SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B.No. 670 
Stmdl:' 
·(!>ft.;r "f 1I1<Jii',·mIl3£1I 
'13 
JUL -9 1\ 9 :14 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
This bill seeks to encourage the establishment and growth of the Health 
Maintenance Organizations (HMOs) in the Philippines to promote participation 
of the private sector in providing health care to Filipinos. 
Section 15, Article II of the 1987 Constitution provides that the State shall 
protect and promote the right to health of the people and instill health 
consciousness among them. Section 11, Article XIII likewise provides that the 
State shall endeavor to provide free medical care to paupers. 
Clearly at present, the State cannot achieve the full delivery of quality 
health services. There is, therefore, a need to encourage private sector 
participation in addressing the health needs of our country. Such private 
participation can be initiated through establishment and regulation of health 
maintenance organizations. 
Under this bill, a health maintenance organization is envisioned an 
insurance company that sells fixed pre-paid health insurance policies to the 
public. It coordinates the delivery of pre-agreed or designated health care 
services to its members through a network of health care providers for a fixed 
periodic fee and for a specified period of time. Through managed care, it 
influences the utilization and cost of health services with the end to make 
beneficial, effective, and/ or necessary quality health care affordable to the 
public. 
The importance of State intervention in this endeavor is crucial to ensure 
that the imposition of harsh unconscionable terms be avoided. That is why this 
proposed measure enumerates the operating guidelines for HMOs to address the 
alleged gross inequality of bargaining power that currently characterizes the 
HMO relationship with its members and health care providers. 
In view of the foregoing, the immediate approval of this bill is earnestly 
sought. 
~.-.-' =:::> ..-------::::> 
~ 
_.:::-::/' 
Lt:J'ltENLEGARDA 
Senator 


SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
l.' 0-, 0 
S.B. No. _D_( 
'13 
JYl.. -9 1\9 :~4 
Introduced by Senator Loren Legarda 
AN ACT 
REGULATING THE ESTABLISHMENT AND OPERATIONS OF HEALTH 
MAINTENANCE 
ORGANIZATIONS 
(HMOs), 
PROVIDING 
THEM 
INCENTIVES AND FOR OTHER PURPOSES 
, 
. 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
' 
, 
SECTION' 1. Short Title. - This Act shall be known as' the "Health 
2 
Mainten~nce Organization,Act of 2013." 
3 
4 
SECTION 2. Statement of Policy. - It is herebydedared the policy of the 
5 
State to protect and promote the right to health of the people and instill health 
" 
' 
6 
consciousness among them. Towards this end, it shall encourage the establishment 
7 
and favorable' operation of Health Maintenance Organizations (HMOs) by sranting 
8 
reasonable incentives to: enhance accessibility to quality health care services through 
9 
affordable health insurance policies, 
10 
11 
SECTION 3. Objectives. - In line with the above policy, this Act seeks to: 
12 
, 
13 
a) Recognize HMOs as unique health care !nsurance entities that combine the 
14 
financing, management and coordination of health services and to encourage 
15 
their growth by granting them reasonable incelitives. 
16 
b) Establish the regulatory framework for HMOs. ' 
'17 
c) Recognize and protect' the rights of HMOs, health care providers and 
18 
members. 
19 
d) Advance health consciousn~ss among out people by promoting greater 
20 
accessibility to quality health care ,through affordable health insurance 
21 
policies. 
22 


1 
SJjCTION 4. Definitions. - When used in this Act, the following terms shall 
2 
mean as follows: 
3 
a) Health Maintenance Organization - im insurance company organized in 
4 
accordance with the provisions of the Corporation Code of the Philippines 
5 
that sells fixed pre-paid health insurance policies as defined in paragraph 0) 
6 
of this section to the public. It coordinates the delivery of pre-agreed or 
7 
designated health care services to its ~embers through a network of health 
8 
care providers for a fi:<ed periodic fee and for a speci,fied period of time. 
9 
Through managed care, it influences the utilization and cost of health services 
10 
with the end to make beneficial, effective, and/or necessary quality health 
11 
care affordable to the public; 
12. 
The HMO shall 'possess the following functional characteristics: 
13 
1) It uses ,an organized system called "Managed Care" to coordinate the 
14 
delivery of health services to its members through health care providers in 
15 
a defined geographical area; 
16 
2) It contracts t,he services of health care providers. to deliver health care 
17 
services to its enrollees and/ or their depepdents as their agreement may 
18 
stipulate; 
19 
3) It has an enrolled group of individuals paying a fixed periodic fee. 
20 
b) Actuary -
a statistician with the necessary ,training, qualification and 
21 
experience and a fellow of the Actuarial Society of the Philippines. He shall, 
22 
among others, compute rates for he<ilth care plans on the basis of experience 
23 
tables and determine the financ,ial soundness of health care agreements and 
f" 
24 
operation of HMOs; 
25 
c) Co-Payment, - a charge which may be collected directly by a health care 
26 
provider from a member in accordance with the member's health care policy; 
27 
d) Claim - a statement of services submitted to an HMO by a health care 
28 
provider following the provision of Covered Services to a member that shall 
29 
include diagnosis or diagnoses and itemization of services and treatment 
30 
provided to the member; . 
31 
e) Covered Services/Coverage - health care services to be delivered by a health 
32 
care provider to a member as provided for in a health care policy; 
33 
f) Deductible - the amount a member pays out-of-pocket before the HMO 
34 . 
begins to pay the cost associated with treatment; 
2 


