added, since currently the 29 HMOs already operating have an average capitalization of between P75 and P150 million.
Of the 29, 14 were new licenses approved by the IC after taking over from the Department of Health as HMO regulator through Executive Order 192 last year.
The other 15 have licenses effective until 2017. The highest capital recorded was P300 million, while the lowest was P2 million.
"We want to make sure that every HMO company can service their obligations and that providers will be duly paid," Dooc said.
Under the order, HMOs were also tasked to deposit an equivalent of 20 percent of their capital with the IC and should also have a net worth that is "not less than their paid-up capital."
Firms should manage their risk exposure, accepting only gross membership fees equivalent to between five and 50 times their paid-up capital.
Companies must also maintain "at all times" an acid test ratio of one. The ratio is computed by dividing companies' current assets over liabilities.
"No domestic HMO corporation shall declare or distribute any dividend on its outstanding stocks unless it has met the minimum paid-up capital," the order stated.
Despite the issuance, Dooc said the IC would still want to have a law enacted to institutionalize HMO regulations similar to the insurance industry.
In a related development, he reminded all insurers to increase their net worth to P550 million from P250 million by year-end, following Republic Act 10607 or the amendments to the Insurance Code.
So far, 80 percent of life insurers are already compliant, but it is their non-life counterparts which are showing "poor" performance.
"We will be compelled to undertake steps in case of non-compliance," Dooc said.
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