FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
First Regular Session 
) 
OF THE PHILIPPINES 
) 
7 
2% -3 A’; :i ;r 
Senate Bill No. 6 7 6 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
Article 11, Section 15 of the Constitution declares that the State shall 
protect and promote the rights to health of the people and instill health 
consciousness among them. Towards this end, the State shall endeavor to 
enhance the accessibility of affordable health care services by encouraging the 
growth of medicallhealth service providers and by regulating their activities to 
prevent the commission of fraudulent acts inimical to the people, 
Pursuant to this constitutional mandate, this measure shall tap the 
participation of the private sector in providing, funding and managing Health 
Maintenance Organizations (HMOs). This will greatly assist the government in 
the efficient delivery of quality and cost-effective basic health care services. 
This proposed measure defines the following characteristics to qualify an 
entity as health maintenance organization, provides the procedures and 
requirements for licensing, and defines the grounds for suspension and 
revocation of their license to operate. 
In view of the foregoing, the immediate approval of this bill is earnestly 
urged. 
< J 
Senator 


Senate Bill No. 676 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
PROVIDING AFFORDABLE HEALTH CARE SERVICES, THROUGH THE 
HEALTH 
MAINTENANCE 
ORGANIZATIONS, 
REGULATING 
THEIR 
OPERATIONS, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Short Title. 
This Act shall be known as the “Health 
Maintenance Organizations (HMOs) Act of 2007.” 
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, government shall enhance accessibility to 
affordable health care services by recognizing and tapping the participation of the 
private sector in providing funding and managing the delivery of cost effective 
and quality health care services. Towards this end, it shall encourage the growth 
of health maintenance organizations (HMOs) and provide the regulatory 
framework that will ensure their sustainability and viability in order to protect the 
interest of the public. 
SEC 3. Objectives. In line with the above policy, this Act seeks to: 
a. 
Recognize HMOs as unique medical service providers that 
combine the financing, management and provisions of health 
services and to encourage their grown; 
Establish the regulatory framework for HMOs that shall protect the 
rights of the buying public as well as the various sectors involved in 
the delivery of health and services; 
Promote the provision of quality health services and to improve the 
efficiency in delivery of health care services; 
Protect the rights of HMOs, their enrollees and health career 
service providers; and 
e. 
Make people more health conscious by making health care 
services readily available, accessible and affordable. 
b. 
c. 
d. 


SEC 4. Definition of Terms. When used in this Code, the following terms 
shall mean: 
a. 
b.. 
C. 
d. 
e. 
f. 
Actuary - a person with the necessary training, qualification and 
experience and a fellow of the Actuarial Society of the Philippines. 
She/he shall, among others, compute rates and reserves for health 
care plans on the basis of experience tables and determine the 
financial soundlessness of health care agreements and operations 
of HMOs; 
Agreement - a contract entered into by an HMO with a member or 
group of members or a corporation on behalf of its employees 
and/or their dependents, for the former to provide or arrange to 
provide pre-agreed or designated health care services to the latter, 
for a fixed period of time and for a specified fee; 
Association - the Association of Health Maintenance Organizations 
of the Philippines, Inc. (AHMOPI), the existing association of Health 
Maintenance Organizations, recognized by the Department of 
Health as the industry association and representing a large number 
of HMOs as well as a greater majority of enrolled members; 
Co-payment - the amount a member must pay in order that shelhe 
can receive a specific service which is not fully prepaid; 
Corporation - a juridical person as defined by law, duly registered 
with the Securities and Exchange Commission; 
Deductible -the amount an enrollee pays out of pocket before the 
health 
maintenance organizations begins to pay the cost 
associated with treatment; 
Department- the Department of Health (DOH); 
Commission -the Insurance Commission: 
Health Maintenance Organization (HMO) - a type of managed care 
organized in accordance with law to provide pre-agreed or 
designated health care services to its enrolled members for a fixed 
periodic fee and for a specific period of time. It uses a system of 
health care delivery called managed care that influences utilization 
and costs of services and 
measures performance resulting in 
quality cost-effective care. It integrates financing and delivery of 
health care services through managed health plans which may be 
in the form of a comprehensive HMO Plan, preferred provider plan 
managed indemnity or self-insured plans, third party administration 
plan and such order that fall under the definition of a managed 
health plan under paragraph (k) of this section. 
A health maintenance organization shall possess the following 
characteristics to qualify as HMO: 
1. 
An organized system of managing and assuring health care 
services in a defined geographical area; 
2. 
A pre-agreed set of basic and supplemental health 
maintenance and treatment services; 


