SIXTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES —)
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez a
Representative Maximo B. Rodriguez, Jr. 4

House Bill No. 1346

EXPLANATORY NOTE

This bill was originally introduced as House Bill No. 2403 by the
undersigned Rufus B. Rodriguez during the Fourteenth Congress. It was
approved by the Committee on Health and Committee on Appropriations
under Commitiee Report No. 1760, dated February 12, 2009. It was
approved on 2™ reading on February 25, 2009 and 3” reading on March 5,
2009. It was transmitted to the Senate on March 11, 2009 where it was not
acted upon

This bill seeks to encourage the establishment and growth of the
Health Maintenance Organizations (HMOs) in the Philippine to promote
participation of the private sector in providing health care to Filipinos.

Section 15, Article Il of the 1987 Constitution provides that the Senate
shall protect and promote the right to health of the people and instill health
consciousness among them. Section 11, Article XIII of the same Constitution
provides that the State shall endeavor to provide free medical care to
paupers.

Over the years, the growing population of the country, which is
expected to reach 94 million in 2010 and the minimal government spending
for public health, have not been able to address the health needs of Filipinos
Of the top ten causes of death and sickness, only four are not poverty-related
More than 30 percent of Filipino children suffer from various stages of
malnutrition. The costs of locally-available drugs and medicines are at least
30 to 50 percent higher than retail costs in countries such as India. Worse,
more than 60 percent of Filipinos have not heard of health insurance
coverage, much less possess of the capacity to pay for such basic protection.

Clearly, the State cannot do it alone. There is therefore a need to
encourage private sector participation in addressing the health need of our
country. Such private participation can be initiated thru establishment and
regulation of health maintenance organizations.

Under this bill, a health maintenance organization is 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's intervention in this endeavor is crucial
because it is only thru such intervention will 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. Moreover, for the
protection of HMO members and health care providers, the establishment and
operations of the Health Maintenance Organizations (HMOs) shall be
regulated and shall be under the supervision of the Insurance Commission

In view of the foregoing, the immediate approval of this bill is earnestly
urged.

RUFUS B. ROD! EZ

MAXIMO B. ale, JR.


SIXTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES —)
FIRST REGULAR SESSION )

HOUSE OF. PRESENTATIVES
Tae

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

AN ACT
REGULATING THE ESTABLISHMENT AND OPERATIONS OF HEALTH
MAINTENANCE ORGANIZATIONS (HMOs), FOR OTHER PURPOSES

Be jit 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
Maintenance Organization Act of 2013”.

SEC. 2. Statement of Policy - It is hereby declared the policy of the
State to protect and promote the right to health of the people and instill health
consciousness among them. Pursuant to this policy, the government shall
encourage the establishment and favorable operation of Health Maintenance
Organizations (HMOs) by granting reasonable incentives to enhance
accessibility to quality health care services through affordable health
insurance policies.

SEC. 3. Objectives ~ In line with the above policy, this Act seeks to:

a) Recognize HMOs as unique health care insurance entities that
combine the financing, management and coordination of health
services and to encourage their growth by granting them
reasonable incentives

b) Establish the regulatory framework for HMOs.

c) Recognize and protect the rights of HMOs, health care providers

and members.

d) Advance health consciousness among our people by promoting
greater accessibility to quality health care through affordable
health insurance policies.

SEC. 4. Definitions - When used in this Act, the following terms shall
mean:

a)Health Maintenance Organization - an insurance company

organized in accordance with the provisions of the Corporation

Code of the Philippines that sells fixed pre-paid health insurance

policies as defined in paragraph (j) of this section 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 HMO shall possess the following functional characteristics:
1)It uses an organized system called managed care to
coordinate the delivery of health services to its members
through health care providers in a defined geographical
area;

2) It contracts the services of health care providers to deliver
health care services to its enrollees and/or their
dependents as their agreement may stipulate;

