FOURTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
, 
7 JUN 30 F12:20 
) 
1 
S E N A T E  
S.B. No. 3 
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Introduced by Senator Ramon Bong Revilla, Jr. 
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 medical/heaIth service providers and 
by regulating their activities to prevent the commission of fraudulent acts inimical to the 
people. 
Pursuant to the constitutional mandate, this measure shall tap the participation of 
the private sector in providing, fhding 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 (HMO) namely: organized system of providing and 
assuring health care services in a defined geographical area; a pre-agreed set of basic and 
supplemental health maintenance and treatment services; and must have an enrolled 
group of individuals paying a fixed periodic fee. 
To protect the rights of individuals dealing with HMOs, this measure provides the 
procedures and requirements for licensing. It likewise 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 


FOURTEENTH CONGRESS OF THE mPUBLIC 
) 
OF THE PHILIPPINES 
1 
First Replur Session 
) 
S E N A T E  
Introduced by Senator RAMON BONG REVILLA, JR. 
AN ACT PROVIDING AFFORDABLE HEALTH CARE SERVICES, 
TEROUGH THE HEALTH MAINTENANCE ORGANIZATIONS, 
REGULATING THEIR OPERATIONS, 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 “HtxzIfhMaintenance 
Orgunizations (HMOs) Act. ’’ 
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 provision of health services and to encourage their growth. 
b. 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 care 
services. 
c. Promote the provision of quality health services and to improve the efficiency in 
delivery of health care services. 
d. Protect the rights ofHMOs, their enrollees and health care service providers. 
e. Make people more health-conscious by making health care services readily available, 
accessible and affordable. 


SEC. 4. Definition of Terms- when used in this Code, the following terms shall 
mean: 
a. Actuary - a person with the necessary training, qualification and experience and a 
fellow of the Actuarial Society of the Philippines. She 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. 
b. Agreement - a contract entered into by an HMO with a member or group of 
members or a corporation on behalf of its employees andior 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; 
c. 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; 
d. Co-payment - the amount a member must play in order that she can receive a 
specific service which is not wholly prepaid. 
e. Corporation - a juridical person as defined by law, duly registered with the 
Securities Exchange Commission. 
f. Deductible - the amount an enrollee pays out of pocket before the health 
maintenance organizations begins to pay the cost associated with treatment. 
g. Department - the Department of Health (DOH) 
h. Commission - the Insurance Commission; 
i. 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 other 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 
1. An organized system of managing and assuring health care services in a 
defined geographical area; 
2. A pre-ageed set of basic and supplemental health maintenance and 
treatment services; 
3. Have enrolled group of individuals paying a fixed periodic fee. 
j. 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; 
k. 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; 
I. Member or Enrollee - an individual or a person who is part of a group or an 
employee andor dependents or a corporation, who entered into a contract with an 
HMO; 
m. Person - a natural or judicial person as defined by law. 
n. Provider- a health professional such as physician, dentist, nurse, midwife, 
physical therapist or health care professional’s group, or a health facility such as 
qualify as HMO: 


hospital, diagnostic clinic, pharmacy, licensed or authorized by the proper 
government agency to provide health care services. 
0. 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. 
p. 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 
care services pursuant to the provisions of this Act shall be entitled to the following 
incentives. 
1. 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. 
2. 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 fees that corporations 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; 
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. Registration. - An HMO shall be legally organized as a juridical 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 immediately be made known to the applicant 
immediately. 
However, if the HMO will directly provide health care services such as medical 
consultation andor treatment by their own employed medical professional, perform 
laboratory or diagnostic services , operate clinics or hospitals, they shall also secure 
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. The minimum authorized and paid-up capitalization required. 
b. Financial StatementsProjections for new HMOs. 


c. Annual Reports for existing HMOs. 
d. Data on membership enrollment 
e. Health Care Services being offered. 
f. Geographical area of operation. 
g. Such other information or requirements that the Commission and/or the Department 
may deem necessary 
These requirements may be amended to conform to the needs of the time and such 
requirements or any amendment thereto shall be effective for a period of one year, 
subject to renewal by the Commission. 
Sec. 9. Actuaries/Finaneial Consultants. - To protect the potential and enrolled 
members of 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 HMO practices prior to issuance or renewal of licenses. For this purpose, 
the Commission shall require &om HMOs such additional data and reports it deems 
necessary: Provided, that such date and reports are certified by either an actuary, financial 
consultant or external auditor. 
SEC. 10. Association. - AI1 Health Maintenance Organizations shall for purposes 
of achieving unity in the industry, facilitating government regulation, mutual assistance 
among HMOs, self-regulation and quality competition, shall 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. - 
Complainants 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 for 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, 
2. When, without justifiable cause, agreements with members are not honored. 
3. 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 
hue status from such statement, sufficient to arrive at an honest appraisal of the true 
capability ofthe HMO. 
4. When the decision of the Association or arbitration of complaint is not honored by a 
HMO. 
5. When a HMO continuously violates the rules and regulations issued by the 
Commission and the Department in implementing this Act as provided 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: 
1. Repealed violations of this Act by an HMO. 
2. Unjustified rehsal to provide the health care services contracted for by a member as 
provided in the agreement. 
3 .  Impairment of the financial status of the HMO, as may be determined by the 
Commission during suspension based on paragraph 1 of 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. 
4. Reksal to comply with decisions of the Commission on cases submitted by the 
Association for arbitration. 
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. Penalties. - The following administrative sanctions are hereby imposed 
for violations of this Act: 
1, 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. 
2. A fine of One Hundred Thousand Pesos (PlO0,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 enrollees and/or participating 
or accredited providers. 
3 .  An order to freeze the assets and finds of the HMO suspended or revoked for the 
protection of investors, providers and members. 
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 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. 
SEC. 16. Publication. - The Commission and the Department shall jointly inform 
the public by publishing periodically: 
1. List of licensed HMOs. 
2. Suspension andor revocation of the license of HMOs, copies of which shall be 
hrnished to associations of the mechcal 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 has 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, firther, 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. Implementing 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 firnished 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 i s  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. Effectivity. - This Act shall take effect fifteen (15) days following its 
publication in at least two (2) newspapers of general circulation. 
Approved,