Evolution of the

HMO in the
Philippines
Ma. Jojo M. Mercado, MD
Objective:

Examines the process of legislating regulation for the

Philippine HMO industry.
How interest groups compete with each other and
attempt to influence legislation of the regulation law.
 The health Maintenance Organization (HMO) industry is
the fastest growing component of the national health
care system.
In 1989, total enrollment was 375,000
Ten years later, total enrollment exceeded 2.5 million,
equivalent to an average growth rate of 19% annually.
Substantial number of government agencies
and private organizations, principally the
Association of health Maintenance
Organization of the Philippines Inc.
(AHMOPI), lobbied for or influenced
regulation.

Karl Kendrick T. Chua; Legislating regulation for the HMO Industry

The Philippines Review of Economics, vol. XLIII
 Problem Policy Agenda Decision- Political Political
perception conception setting making execution impact

Interest Groups, Media,

Public opinion

SUPREME
Problem CONGRESS COURT
Areas
(eg, health,
security, PRESIDENT BUREAUCRACY
pollution)

Political Parties

F E E D B A C K
 Share of HMO in Total
expenditure
60

50

40

30 Share

20 Growth in Share

10

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
History of HMO in the
Philippines
Began in the late 1970s as a spill over from a successful
run in the United States.
US Congress passed the HMO Act of 1973
Paved the way for a federal grant and loan program to
encourage and stimulate the growth of US HMOs.
PIONEERS WERE:
Philam Care
Medicard
Fortune Care
Health Maintenance Inc.
Problem encountered

Department of Health
2001 accredited 40HMOs
Admitted that Existence of a fly by night HMO which offers
lower premiums but with higher probability of default
Medical Inflation
Medical costs have risen rapidly over years
HMO brokers revealed that premium rates of their clients
grew by an average of 20-30%in 2003
Contracts used to be 3 years
Causes competition among HMOs
Self regulation by AHMOPI

Government requires HMOs to register with the SEC

SEC does not have regulatory power on HMO since they do
not sell securities
To secure clearance from the Bureau of Health Facilities
and Services of the DOH
Mandated by Executive Order 102*
Directs DOH to supervise all health care services and
facilities.
DOH only issues clearance to operate though do not have
direct regulatory power over HMOs.
Insurance Commission (IC)
Does not consider HMOs as an insurance companies.
Association of Health Maintenance
Organization of the Philippines Inc.
(AHMOPI)
The official trade association of Philippine HMOs
Mandated by its mission to protect the interest of the
industry and individual member firms as well as to
improve means of providing appropriate health care at
affordable costs.
Goals:
To attain proper recognition for itself and the industry
To establish minimum industry standards
To represent the industry in transactions with the
government.
 AHMOPI was formed in 1987 by the first six HMOs:
Health Maintenance
Philam Care
Medicard
Fortune Medicare
Health Plan Philippines
Integrated Health Care Services
Role of AHMOPI

Primarily regulates the marketing and financial

standards.
Premium discounts offered are checked for their
sustainability
Determines standard procedures that can be covered in
hospitals, clinics and by doctors.
Prevent destructive price wars and maintain
sustainability of premium corresponding to an agreed
upon quality of service.
Hears all complaints filed by or against a member firms.
The Road to Regulation

HMOs were already a national issue As early as the 8th

Congress
In the Senate
Senate Resolution 425
Directed the Senate Committee on Health to look into the
practices, program, policies, procedures and government
supervision of HMOs

In the Lower House

House Bill 16185
Sought to revise the Philippine Medicare Act and establish a
national non-profit HMO
Bill-by-Bill summary
comparison
Provision HB 588 HB 826 HB 2436 HB 4666
1. Defines HMO as an insurance Y N N Y
company
2. Regulator IC DOH DOH Both
3. Rights of consumers and Y N N Y
providers
4. Mechanism for arbitration and Y Y N Y
review
5. Provides sanctions for erring Y Y Y Y
HMOs
6. Tax incentives Y Y Y N
7. Recognition of AHMOPI N Y N Y
Conclusion

Medical Care is a right and its protection is

necessary, but it does not automatically
follow that state regulation of HMOs can
improve total welfare.
Conclusion:

Since PHIC and HMOs have a common

objective of providing a quality health care
at low cost, then the law creating and
regulating them must necessarily explore
possible areas of collaboration, which may
need some amendments to the National
Health Insurance Act and the HMO Bill to
achieve smoother functions.