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HOUSE OF REPRESENTATIVES > RECEIVED @

‘Quezon City, Philippines 17 JUL 2013

SIXTEENTH CONGRESS
First Regular Session

House sit no,_1518

INTRODUCED BY HON. MARCELINO “MARCY” R. TEODORO

EXPLANATORY NOTE

Section 15, Article Il of the 1987 Constitution states that "(t)he State shall protect
and promote the right to health of the people and instill health consciousness among
them." Moreover, the state is cognizant of the less fortunate Filipinos who could not
afford the expensive costs of medical services and so the budget allocated for the
Department of Health is included in the top 10 priorities of the country. Hence, this bill
proposes the establishment and growth of Health Maintenance Organizations (HMOs) in
the Philippines in order to promote participation of the private sector in catering to the
needs of the Filipinos in terms of health services.

Much has been said that the responsibility of the State is to protect and provide
the needs of its people. It has created different departments and agencies that would
give aid to the Filipinos. However, with the growing population in the county, the State
needs to give more efforts in order to help the people.

From this perspective, the State cannot do its task alone. Hence, in this bill, it
urages the private sector to give a hand in addressing the health needs of the
ino people. In return, the bill provides incentives for the companies to be able for
them to continue the good deed which is stated under Section 5.

Stated in 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.

State intervention is very important in this endeavor because it is only through
this manner that the imposition of unconscionable or abusive actions would be avoided.
Hence, with this given dilemma, this proposed bill enumerates the operating guidelines
for HMOs to address the asserted gross inequality of bargaining power that currently
characterizes the HMO relationship with its members and health care providers. Also,
the protection of HMO members and health care providers and the establishment and
operations of the Health Maintenance Organizations shall be regulated and supervised
by the Insurance Commission and the Department of Health

In view of the propositions stated above, the approval of this bill is earnestly
requested.

MARCELINO “MARCY” R. TEODORO
Representative
4 District, City of Marikina

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Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City, Philippines

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 1518

INTRODUCED BY HON. MARCELINO “MARCY” R. TEODORO

AN ACT
REGULATING THE ESTABLISHMENT AND OPERATIONS OF HEALTH
MAINTENANCE ORGANIZATIONS (HMOs) 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 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;
and

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

SEC. 4. Definition of Terms. — As used in this Act, the following terms shall mean:

(a) "Health Maintenance Organization (HMO)" 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 () 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; and

(3) It has an enrolled group of individuals paying a fixed periodic fee.

(b) “Actuary” is a business professional who analyzes the financial consequences of
risk with the necessary training, qualification and experience, and a fellow of the
Actuarial Society of the Philippines or in any intemationally recognized
association or society of actuaries (SOA).

He or she 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.

(©) "Co-payment” is 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" is 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” are health care services to be delivered by a health
care provider to a member as provided for in a health care policy.

(f) “Deductible” is the amount a member pays out-of-pocket before the HMO begins
to pay the cost associated with treatment

(g) "Health Care Provider’ is a health professional such as a physician, dentist,
nurse, midwife, health care professional group or hospital, duly licensed by the
proper government agency to provide active health care services.

(h) "Health Care Provider Contract" is 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” is 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,

(i) "Managed Care" is 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 organizations of the providers giving care,
and the covered benefits tied to managed care rules.

(k) "Medically necessary services" are 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” is an insured individual, a part of a group or an employee of a
corporation and his or her dependents, who entered into a contract of health-
insurance with an HMO.


(m) "Enrollment fee" is 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 heath services, for a specific
period of time,

(n) “Participating provider’ is 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” is 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 an 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 Commission and the Department of Health
(DOH) 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 statements/projections for new HMOs;

(©) Annual reports for existing HMOs;

(d) Data on membership enroliment;

(e) 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 HMO;

(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;

() Department of Health HMO accreditation. - The DOH shalll accredit HMOs after
the Secretary has determined that the applicant

(1) Guarantees its members fundamental patient's rights, to include among
others:
(i) Patient's right to choose physician or facility - The freedom of patients to
choose their physician or health facility shall not be negotiated by any
contract arrangement or procedure of an HMO.


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.

(ii) Patient's right 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.

(iii) Patient's right to emergency care - A member who reasonably believes
that he or she 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.

(iv) 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,

(2) Guarantees in health care providers:
(i) 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 physicians/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.

(ji) 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 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 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 (RUV) and multiplying factors prevailing upon
the effectivity date of the contract

(3) Has a network of qualified and duly 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 the 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 intemal 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 within thirty (30) days and the decision shall be
final and executory. All other complaints that remain with the Commission for arbitration
shall be decided 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;
and

(2) When an HMO continuously violates the rules and regulations issued by the
Commission and the DOH pursuant to Section 17 of this Act.

SEC. 12. Grounds for Revocation of License. - The Commission shall revoke the
license of any HMO on the following grounds:

(a) Repeated violations of this Act by an HMO;
(b) Repeated suspension of HMO license;

(0) Impairment of the status of the HMO, as may be determined by the 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:

(a) A fine of Ten thousand pesos (P10,000.00) for the first violation of the provisions
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;


(b) 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;

() 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:

(a) List of duly licensed HMOs in good standing;

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

SEC. 15. Existing HMOs. - All existing HMOs duly registered with the SEC and 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 (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 respected:

Provided, further, That the HMOs comply with the licensing requirements within one (1)
year.

SEC. 17. Implementing Rules and Guidelines. - The Commission and the DOH 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 by HMOs and shall
take effect upon publication in a newspaper of general circulation.

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

SEC, 19, Repealing Clause. — All laws, decrees, executive orders, rules and regulations
or any part hereof inconsistent with the provisions of this Act are hereby repealed,
modified or amended accordingly.

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

Approved,