Higher capital requirement for HMOs to ensure ample coverage for clients, IC chief says
THE PROPOSED higher minimum capitalization requirement for health maintenance organizations (HMOs) could cause “a few” providers to halt their operations but is unlikely to affect larger firms, the Insurance Commission (IC) chief said.
“We studied it and only a few will be hit. If I remember correctly, around seven providers will be affected, but they only have small coverages. What we might do is limit the number of those who have lower capitalization. We’re still open to suggestions,” Insurance Commissioner Reynaldo A. Regalado told reporters on Tuesday.
Mr. Regalado said he hopes to immediately implement the new capital rules as these would help ensure that HMO clients can be adequately covered by their providers.
The IC last month issued an advisory seeking industry comments on a possible increase in HMOs’ minimum paid-up capital requirement, which will be implemented over 10 years.
Under the proposal, from the current P10-million requirement, existing HMOs will need to have at least P50 million in paid-up capital by end-2024, while new HMOs will need to put up at least P100 million in capital.
By end-2025, all HMOs should have at least P100 million in capital. This will be increased to P200 million by end-2028, P350 million by end-2031, and to P500 million by end-2034.
Most of the bigger firms are already compliant with the increased capital requirement as some life insurance companies are setting up or have established their own HMOs, which ensures they have enough buffers, Mr. Regalado said.
Meanwhile, the IC has already closed two HMOs and could close two more, due to their inability to meet the current minimum capital level, he noted.
Mr. Regalado said they will help find ways to keep existing HMOs from being closed down when the higher capital requirements are implemented, including facilitating mergers.
“We’re very open because they have existing coverages already. We have to take care of the public, so the adjustments have to be clearly set out,” he added.
The HMO industry swung to profit in the first quarter amid higher revenues despite increased benefit payouts, IC data showed.
The industry booked a combined net income of P6.8 million in the first three months of 2024, a turnaround from the P319-million net loss incurred in the same period last year, IC data based on the financial statements of 24 licensed HMOs showed.
Only five out of the 24 licensed HMO companies recorded net losses in the period, according to the report, with all firms meeting the current P10-million capital requirement. — A.M.C. Sy