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n these times when cost of hospitalization including medicines is quite prohibitive, Filipinos find it easy to relate to the popular “Bawal magkasakit!” (You must not get sick!) teaser of a TV ad selling vitamins. The same prohibitive cost of getting sick behooves many people to purchase health maintenance organizations’ (HMO) cards or healthcards as cushion in case they get hit by a financially debilitating disease.
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HMOs
Health maintenance organizations provide prepaid healthcare plans. HMO members pay an annual premium, which is renewed and evaluated annually based on their utilization bill or the total hospitalization bill they have incurred the previous year. In turn, HMOs provide maintenance care, including check-ups, hospitalization, emergency, surgery – either through their own clinics or their network of doctors and hospitals. HMOs also negotiate with clinics and hospitals for discounted fees and credit lines.
As a trade-off, doctors and hospitals are assured of a higher volume of patients from HMO memberships.
A Look at the Industry
“It’s a highly-volatile and a difficult industry,” says Carlos Da Silva, President of Insular Life Health Care Inc. and President of the Association of Health Maintenance Organization of the Philippines Inc. (AHMOPI).
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He adds, “Competition is very keen. On one end, medical costs, doctors and professional fees, and hospital bills continue to rise. On the other end, we have a sluggish business environment. The HMO is situated between these two.”
HMOs are confronted with several issues. First, medical costs increase at an average of 15 to 20 percent every year.
Second, most HMO clients, who come from the corporate sector, are cutting costs, hence want only the lowest rates from an HMO. “Today, more and more companies are going into the bidding process. If you look at the companies, they’ve usually been to 12 HMOs,” Da Silva points out.
These factors result to intense competition and price wars as HMOs fight for the same account. Clients are less likely to choose an HMO based on financial stability or the network and quality of physicians and services.
“Choice of an HMO is based on price so if you don’t regulate, competition becomes cutthroat,” observes Daniel Reyes, president of Philam Healthcare Systems Inc., which has 300,000 members, 75 percent of which are corporate accounts.
On a positive note, figures from AHMOPI show that there are currently only 1.8 million Filipinos who are HMO members – which means a huge, still untapped market. Based on 2004 financials released by AHMOPI, 11 of the top HMOs in the country posted a combined revenue of P4.2 billion, a result of correct pricing, good management, and efficient operations.
Pushing for the HMO Bill
The HMO industry is not a tightly regulated one, at least not yet. Da Silva points out that the HMOs that have closed down were often poorly capitalized, poorly managed, and had inadequate financial reserves. With no minimum capital requirement and stricter regulations, inexperienced and even financially weak companies can set up an HMO.
Because of these, AHMOPI has been lobbying for the HMO Bill, which, however, failed to pass in the Senate.
Under the bill, HMOs would be jointly regulated by the Insurance Commission for the financial side of the business, and the Department of Health for the medical side.
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