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Republic of the Philippines

Department of Finance c
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INSURANCE COMMISSION E
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1071 United Nations Avenue rso 9001

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Circular Letter No ?.024-O1

Date O, Jrnuerlr 2O2l
Amends/Supersedes N/A

CIRCULAR LETTER

TO ALL HEALTH MAINTENANcE ORGANIZATIONS (HMOs)

AUTHORIZED TO DO BUSINESS IN THE PHILIPPINES

SUBJECT GUIDELINES DEFINING UNSOUND BUSINESS ACTS AND

PROVIDING ADMINISTRATIVE FINES FOR VIOLATION
THEREOF

WHEREAS, Executive Order (EO) No. 192, s. 2015 transferred the jurisdiction over
the HMOs from Department of Health to the lnsurance Commission (lC);

WHEREAS, Section 1 of EO No. 192, s. 2015 mandates the lC to regulate and

supervise the establishment, operations, and financial activities of the HlVlOs;

WHEREAS, in the exercise of its authority under EO No. 192, s. 2015, the lC is
empowered, among others, to: (a) regulate, supervise, and monitor the operations and
management of HMOs to ensure compliance with this Order, existing laws, rules, and
regulations, and such other directives and circulars issued by the lC; (b) issue orders
to prevent fraud and injury to the HMO plan holders and industry stakeholders; (c)
pursuant to existing laws, rules, and regulations, impose sanctions and/or appropriate
penalties;

WHEREAS, Republic Act No. 11765 or the " Financial Products and Services
Consumer Protection Act," mandates the lC, as a financial regulator, to protect the
rights of the financial consumers, namely: (a) right to equitable and fair treatment, (b)
right to disclosure and transparency of financial products and services; (c) right to
protection of consumer assets against fraud and misuse; (d) right to data privacy and
protection; and (e) right to timely handling and redress of complaints;

NOW, THEREFORE, pursuant to the powers vested in me by EO No. 192, s 2015,

the following guidelines are hereby promulgated:

Head Office, P.O. Box 3589 Manila I Trunk ling; +(632) 8523-8461 to 70 | Fax No: +(632) 8522-1434 | www.insurance.gov.ph
Section 1. Applicability

This Circular shall govern the unsound business acts of HMOs and HMO
intermediaries.

This Circular does not cover acts that affect compliance with requirement on capital
adequacy, product approval, corporate governance, or other internal matters not
directly dealing the public and are covered by other rules or regulations of the
Commission.

Section 2. Definition of Terms

For purposes of this Circular, the following definitions shall apply:

A. Advertisement any communication, notice, or presentation designed to

motivate and/or inform the public with respect to any HMO product or related
services.

B. Annual Benefit Limit (ABL) - the maximum liability that the HMO shall assume
for all covered services rendered to a memberwithin the one-yearterm of the HMO
product. ABL is replenished upon renewal of the HMO product but not during
extension.

C. Authorized Representative - a person duly authorized by the HMO to approve

the provision of medical services or claims reimbursements to a member.

D. Commission - refers to the lnsurance Commission of the Philippines

E. Commissioner - refers to the lnsurance Commissioner.

F. Claims - a request or a demand for payment of benefits under an HMO product,
such as, but not limited to, refund or reimbursement. lt may also refer to the
request for availment of healthcare benefits under the HMO product.

As used in this Circular, the terms "claims" and "availments" may be used
interchangea bly.

G. Documentation - all pertinent communications, receipts, bills, records, reports,

and all other papers relative to an HMO claim.

H. HMO - a juridical entity legally organized to provide or arrange for the provision
of pre-agreed or designated health care services to its enrolled members for a
fixed pre-paid fee for a specified period of time.

l. HMO Card - the identification card (lD) issued by the HMO to a member
containing the latter's name and signature, lD reference number, and other
matters pertaining to his or her membership.
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 J. HMO Product - refers to a pre-agreed ordesignated health care services to the
enrolled members for a fixed pre-paid fee for a specified period of time through
the use of selected network of health care providers.

