MANILA, Philippines — The health maintenance organization (HMO) industry will now face penalties for their unsound business acts as the government moves to protect consumers who are availing of financial products and services.
In its latest circular, the Insurance Commission (IC) released the guidelines defining unsound business acts and providing administrative fines for violations of any HMO authorized to do business in the Philippines.
IC commissioner Reynaldo Regalado said this is in line with the Financial Products and Services Consumer Protection Act that mandates the IC to protect the rights of financial consumers.
These include their right to equitable and fair treatment, right to disclosure and transparency of financial products and services, and right to protection of consumer assets against fraud and misuse.
It also covers their right to data privacy and protection, and right to timely handling and redressal of complaints.
Similarly, the IC is also empowered to issue orders to prevent fraud and injury to the HMO plan holders and industry stakeholders, as well as impose sanctions and appropriate penalties when necessary.
According to the IC, unsound business acts include misrepresentation to the public, unfair discrimination, unfair claims or availments management, and misrepresentation in HMO applications or claims.
Also considered as unsound business acts are the failure to effectively control and supervise HMO agents, failure to provide a copy of the HMO product, and failure to respond to regulatory inquiries.
Specifically, HMOs can be penalized for misrepresenting to clients and members the true nature or terms and conditions of a certain product, particularly on benefits, limitations, affiliated hospitals, covered illnesses, and membership fees, among others.
HMOs are also not allowed to make partial settlement of claims, that contains a statement which directly or indirectly releases the HMO from total liability under a certain product.
In terms of advertisement, HMOs cannot promote products that are not approved by the IC.
Further, HMOs can be held liable for unfair discrimination when they give less advantageous rates and conditions to any Filipino or any race, for that matter.
The IC, likewise, warned HMOs that they can be fined for unfair claims, including denial to pay without reasonable investigation, attempting to settle a claim for less than the amount due, and delaying probe or payment by requiring unnecessary documents, among others.
The IC’s Regulation, Enforcement, and Prosecution Division will conduct an administrative hearing should there be a complaint or case against any HMO.
For the first offense, a fine of P10,000 to P50,000 can be imposed, which could increase to as much as P100,000 if done for the second time. This will be hiked to P150,000 if an HMO violates a provision for the third time.
It should be noted that if the punishable conduct or violation was made deliberately or willfully, a higher fine will be imposed.
The penalty is P50,000 to P100,000 for the first offense, as much as P150,000 for the second offense, and up to P200,000 for the third offense.
“The suspension or removal from office may also be imposed upon directors, officers or employees of HMOs or intermediaries found to have violated, as the circumstances would warrant,” the IC said.
As of the end of the third quarter of 2023, the HMO industry suffered a higher net loss of P2.15 billion.
This was attributed to the higher benefits and claims released by 28 HMO firms which jumped by 28 percent to P40.92 billion from P31.93 billion in 2022.
The financial condition of several HMOs was heavily impacted by the 2022 loss and the continuing increase in health care costs last year.