3)It has an enrolled group of individuals paying a fixed

periodic fee

b) Actuary - a business professional who analyzes the financial
consequences of risks with the necessary training, qualification
and experience and a fellow of the Actuarial Society of the
Philippines or in any internationally recognized association or
society of actuaries (SOA). He shall, among others, determine
the financial soundness of health care agreements , evaluate the
likelihood of events, design creative ways to reduce the likelihood
and decrease the impact of adverse events that may actually
occur in the operation of HMOs;

c) Co-Payment — a charge which may be collected directly by a
health care provider from a member in accordance with the
member's health care policy,

d) Claim — a statement of services submitted to an HMO by a health
care provider following the provision of Covered Services to a
member that shall include diagnosis or diagnoses and itemization
of services and treatment provided to the member;

e)Covered Services/Coverage - health care services to be
delivered by a health care provider to a member as provided for in
a health care policy;

f) Deductible — the amount a member pays out-of-pocket before the
HMO begins to pay the cost associated with treatment,

g) Health-Care Provider — a health professional such as physician,
dentist, nurse, midwife, health care professional group and
hospital, duly licensed by the proper government agency to
provide active health care services;

h) Health Care Provider Contract - a contract between an HMO and
‘a health care provider for the latter to deliver or provide health care
services to members of the former. It includes a schedule of
Covered Services and compensations and specifies all other
terms, conditions, limitations, exclusions, benefits, rights and
obligations thereof to which the HMO and health care provider are
subject.

i) Health Care Policy — an insurance policy comprising an individual
set of health service delivery and compensation procedure offered
as a Managed Care product of an HMO to its members. It
specifies Covered Services and all other terms, conditions,

limitations, exclusions, benefits, rights and obligations thereof to
which the HMO and members are subject. It may be in the form



of a Comprehensive HMO Policy, Preferred Provider Policy,
Managed Indemnity, Self-Insured Policy or Third Party
Administration Policy.

j) Managed Care - A complex system that involves the active
coordination of, and the arrangement for, the provision of health
services and coverage of health benefits. It involves relationships
and organization of the providers giving care, and the covered
benefits tied to managed care rules;

k) Medically Necessary Services — refer to health care services that
a reasonably prudent physician would deem necessary for the
diagnosis or treatment of illness or injury or to improve the
functioning of a malformed body part of a member;

|) Member — an insured individual, a part of a group or an employee
of a corporation and his dependents, who entered into a contract
of health insurance with an HMO;

m) Enrollment Fee — the amount of money paid to an HMO by an
individual member, group or corporation on behalf of its
employees and the latter's dependents, in payment for a pre-
agreed set of health services, for a specific period of time:

n) Participating Provider ~ a health care provider, who, under a
Health Care Provider Contract, has agreed to provide health care
services to the HMO members, with the right to payment, other
than co-payment or deductible directly or indirectly from the HMO;

0) Specialist - a diplomate and/or Fellow of a Specialty Society
recognized by the Philippine Medical Association (PMA).

SEC. 5. Health Care Incentives — To tap and encourage private
sector participation in the government's thrust to make health services
accessible to the low income sectors of the population through affordable
enrollment fee. Domestic corporations, individuals and resident corporations
shall be allowed to deduct the cost of HMO membership fees from the taxable
income of said employers.

SEC. 6. Registration - An HMO shall be legally organized as a
juridical person and shall be registered with the Securities and Exchange
Commission, hereinafter referred to as the SEC.

SEC. 7. Licensure ~ The Insurance Commission, hereinafter referred
to as the Commission, shall supervise and regulate the operations of all
HMOs and all other entities that possess the functional characteristics of
HMOs, except the Philippine Health Insurance Corporation (PHIC). After
registering with the SEC, said entities shall secure a license to operate as an
HMO from the Commission. All HMOs existing at the time of effectivity of this
Act shall likewise secure a license to operate from the Commission

The Commission shall, upon receipt of a completed application for a
license to operate, provide a sixty (60) day period for public comment. As
soon as the period has lapsed and after thorough review, it shall either
approve or deny the application, the reasons thereof shall immediately be
known to the applicant. The license to operate granted under this Act shall be
effective for one (1) year, subject to renewal by the Commission.