1. 
k. 
I. 
m. 
n. 
0. 
P. 
3. 
Have an enrolled group of individuals paying a fixed periodic 
fee. 
Managed Care - a system of health care delivery that influences 
utilization and cost of services and measures performance with a 
goal to deliver quality and cost-effective health care; 
Managed Health Plan - a plan that covers health care services 
through an integrated and organized system of financing, delivery, 
and management of services to an enrolled population for a specific 
period of time on a fixed periodic fee; 
Member or Enrollee - an individual or a person who is part of a 
group or an employee andlor dependents or a corporation, who 
entered into a contract with an HMO; 
Person - a natural or judicial person as defined by law; 
Provider - a health professional such as physician, dentist, nurse, 
midwife, physical therapist or health care professional's group, or a 
health facility such as hospital, diagnostic clinic, pharmacy licensed 
or authorized by the proper government agency to provide health 
care services; 
Participating or Accredited Provider - a provider as defined in 
paragraph (n) who, under an express contract with, or is owned and 
operated by, a health maintenance organization (HMO) or with the 
latter's contractor or subcontractor, has agreed to provide health 
care services to the HMO enrollees, with the right to payment, other 
than co-payment or deductible directly or indirectly from the HMO. 
Membership fee - the amount of money paid by an individual 
member, group corporation on behalf of its employees and the 
latter's dependents, in payment for pre-agreed set of health 
services, for a specific period of time. 
SEC 5. 
Health Care Incentives - HMOs and health care providers 
engaged in health are services pursuant to the provisions of this Act shall be 
entitled to the following incentives. 
Reduced customs duties for importation of medical equipment used 
in health care services of HMOs and similar providers 
contemplated under this Act; Provided, That such equipment are 
used exclusively by the HMO and not for resale. 
Exemption from percentage tax, documentary stamp tax and Value 
Added Tax on all health care agreements so as to reduce the cost 
of health care; 
3. 
The cost of health care membership fee that corporation or 
employers pay for the health care plans of their employees shall be 
deductible from the taxable income of said employers, as this will 
encourage employers to provide health care plans for the 
employees; 
1. 
2. 


4. 
Such other incentives that the Insurance Commission and the 
Department of Health may deem proper to recommend subject to 
the concurrence by the Department of Finance and approval by the 
President of the Philippines. 
SEC 6. Regisfration. An HMO shall be legally organized as a judicial 
person and shall be registered with the Securities and Exchange Commission. 
Thus, HMOs shall be organized in accordance with the provisions of the 
Corporation Code. 
SEC 7. Licensure. The Insurance Commission is hereby designated as 
the government agency to supervise and regulate the operations of HMO and all 
other entities offering health care services that fall under the definition of HMO in 
accordance with Section 4 of this Act. After registering with the Securities and 
Exchange Commission, said entities shall secure a license to operate as an 
HMO from the Insurance Commission. 
Existing HMOs at the time of the 
effectivity of this Act shall likewise secure a license to operate from the Insurance 
Commission in accordance with the Transitory Provisions provided herein. 
The Commission shall issue the license to operate within thirty (30) days 
from the submission of the complete application and requirements. In case the 
application is not approved, the reasons therefore shall be made known to the 
applicant immediately. 
However, if the HMO will directly provide health care services such as 
medical consultation andlor treatment by their own employed medical, 
professional, perform laboratory or 
diagnostic servicesloperate clinics or 
hospitals, they shall also secure a license from the Department of Health for said 
facilities. 
SEC 8. Licensure. The Insurance Commission and Department of Health 
shall promulgate 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. 
b. 
c. 
d. 
Data on membership enrollment; 
e. 
f. 
g. 
These requirements may be amended to conform to the needs of the time 
and such requirements or any amendment thereto shall be effective for 
period of one year subject to renewal by the Commission. 
SEC 9. Actuaries/Financia/ Consultants. To protect the potential and 
enrolled members of HMOs the Commission shall ensure that HMOs adhere to 
The minimum authorized and paid up capitalization required; 
Financial StatementslProjections for new HMOs; 
Annual Reports for existing HMOs; 
Health Care Services being offered; 
Geographical area of operation; and 
Such other information or requirements that the Commission and/or 
the Department may deem necessary; 