1 
g) Health-Care Provider - a health professional such as physician, dentist, . 
2 
nurse, midwife, health care professional group and hospital, duly licensed by 
3 
the proper government agency to provide active health care services; 
4. 
h) Health Care Provider Contract - a contract between an HMO and a health 
5 
care provider for the latter to deliver. or provide health care services to 
6 
members of the former. It includes 'a schedule of Covered Services and 
7 
compensations and specifies all other terms,. conditions, limitations, 
8 
exclusions, benefits, rights and obligations thereof to which the HMO and 
9 
health care provider are subject. 
10 
i) Health Care Policy - an insurance policy comprising an individual set of 
11 
health service delivery and compensation procedure offered as a Managed 
12 
Care product of an HMO to its members. It specifies Covered Services and all 
13 
other terms, conditions, limitations, exclusions,. benefits, rights and 
14 
obligations thereof to which the HMO and members are subject. It may be in 
15 
the form of a Comprehensive HMO Policy, Preferred Provider Policy, 
16 
Managed Indemnity, Self-Insured Policy or Third Party Administration 
17 
Policy. 
18 . 
. j) Managed Care - A complex system that involves the active coordination of, 
19 
and the arrangement for, the provision of health services and coverage of 
20 
health benefits. It involves relationships and organization of the providers 
21 
giving care, and the covered benefits tied to managed care rules; 
-., 
. 22 
k) MedicallY'Necessary Services - refer to health care services that a reasonably 
23 
prudent physician would deem necessary for the diagnosis or treatment of 
24 
illness or injury or to impr.ove the functioning of a malformed body part of a 
25 
. member; 
26. 
1) Member - an insured individual, a part of a group or an employee of a 
. 27 
corporation and his dependents, who entered into a contract of health 
. 28 
insurance with an,HMO; 
29 
m) Enrollment Fee - the amount of money paid to an HMO by an individual 
'30 
member, group or corporation on behalf of its employees and the latter's 
31 
dependents, in payment for a pre-agreed set of health services, for a specific 
32 
period of time; 
33 
n) Participating Provider - a' health care provider who, under a Health Care 
34 
Provider Contract,has agreed to. provide health care services to the HMO 
35 
members, with the right to payment, other than co-payment or deductibl~ 
, 
36 
directly or indirectly from the HMO; 
3. 


.28 
period has lapsed and after thorough review, it shall either approve or deny the 
29 
application, the reasons thereof shall immediately be known to the applicant. The 
30 
license to operate granted under this Act shall be effective for one (1) year, subject to 
31 
renewal by the Commission. 
32 
33 
SECTION 8. Licensure Requirements. - The Insurance Commission and the 
34· 
Department of Health shall prescribe the requirements for licensure and renewal of 
35 
li.;:ense of HMOs based on the provisions of Section 7 of this Act. The requirements 
36 
shall include but not be limited to: 
4 


a) The minimum authorized and paid up capitalization; 
2 
b) Financial Statement! projections for new HMOs; 
3 
c) Annual Reports for existing HMOs; 
4 
d) Data on membership enrollment; 
5 
e)' Geographical area operation; 
6 
f) ,Health policies being offered; 
7 ' 
g) Arrangements for ensuring the payment of the cost of health care services or 
8 
the provision for automatic applicability of an alternative ,coverage in the 
9 
event of discontiriuance of the Health Maintenance Organization; 
10 
h) Any deposit of cash, or guaranty or minimum restricted reserves which the 
11 
Commissioner, by regulation may adopt to assure that the obligations to 
12 
subscribers and providers will be performed; , 
13 
i) Philippine Health Insurance Corporation (PHIC) Accreditation; 
14 
j) Department of Health HMO Accreditation - The Departrrient of Health shall 
15 
accredit HMOs after the Secretary has determined that the applicant: 
16 
A. Guarantees its members fundamental patient's rights, to inclrtde among 
17 
others: 
18 
1) Patient's right to choose physician or health facility -
The freedoin of 
19 
patients to' choose their physician or health facility shall not be 
20 
negotiated by any contract arrangement or procedure of a health 
21 
maintenance organization. All members in HMOs ,shall be offered an 
22 
out-of-network ,option that will enable them to obtain, even at the 
23 
member's additional expense care from a 'health provider. Such Qut-
24 
of-network health providers shall have the right to HMO 
25 
compensation, other than co-payment or deductible directly or 
26 
indirectly from the HMO; 
27 
2) To see a specialist of choice - An HMO patient may seek the services of a 
28 
specialist who may not necessarily be affiliated with the HMO. 
29 
3) Patient's right to emergency care - A member who reasonably believes 
30 
that he is suffering from an emergency condition has the right to seek 
31 
emergency care from the nearest emergency department without first 
32 
pre-authorizing or pre-certifying the care with their HMO; 
33 
4) Patient's right to Grievance and external review program -:- Members of an 
, 34 
HMO shall be granted the right to dispute coverage denials on the 
35 
36 
basis of "medically necessary" decisions before an independent 
Review Committee as provided for in Section 10 hereof, 
5 