SEC. 8. Licensure Requirements — The Insurance Commission and
the Department of Health shall prescribe the requirements for licensure and
renewal of license of HMOs based on the provisions of Section 7 of this Act
The requirements shall include but not be limited to:

a) The minimum authorized and paid up capitalization:

b) Financial Statement/projections for new HMOs;

©) Annual Reports for existing HMOs;

d) Data on membership enrollment;

) Geographical area operation;

f) Health policies being offered:

g) Arrangements for ensuring the payment of the cost of health care
services or the provision for automatic applicability of an alternative
coverage in the event of discontinuance of the Health Maintenance
Organization;

h) Any deposit of cash, or guaranty or minimum restricted reserves
which the Commissioner, by regulation may adopt to assure that
the obligations to subscribers and providers will be performed;

i) Philippine Health Insurance Corporation (PHIC) Accreditation;

j) Department of Health HMO Accreditation - The Department of
Health shall accredit HMOs after the Secretary has determined that
the applicant
‘A. Guarantees its members fundamental patient's rights, to include
among others:

1) Patient's right to choose physician or health facility - The
freedom of patients to choose their physician or health facility
shall not be negotiated by any contract arrangement or
procedure of a health maintenance organization. All
members in HMOs shall be offered an out-of-network option
that will enable them to obtain, even at the member's
additional expense care from a health provider. Such out-of-
network health providers shall have the right to HMO
compensation, other than co-payment or deductible directly or
indirectly from the HMO;

2) To see a specialist of choice - An HMO patient may seek the
services of a specialist who may not necessarily be affiliated
with the HMO.

3) Patient's right to emergency care - A member who
reasonably believes that he is suffering from an emergency
condition has the right to seek emergency care from the
nearest emergency department without first pre-authorizing or
pre-certifying the care with their HMO;

4) Patient's right to Grievance and external review program ~
Members of an HMO shall be granted the right to dispute
coverage denials on the basis of “medically necessary”
decisions before an independent Review Committee as
provided for in Section 10 hereof

B. Guarantees in Health Care Providers:

1) Physician’s/Dentist’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 necessary"
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/acility 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
therefor shall be made known to the provider within seven (7)
days after receipt of such written or electronic plan. Disputes
may then be addressed to 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 Philippine Medical
Association's/Philippine Dental Association's latest schedule
of fees and latest Relative Unit Values and multiplying factors
(RUV) prevailing upon the effectivity date of the contract

C.Has a network of qualified and duty licensed health providers.

SEC. 9. Actuaries/Financial Consultants — To protect the potential
and enrolled members of the HMOs, the Commission shall ensure that HMOs
adhere to actuarially sound practices and possess financial capabilities to
render the services stipulated in their agreements

To achieve these objectives, the Commission shall engage the
services of actuaries and/or financial consultants to analyze the financial
status and the actuarial soundness of the HMO practices prior to issuance or
renewal of licenses. For this purpose, the Commission shall require from
HMOs such additional data and reports it deems necessary: Provided, That,
such data and reports are certified by either an actuary, financial consultant or
external auditor.

SEC. 10. Arbitration and Review — HMOs shall provide an internal
mechanism where disputes between parties to a Health Care Policy or parties
to an internal Care Provider Contract may be resolved in an expeditious
manner. In the event that the dispute is unresolved, a member, health
provider or an HMO may elevate the case directly to the Commission for
binding arbitration. However, if the Commission determines the conflict to be
medical in nature or requiring a review of medically necessary decisions, the
case shall be referred to an HMO Medical Review Committee to be
constituted by the DOH for judgment. The HMO Medical Review Committee
shall ensure that reviews of medically necessary decisions must be made only
by truly independent licensed physicians familiar with the medical condition or
treatment in question and of the same specialty as the treating physician.
Such complaints or disputes shall be decided upon within thirty (30) days and


the decision shall be final and executory. All other complaints that remain
with the Insurance Commission for arbitration shall be decided upon within
sixty (60) days. The decision of the Commission shall be final and executory,
appealable to the Supreme Court only on question of law.