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 HMO practices prior to the issuance or renewal of 
licenses. 
For this purpose, the Commission shall require from HMOs such 
additional data and reports if deems necessary. Provided, that such data and 
reports are certified by an actuary, financial consultant or external auditor. 
SEC 10. 
Association. All Health Maintenance Organization shall, for 
purposes of achieving unity in the industry, facilitating government regulation, 
mutual assistance among HMOs, self-regulation and quality competition, be 
encouraged to be a member of the existing association of Health Maintenance 
Organizations at the time of the enactment of this act. 
SEC 11. 
Arbitration by the Association and by the Commission. 
Complaimmts that may be brought by members or providers or even by a HMO 
against another HMO shall be referred to the Association for arbitration. The 
Association shall refer such complaint to the grievance mechanism in the 
Association and shall be decided within thirty (30) days. 
In the event no 
settlement of the complaint has been reached after thirty (30) days, the 
Association 
shall submit the case to the Commission which shall assume 
jurisdiction over the case and shall decide the case 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 12. Grounds/or Suspension of License. The license to operate 
issued to HMOs may be suspended by the Commission, with strict adherence to 
due process, on the following grounds: 
1. 
When, based on the financial reports, continued operation of the 
HMO business is no longer financially sound; 
When, without justifiable cause, agreements with members are not 
honored 
When the statements in the application for license or renewal 
thereof are found to be false, misleading, inadequate or incomplete 
such that the Department cannot ascertain the true status from 
such statement, sufficient to arrive at an honest appraisal of the 
true capability of the HMO; 
When the decision of the Association or arbitration of complaint is 
not honored by a HMO; and 
When a HMO continuously violates the rules and regulations issued 
by the Commission and the Department in implementing this Act as 
provided for in Section 19 hereof. 
SEC 13. Grounds for Revocation of License. The Commission shall 
revoke the license of any Health Maintenance Organization, with strict adherence 
to due process, on the following grounds. 
2. 
3. 
4. 
5. 
1. 
2. 
Repeated violations of this Act by an HMO; 
Unjustified refusal to provide the health care services contracted for 
by a member as provided for in the agreement; 


3. 
Impairment of the financial status of the HMO, as may be Section 
12 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; and 
Refusal to comply with decisions of the Commission on cases 
submitted by the Association for arbitration. 
4. 
In all cases of revocation, the Commission shall have the authority to 
assign the agreements of the HMO whose license was revoked, to other existing 
HMOS, or to order such applicable remedies in order to protect the rights derived 
by members from the agreements. 
SEC 14. The following administrative sanctions are hereby imposed for 
violations of this Act: 
A fine of Twenty Thousand Pesos (P20,OOO.OO) for the first violation 
of the provisions of this Act, Thirty Thousand Pesos (P30,OOO.OO) 
for the second; and Fifty Thousand Pesos (P50,OOO.OO) for the third 
violation. 
For the fourth violation of this Act, the provision of 
Section 13, shall apply; 
A fine of One Hundred Thousand Pesos (P100,OOO.OO) 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 
agreements it has contracted with members and/or participating or 
accredited providers. 
An order to freeze the assets of the HMO suspended or revoked for 
the protection of investors, providers and members. 
1. 
2. 
3. 
The amount that may be collected as fines shall be retained by the 
Commission for its use in the information dissemination mentioned in the 
following section: Provided, That a separate account be maintained by the 
Commission for such purpose. 
Violations committed by HMOs in the direct provisions of health care 
services, performance of laboratory or diagnostic services, operation of hospitals 
or clinics shall be subject to applicable rules and regulations of the Department of 
Health. 
SEC 15. 
Reinstatement of Suspended or Revoked Licenses. 
The 
Commission shall order the reinstatement of a suspended or revoked license 
upon reasonable showing that the ground for which the suspension or revocation 
was based has ceased to exist and that the HMO has sufficiently complied with 
the requirements the Commission may determine for such reinstatement. 
inform the public by publishing periodically: 
1. 
List of licensed HMOs. 
SEC 16. Publication. The Commission and the Department shall jointly 
2. 
Suspension andlor revocation of the license, of HMOs, copies of 
which shall be furnished to associations of the medical profession, 
hospitals and employers who shall inform their members 
accordingly. 


SEC 17. Existing HMOs. Health Maintenance Organizations registered 
with the Securities and Exchange Commission and the Department that have 
been in operation prior to the effectivity of this Act shall continue to operate: 
Provided, That they shall apply for a new license with the Commission within one 
year from the effectivity of this Act. 
SEC 18. New License. The Commission shall grant the above HMOs 
their new licenses in accordance with this Act. 
Provided, That the existing 
agreements, the rights and obligations derived therefrom shall be respected: 
Provided, further, That the HMOs comply with the licensing requirements within 
one year. 
SEC 19. Appropriations. The amount necessary for the implementation 
of this Act shall be included in the General Appropriations Act of the year 
following its enactment and every year thereafter. 
SEC 20, lmplementing Rules and Regulations. The Commission and the 
Department of Health, in consultation with the concerned sectors, 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 concerned sectors and shall take effect upon publication in a 
newspaper of general circulation. 
SEC 21. 
Separability Clause. If 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 22. 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 23. ffecfivity. This Act shall take effect fifteen (15) days following its 
publication in at least two (2) newspapers of general circulation. 
Approved,