1 
2 
3 
4 
5 
6 
8 
9 
10 
11 
12, 
13 
14 
15 
16 
17 
18 
19 
20 
B. Guarantees in Health Care Providers: ' 
1) Physician'sjOentist's full freedom to manage and treat patients in accordance 
with the prevailing standard of care - Permitting arbitrary health policy 
definitions of "medically necessary" 
to control all coverage 
determinations and allowing HMO bureaucrats, rather than properly 
qualified licensed physician/ dentists to make "medically nece~sary" 
decisions shall be made by physicians/ dentists in accordance with 
generally accepted standards of medical! dental practice that a prudent 
, physician/ dentist will make; 
, 2) Prompt and just compensation -:- health care providers shall be paid their 
just professional! facility .fees within thirty'(30) days from receipt of the 
latter's written or electronic claim. In the event that such claim is not 
approved, the reasons therefore shall be made known to the provider 
, 
. 
within seven (7) days after receipt of such written or electronic plan. 
Disputes may then be addressed td the Insurance Commission for . 
arbitration as provided for in Section 10 hereof. HMOs that do not pay 
clean claims within. the thirty (30) day window may be liable for 
suspension of its license to operate and, additionally, will be required 
'to pay interest at a rate to be determined by the Insurance 
Commission. 
Professional fees must be in accordance with the 
21 
Philippine Medical Associations/Philippine Dental Association's 
22 
latest schedule of fees and latest Relative Unit Values and multiplying 
23 
factors (RUV) pt~vailing upon' the effectivity date of the contract. 
24 
,CO Has a network of qualified and duty licensed health providers. 
2S 
26 
SECTION 9. Actuaries/Financial Consultants. - To protect the potential and 
27 
enrolled members of the HMOs, the Commission shall ensure that HMOs adhere to 
28 
actuarially sound practices and possess financial capabilities to render the services 
" 
' 
-
29 
stipulated in their agreements. 
30 
31 
To achieve these objectives, the Commission shall engage the service,S of 
32 
actuaries and/ or financial consultants to analyze the financial status and the 
3:i 
actuarial soundness of the HMO practices prior to issuance or renewal of licenses. 
34 
For this purpose, the Co~ission sh~ll require fro~ HMOs such additional data 
35 
and reports it deems necessary: Provided, That, such data and reports are certified by 
36 
either an actuary, financial consultant or external auditor. 
. 
6 


SECTION 10. Arbitration and Review. - HMOs shall provide an internal 
2 
mechanism where disputes between parties to a Health Care Policy or parties to an 
3 
internal Care Provider Contract rimy be resolved in an expeditious manner. In the 
4 
event that the dispute is unresolved, a member, health provider or an HMO may 
5 
elevate the case directly to the Commission for binding arbitration. However, if the 
6 
Commission determines the conflict to be medical in nature or· requiring a review of 
7 
medically necessary.decisions, the case shall be referred to an HMO Medical Review 
8 
Committee to be constituted by the DOH for judgment. The HMO Medical Review 
9 
Committee shall ensure that reviews ofmedicaliy necessary decisions must be made 
10 
only by truly independent licensed physicians familiar: with the medical condition or 
11 
treatment in question and of the same specialty as the treating physician. Such 
12 
.complaints or. disputes sha,ll be decided upon within thirty (30) days and the 
. 13 
decision shall be final and executory, All other complaints that remain with the 
14 
Insurance Commission for arbitration shall be decided upon within sixty (60) days. 
15 
The decision of the Commission shall be final and executory, appealable to the 
16 
Supreme Court only on questions of law. 
17 
18 
SECTION 11. Grounds for Suspension of License. - The license to operate 
19 
issued to an HMO may be suspended by the Cointnission on the following grounds: 
, 
\ '  
. 
. 
. 
20 
a) V\Then, based on financial reports, continued operation of the HMO business 
21 
is no longer financially sound; 
22 
b) When agreements with members are not honored; 
23 
c) When contracts with health .care providers, including but not limited to 
24 
prompt and just compensation for health services rendered, are violated; 
25 
d) When' the statements in the application.for 1ice~se or'renewal thereof are 
26 
found ·to be false, misleading, inadequate or incomplete such that the 
27 
Corrtmission cannot ascertain the true status from such'statement or are not 
28 
sufficient to arrive at an honest appraisal of the true capability of the HMO; 
29 
e) When the decision of the Commission on cases for arbitration is not honored 
30 
by an HMO; 
31 
f) When the decision of the HMO Review Committee is not honored by an 
32 
HMO; 
33 
. g) When an HMO continuously violates the rules 'and regulations issued by the 
34 
Commission and the Depart:rnent of Health pursuant to Section 18 of this Act .. 
7 


