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Bepublic of the Philinpiaes
Bouse of Representatives
neem City, Aetre Manila

Fifteenth Congress
First Regular Session

House Bit Wo. 2430

Intreduced by HON. ROMEO M. ACOP

EXPLANATORY NOTE

Article XItI, Section 11 of the 1987 Constitution mandates that =

“The State shalt adopt an integrated and comprehensive approach to health
development which shall endeavour to make goods, health and other social
services available to all the people at affordable cost. There shall be priority for
the needs of the underprivileged, sick, elderly, disabled, women and children.”
(underscoring supplied)

‘Thus, Republic Act No. 7875 was passed in 1995 instituting a National Health
Insurance Program and creating the Philippine Health Insurance Corporation
(PhilHeatth) as the vehicle to provide Filipinos an equitable access to quality health
care. To ensure the financiat viability of its social mandate, the law established the
National Heatih Insurance Fund, a component of which is the Reserve Fund provided

for in Section 27 thereof.

Under Section 27, the reserve fund is that portion of the Corporation's
accumulated revenues not needed to meet the cost of its current year’s expenditures
and is earmarked to cover the amount of its actuarially estimated two year’s projected


program expenditures. Any excess of the actual reserves from the two-year cover is
mandated to be utilized to prospectively increase the Program's benefits or decrease

investments enumerated in the law.

A review of PhilHealth’s financial performance over the period of 2007-2009
indicates a strong growth with a 30% increase in total funds from P 71.31 billion in 2007
to P 100.05 billion in 2009. This growth is captured in the Corporation's reserve fund
and retained eamings. Under RA 7875, PhilHealth need not create a retained eamings
fund, notwithstanding that it is a corporate entity, since it is not required to make
remittances to the National Treasury, neither does it have to distribute dividends nor
engage in massive capital expenditure programs. PhilHealth’s retained earings may
represent additional funds that could be utilized to fund additional benefits.

‘On the other hand, PhilHealth posted P 69.42 billion in reserves in 2008 while its
actual total program expenditures (inclusive of benefit payments and operating
expenses) combined for 2009 and 2010 (2-year cover) only amounted to P 54.81 billion,
resulting to an excess of actual reserves of P 14.61 billion by end of 2010. This is the
amount which is supposed to be utilized in increasing the benefits of the Program or
decreasing the member-contributions as mandated by law. Moreover, in 2010,
PhilHealth reported a net investment of P 56.97 billion with interest and other income
eamings of P 6.28 billion.

Meanwhile, the General Appropriations Act of 2010 has allocated P 7.14 billion
for the Health Facilities Enhancement Program of the Department of Health, which the
Department claims to be just half or less of its actual requirements to wipe out the
current backlog of the program. The excess reserves of PhilHealth could be used to fill
such budgetary gap in the program and ease the backlog, and thereby increase the
funds in the health care system in the country in pursuit of the level prescribed by the
Word Health Organization at 5% of the country's Gross National Product.

Furthermore, PhilHeatth indicated in its Financial Report for 2010 receivable
amounts of P 6.44 billion constituting unremitted counterpart-contributions of the
National Government for the indigent program for the years 2005-2009, and P 143.49
million on the part of Local Govemment Units. As things currently stand, this recurring
inability of the National Government and the Local Gavernment Units to remit fully their
counterparts, if not properly addressed, may affect PhilHealth's financial viability and
operational effectiveness in the long-run


Hence, this bill aims to make use of the excess reserves of PhilHealth by

earmarking the same for the following purposes with their corresponding percentage
shares :

1) Thirty percent (30%) for the augmentation of the Department of Health's:
“Health Facilities Enhancement Program’ through the establishment of a
Healthcare Facilities Fund to be administered by the Department of Heath,

2) Ten percent (10%) to constitute a standby fund to cover such portion possible
of the unremitted but due and obligated counterpart-contributions of the
National Government and the Local Goverment Units under the indigent
program.

The bill also mandates a specific share of thirty percent (30%) of the excess
reserves to be utilized for the prospective increase in program benefits or decrease in
member-contributions, and puts a maximum limit of only thirty percent (30%) of the
reserves to be invested in short-term investments enumerated in the law.

These measures will make the country’s healthcare financing and delivery
systems more viable and responsive to the needs of the people. Ultimately, it is hoped
that the National Health Insurance Program achieves its social mission of ensuring
‘equitable access to quality health care for all Filipinos,

For the foregoing reasons, the immediate passage of this bill is earnestly
sought.



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Republic o€ the Philippines
Bouse of Representatives
Cuesan City, Metre Manik
Fifteenth Congress
First Regular Session

Introduced by HON. ROMEO M. ACOP

AN ACT
PROVIDING FOR THE UTILIZATION OF THE EXCESS RESERVE FUND
OF THE PHILIPPINE HEALTH INSURANCE CORPORATION, AMENDING FOR THE
PURPOSE REPUBLIC ACT NO. 7875

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled :

SECTION 1. - Section 27 of Republic Act No. 7875, otherwise known as, an “Act
instituting a National Health Insurance Program For All Filipinos and Establishing the
Philippine Health Insurance Corporation for the Purpose’, is hereby amended to read as.
follows :

