Blind

When infections broke out in Melbourne, Australia, the authorities completely locked down the large city. Yesterday, after over a hundred days, the city was finally reopened – but only after zero infection was achieved.

This was a remarkable feat. But it was possible only because adequate resources were available to test, trace and treat.

Over the past few weeks, China shut down two areas after small clusters of infection were found. Mass testing was conducted. Restrictions were lifted only after no further infections could be found.

The cases cited above required a hard-knuckle approach. But their success depended entirely on the public health measures undertaken at the same time movement was restricted. Massive testing, tracing and treating cost a lot of money – although probably not more than the economic costs of open-ended community quarantines.

When we put Metro Manila and all of Luzon under enhanced community quarantine last March, we had only one molecular laboratory capable of processing a few hundred tests. As a result the very first COVID-19 tests conducted took many days to process. That defeated the purpose of the exercise. Test results must be prompt so contact tracing could kick in quickly or else the virus will just continue to run rampant.

When the pandemic hit us, it is correct to say we were fighting it blind. Until we are able to test quickly, trace effectively and contain the infected, we cannot suppress the pandemic. This is ultimately the reason quarantine measures, in varying degrees of severity, have been maintained here – at great cost to the economy.

Last Tuesday, it was announced that GCQ restrictions would continue in Metro Manila and several other urban centers until the end of November. But for several weeks now, a substantial portion of our testing capacity has been put out of action because, for some reason, PhilHealth failed to pay the Philippine Red Cross for the tests already conducted. For reasons of incompetence or bad faith, our testing capability is now crippled.

When the independent Octa group released its latest analysis of the health emergency, among its main recommendations is to get Red Cross testing back on stream. For some reason, Palace spokesman Harry Roque chose to quarrel with this recommendation, saying we had other facilities to process tests.

The testing capacity that the Philippine Red Cross rapidly set up, on PhilHealth guarantees that the non-profit will be reimbursed, account for a quarter of all tests nationwide. But the Red Cross labs account for 40 percent of all tests done in Metro Manila – the epicenter of infections.

Unless this testing capacity is quickly restored, we will again be fighting the virus blind.

Precarious

The deep contraction of our economy through the first three quarters of this year is unprecedented. It will have second-generation effects that will push many of our companies into precarious positions in the immediate future.

Reflecting the economic contraction, stock prices in our market plunged perilously during the most intense moments of this health emergency. Fortunately, our stock market showed signs of a stable recovery the past week.

Stock prices are not only important to the companies that issued them. A host of companies, from social security providers to pre-need firms, have a large part of their funds invested in the stock market. If stock prices collapse, these companies will find difficulty delivering the services and benefits their clients depend on.

If stock prices remain mired for an extended period, this could create third-generation problems: families that could not draw on health insurance they are entitled to, students who could not cash in on their education plans and retirees who might not get their benefits. There is a huge social cost here.

The way PhilPlans has handled the challenges of this situation is illustrative of how the entire pre-need sector is coping. PhilPlans is one of the country’s largest pre-need firms. It is an industry leader in education, pension and memorial plans. It is also an exemplar of prudent management.

As of end-2018, PhilPlans had capitalization of P700 million – five times the capitalization required by the Insurance Commission. The company maintains a trust fund amounting to P31.8 billion. At end-2018, the company paid out P4.3 billion to its clients. Since its establishment in 1989, the pre-need firm paid over P35 billion to over half-a-million plan holders.

Its size and prudent management, however, did not spare PhilPlans from the effects of the downturn. Jimmy Dizon, PhilPlans EVP, notes that as of the end of March, the PSEi dropped 31.91 percent year-to-date. The fixed income market was down 0.5 percent year-to-date. The company’s real estate investments also lost value.

On top of it, the market for pre-need products slowed down along with the rest of the economy. Seeing that their consumers would rather hold on to their cash than purchase new pre-need plans, the company closed down its branches to save on operating costs and protect the trust fund.

When the crisis struck, PhilPlans made painful decisions such as closing down some of its branches. Its survival strategy centered on saving the company’s trust fund because this immediately affected servicing the needs of its clients.

The company had to make a hard choice: sell down its assets at distressed prices or defer payments of maturities this year. The Insurance Commission agreed that deferment in paying maturities was the wiser and more sustainable option.

Meanwhile, the company will rapidly digitalize its operations and proceed with plans to bounce back strongly in the coming year.