SECTION 12. Grounds for Revocation of License. - The Commission shall 
2 
revoke the license of any Health Maintenance Organization on the following 
3 
grounds: 
4 
a} Repeated violations of this Act by an HMO; 
5 
b) Repeated suspension of HMO license; 
6 ' 
c) Irripairment of the status of the HMO, as may be determined by the Insurance 
7 
Commission during suspension based on paragraph (a) of Section 11 hereof, 
8 
after a fair appraisal by impartial actuaries and financiai consultants, such 
9 
that even if allowed to continue to operate, it can no longer provide the 
10 
services it assumed under the agreement'with its members. 
11 
12 
SECTION 13. Administrative Sanctions.- The following administrative 
13 
sanctions are hereby imposed for violations that do not warrant susp~nsion or 
14 
revocation of license: 
15 
a) A fine of Ten Thousand Pesos (PIO,OOO.OO) for the first violation' of the 
16 
provision of this ,Act, Twenty Thousand Pesos (P20,OOO.OO) for the second 
17 
violation, and Thirty Thousand Pesos (P30,OOO.OO) for the third violation. The 
18 
provision of Section 11 shall apply upon the fourth violation of this Act; 
19 
b) A fine of Fifty Thousand Pesos '(P50,OOO.OO) every time the license of the 
,20 
HMO is suspended: Provided, That payment of this fine shaJl not absolve the 
21 
HMO from its obligations under the agreement; 
22 
c) An order to freeze the assets and funds of the HMO suspended or revoked' 
23 
for the protection of investors, providers and members. 
24 
The Commission shall retain the amount that may be collected as fines for its 
25 
use in the information dissemination mentioned in the immediately succeeding 
26 
section: Provided, That a separate, account be maintained by the Commission for 
27 
such purpose. 
28 
29 
SECTION 14. Publication. - The Commission shall periodically publish in a 
30 
newspaper of general circulation the following: ' 
31 
a) List of duly licensed HMOs in good standing; 
32 
b) Suspension and/or revocation of the license of HMOs, copies of which shall 
33 
be furnished to associations of the medical! denta1 profession, hospitals and 
34 
employers who shall inform their members accordingly. 
35 
8 


1 
SECTION 15. Existing HMOs. -
All) existing Health Maintenance 
2 
Organizations duly registered with the Securities and Exchange Commission and 
3 
h,lVe been in operation prior to the effectivity of this Act shall continue to operate: 
4 
Provided, That they shall apply for new license with the Commission within one (1) 
5 
'year from the effectivity of this Act. 
6 
7 
SECTION 16. New License. - The Commission shall grant the above HMOs 
8 
their new license in accordance with th~s Act: Provided, That existing agreements, 
9 
rights and obligations derived therefrom shall be respected: Provided further, That the, 
10, HMOs comply with the licensing requirements within one (1) year. 
11 
12 
SECTION 17. Implementing Rules and Guidelines, -
The Insurance 
13 
Commission and the Department of Health shall promulgate the rules and 
14 
regulations. necessary to implement this Act within ninety (90) days from its 
15 
approval. Said rules and regulations shall be furnished to HMOs and shall take 
16 
effect upon publication in a newspaper ,of general circulation. 
17 
18 
SECTION 18. Separability Clause. - If any provision of this Act is ,declared 
19 
unconstitutional or invalid, other provisions hereof not affected thereby shall remain 
20 ,in full.force and effect. 
21 
22 
SECTION 19~ Repealing Clili(se. - All laws, decrees, ordinances, rules and 
23 
regulations, executive or administrative orders or parts thereof inconsistent with this 
24 
Act are hereby repealed, amended or modified accordingly. 
25 
26 
SECTION 20. Effectivity. - This Act shall take effect fifteen (15) days 
27 
. !ollowing its publication in at least two (2) newspapers of general circulation. 
28 
29 
Approved, 
9