Government wants to raise capital base for HMOs

MANILA, Philippines — The government is planning to increase the minimum paid-up capital of health maintenance organization (HMOs) every three years to establish progressive regulatory policies on the industry.

In a notice, the Insurance Commission (IC) released the draft circular on the proposed revision in the minimum capitalization, financial capacity and other regulatory requirements of HMOs.

HMOs are juridical entities legally organized to provide or arrange for the provision of pre-agreed or designated health care services to its enrolled members for a fixed prepaid fee or a specific period of time.

IC commissioner Reynaldo Regalado said the agency sees the need to revise the rules and regulations that govern the minimum capitalization and financial capacity requirements for HMOs.

“This is to establish progressive regulatory and supervisory policies over the HMO industry,” Regalado said.

As such, the IC will increase the prevailing minimum paid-up capital requirement to P50 million for existing HMOs and P100 million for new ones by yearend.

Currently, existing domestic HMOs must have a minimum paid-up capital of at least P10 million. By end-2025, this will be raised again to P100 million for existing and new HMOs.

After that, further hikes will be done every three years which means that minimum paid-up capital should be P200 million by 2028, P350 million by 2031 and P500 million by 2034.

Community-based and cooperative HMOs will maintain a paid-up capital equivalent to 50 percent of what is prescribed for a regular HMO.

In case of a foreign HMO applying for an HMO branch license, no license shall be issued unless the branch has a statutory deposit of an amount equal to the prevailing minimum paid-up capital for domestic HMOs.

Further, the IC said every HMO doing business shall at all times maintain a security deposit of at least 25 percent of the actual paid up capital.

This will be an increase from the current 20 percent.

All HMOs must likewise maintain a net worth that is at least equal to their actual paid-up capital.

The draft circular also showed that the HMO’s maximum risk on membership fees has been simplified.

If the net worth is up to P1 billion, the maximum gross membership fees should be five times the net worth. If it’s over P1 billion, there will be no limit.

ln addition to the disclosures required under the Philippine Financial Reporting Standards, HMOs shall present information on their compliance with the minimum capitalization and financial capacity requirements.

With this, the filing fee will be doubled to P40,000 upon submission of audited financial statements and a higher penalty of P10,000 will be imposed for every calendar day of delayed submission.

The IC also increased the annual supervision fees to P100,000 for gross membership fees of up to P10 million and P500,000 for those over P50 million.

Those between P10 million and P50 million will have a supervision fee of one percent of the gross membership fees.

HMOS that fail to pay the required fee will now be subject to a higher basic fine of 25 percent of the supervision fee plus an additional P1,000 for each calendar day the payment is delayed.

Following the draft release, the IC is now soliciting comments and suggestions from all interested persons within 14 days in a bid to promote participation from the public.