SECTION 27. Reserve Funds - The Corporation shall set aside a portion of its
accumulated revenues not needed to meet the cost of the current year’s expenditures as
reserve funds: Provided, that the total amount of raserves shall not exceed a ceiling
equivalent to the amount actuarially estimated for two years’ projected Program
expenditures: Provided, further, that whenever actual reserves exceed the required
ceiling at the end of the Corporation's fiscal year, { the Program's benefits shal be


increased or member contributions decreased prospectively in order to adjust
expenditures or revenues to meet the required ceiling for reserve funds J, such portions
of the reserve fund as are not needed to meet the current expenciture obligations shall
be SET ASIDE AND EARMARKED FOR THE FOLLOWING PURPOSES :

1)

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4)

THIRTY PERCENT (30%) FOR THE PROSPECTIVE INCREASE OF THE
PROGRAW’S BENEFITS OR DECREASE OF MEMBER-CONTRIBUTIONS;

THIRTY PERCENT (30%) TO AUGMENT THE DEPARTMENT OF HEALTH'S:
“HEALTH FACILITIES ENHANCEMENT PROGRAM’ FOR THE NEXT
FISCAL YEAR AND SHALL BE KNOWN AS THE “HEALTHCARE FACELITIES
FUND’ TO BE ADMINISTERED BY THE DEPARTMENT OF HEALTH iN
ACCORDANCE WITH THE RULES AND REGULATIONS THAT SHALL BE
PROMULGATED BY THE DEPARTMENT OF BUDGET AND MANAGEMENT
FOR THE PURPOSE;

TEN PERCENT (10%) AS STAND-BY FUND TO COVER SUCH PORTION
POSSIBLE OF THE AMOUNT OF UNRECEIVED BUT DUE AND OBLIGATED
COUNTERPART-CONTRIBUTIONS BY THE NATIONAL GOVERNMENT AND
LOCAL GOVERNMENT UNITS UNDER THE INDIGENT PROGRAM;
PROVIDED, THAT SUCH AMOUNT EXPENDED FROM THE FUND UPON
ACTUAL RECEIPT FROM THE CONCERNED AGENCIES AND UNITS SHALL
BE REIMBURSED TO THE FUND; PROVIDED, FURTHER THAT IF SUCH
FUND IS UNUTILIZED, IT SHALL, AS MUCH AS PRACTICABLE, BE
INVESTED UNDER THE SUCCEEDING PARAGRAPH; AND,

THIRTY PERCENT (30%) SHALL BE invested in short-term investments to eam
‘an average annual income at prevailing rates of interest and shall be known as the
‘Investment Reserve Fund’ which shall be invested in any or all of the following

) In interest-bearing bonds, securities or other evidences of indebtedness of the
Government of the Philippines, or in bonds, securities, promissory notes and
other evidences of indebtedness to which full faith and credit and unconditional
guarantee of the Republic of the Philippines is pledged;
In interest-bearing deposits and loans to or securities in any domestic bank
doing business in the Philippines: Provided, that in the case of such deposits,
this shall not exceed at any time the unimpaired capital and surplus of total
Pfivate deposits of the depository bank, whichever is smaller: Provided, further,
that said bank shall first have been designated as a depository for this purpose
by the Monetary Board of the Bangko Sentral ng Pilipinas; and,
©) In preferred stocks of any solvent corporation or institution created or existing
under the laws of the Philippines: Provided, that the issuing, assuming, or
guaranteeing entity or its predecessor has paid regular dividends upon its
Preferred or guaranteed stocks for a period of at least three (3) years

b)


immediately preceding the date of investment in such preferred guaranteed
stocks: Provided, further, that if the corporation or institution has not paid
dividends upon its preferred stocks, the corporation or institution has sufficient
retained eamings to deciare dividends for at least two (2) years on such
preferred stocks and in common stocks options or warrants to common stocks
of any solvent corporation or institution created or existing under the laws of the
Philippines in the stock exchange with proven track record of profitability and
Payment of dividends over the last three (3) years or in common stocks of 4
newly organized corporation about to be listed in the stock exchange: Provided,
’s” of triple “‘A's” by authorized accredited domestic rating agencies or by
the Corporation or in mutual funds including allied investments.

D. IN BONDS, SECURITIES, PROMISSORY NOTES OR OTHER EVIDENCE OF
INDEBTEONESS OF MEDICAL {NSTITUTIONS TO FINANCE THE
CONSTRUCTION, IMPROVEMENT AND MAINTENANCE OF HOSPITALS
AND OTHER MEDICAL FACILITIES: PROVIDED, THAT IT SHALL NOT BE
LESS THAN TWENTY-FIVE PERCENT (25%) OF THE TOTAL INVESTMENT
RESERVE FUND.

SECTION 2. - implementing Rules and Regulations - The Secretary of the Department
of Budget and Management, upon consultation with the Secretary of the Department of Health
and with the Prasident of the Philippine Health Insurance Corporation, shall promulgate the
rules and regulations necessary for the effective implementation of this Act within sixty (60) days
from the approval of this Act.

SECTION 3. - Separability Clause - If any provision of this Act is declared invalid or
unconstitutional, the remaining provisions hereof shall remain in full force and effect.

SECTION 4. - Repealing Clause - All laws, decrees, executive orders, rules and
regulations, and other issuances, or parts thereof which are inconsistent with this Act are hereby
repealed or modified accordingly.

SECTION 5 -  Effectivity Clause - This Act shall take effect fifteen (15) days after its
Publication in any two (2) newspapers of general circulation,