SEC. 11. Grounds for Suspension of License — The license to
operate issued to an HMO may be suspended by the Commission, after due
notice, examination and hearing, on the following grounds:

a) When, based on financial reports, continued operation of the HMO

business is no longer financially sound;

b) When agreements with members are not honored;

) When contracts with health care providers, including but not limited
to prompt and just compensation for health services rendered, are
violated;

d) When the statements in the application for license or renewal
thereof are found to be false, misleading, inadequate or incomplete
such that the Commission cannot ascertain the true status from
‘such statement or are not sufficient to arrive at an honest appraisal
of the true capability of the HMO;

e) When the decision of the Commission on cases for arbitration is not
honored by an HMO;

f) When the decision of the HMO Review Committee is not honored
by an HMO;

g) When an HMO continuously violates the rules and regulations
issued by the Commission and the Department of Health pursuant
to Section 18 of this Act

SEC. 12. Grounds for Revocation of License ~ The Commission
shall revoke the license of any Health Maintenance Organization on the
following grounds:
a) Repeated violations of this Act by an HMO;
b) Repeated suspension of HMO license;
©) Impairment of the status of the HMO, as may be determined by the
Insurance Commission during suspension based on paragraph (a)
of Section 11 hereof, after a fair appraisal by impartial actuaries and
financial consultants, such that even if allowed to continue to
operate, it can no longer provide the services it assumed under the
agreement with its members

SEC. 13. Administrative Sanctions - The following administrative
sanctions are hereby imposed for violations that do not warrant suspension or
revocation of license

1) A fine of Ten Thousand Pesos (P10,000.00) for the first violation of

the provision of this Act, Twenty Thousand Pesos (P20,000.00) for
the second, and Thirty Thousand Pesos (P30,000.00) for the third
violation. The provision of Section 11 shall apply upon the fourth
violation of this Act;

2) A fine of Fifty Thousand Pesos (P50,000.00) every time the license

of the HMO is suspended : Provided, that, payment of this fine shall
not absolve the HMO from its obligations under the agreement;


3) An order to freeze the assets and funds of the HMO suspended or
revoked for the protection of investors, providers and members.
The fees and penalties collected pursuant to this section shall be
deposited in the National Treasury as income of the general fund

SEC. 14. Publication - The Commission shall periodically publish in a

newspaper of general circulation the following

1) List of duly licensed HMOs in good standing;

2) Suspension and/or revocation of the license of HMOs, copies of
which shall be furnished to associations of the medical/dental
profession, hospitals and employers who shall inform their
members accordingly.

SEC. 15. Existing HMOs ~ All existing Health Maintenance
Organizations duly registered with the Securities and Exchange Commission
and have been in operation prior to the effectivity of this Act shall continue to
operate: Provided, That, they shall apply for new license with the
Commission within one (1) year from the effectivity of this Act.

SEC. 16. New License - The Commission shall grant the above
HMOs their new license in accordance with this Act: Provided, however, That
existing agreements, rights and obligations derived therefrom shall be
tespected: Provided, further, That the HMOs comply with the licensing
requirements within one (1) year.

SEC. 17. Implementing Rules and Guidelines — The Insurance
Commission and the Department of Health shall promulgate the rules and
regulations necessary to implement this Act within ninety (90) days from its
approval. Such rules and regulations shall be furnished to HMOs and shall
take effect upon publication in a newspaper of general circulation.

SEC. 18. Separability Clause — \f any provision of this Act is declared
unconstitutional or invalid, the other provisions not affected by such
declaration shall remain in full force and effect.

SEC. 19. Repealing Clause — All laws, decrees, ordinances, rules
and regulations, executive or administrative orders or parts thereof
inconsistent with this Act are hereby repealed, amended or modified
accordingly.

SEC. 20. Effectivity — This Act shall take effect fifteen (15) days
following its publication in al least two (2) newspapers of general circulation

Approved