This term also refers to the agreement, whether individual or corporate, entered
into by the HMO and the member pursuant to Circular Letter No. 2017-19.1

K. HMO lntermediaries - include HMO agents, brokers, and soliciting official

under Circular Letter No. 2022-09.2

L. lnvestigation - all activities of an HMO related to the determination of liabilities

under coverage of an HMO product.

M. Leffer of Authorization (LOA) - a written document issued by the HMO or its

authorized representative to, and signed by, the member which shall serve as
the authority of the latter to avail of the medical services.

N. Material lnformation - an information is deemed material if its disclosure would

have resulted in (a) declining the application for membership of the applicant,
(b) higher assessment of membership fee or (c) inclusion of additional
exclusions or limitations to the benefits of the member under the HMO product.

O. Maximum Benefit Limit (MBL) - refers to the maximum

liability that the HMO
assumed per covered illness or injury, and its complications, of a member within
the terms and conditions of the HMO product. MBL is replenished upon renewal
of the HMO product by the member but not during any extension thereof.

P. Member- refers to the principal client, whether individual or corporate, that has
been accepted for membership by the HMO after complying with the eligibility
provision and is currently enrolled in any of the HMO's products. ln case of
individual client, the term 'member' also refers to his or her dependents
designated in the HMO product; while, in case of corporate client, the term
'member' covers its employees, officers, directors, and other persons enrolled
by the juridical entity in its HMO product.

O. Membership - refers to membership in an HMO product

R. Membership Fees - refers to the fees for the enrollment of a member or
members, specified in the HMO product.

S. Surface Bargaining -
an act or series of acts in the guise of negotiating the
HMO claims but made without any intent to reach an agreement or a settlement.

t Entitled, "Guidelines on the Approvalof HMO Products and Forms,"

2 Entitled, "Guidelines on the Licensing Requirements of lnsurance and/or Reinsurance Brokers Engaged in Heafth
Mainte nance Organization (HMO) Eusrness."
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Section 3. Unsound Business Acts. The following are considered unsound business
acts by an HMO or an HMO intermediary, whenever applicable:

A. Misrepresentation to the Public -

1. On HMO product provisions
Misrepresenting to prospective client or member the true nature or the terms
or conditions of the HMO product, such as, but not limited to:

(a) Making, issuing, circulating, or permitting to be made, issued and/or

circulated any literature, illustration, circular or statement of any sort
which misrepresents the terms or conditions of an HMO product;

(b) Misrepresenting or making false misrepresentation or misleading

statements as to the benefits; exclusions or limitations; affiliated
hospital, medical clinic or physician; covered injuries or illnesses;
membership fees; MBL; ABL; application of the pre-existing conditions;
or, other benefits or perks, without which the member would not have
availed the HMO product;

(c) Making any false or misleading statement regarding the financial

position of any person with respect to HMO business or with respect to
any person in the conduct of the HMO business;

(d) Using any name or title of any HMO product or class of HMO products
misrepresenting the true nature thereof;

(e) Failing to disclose all applicable charges

2. On payment of claims

(a) lndicating on a payment draft, check, or in an accompanying letter for

payment of benefits of the HMO product made to a member that said
payment is a final release of any claims under the HMO product, except:

i. the member already consumed the MBL or ABL of the HMO

product; or

ii. the member and the HMO amicably settled regarding the amount
payable and coverage under the HMO product.

(b) Making partial settlement of a claim, which contains a statement which

directly or indirectly releases the HMO from total liability under the HMO
prod uct.

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 3. On advertisement
(a) Advertising an HMO product which has not been approved by the
Commission; or

(b) Mispresenting an H MO product to have been approved by the

Commission

B. Unfair Discrimination. -The following are considered unfair discrimination

1. Making any discrimination against any Filipino, or any other race, in the
sense that he or she is given less advantageous rates or other HMO product
conditions or privileges than are accorded to other nationals solely because
of his or her race; or

2. Making or permitting to make any unfair discrimination in any person

similarly situated with respect to fees or rates charged, conditions or
privileges of an HMO product, or in any other manner or means constituting
the same.

C. Unfair Claims/Availments Management. - The following acts are considered

unfair claims/availments management:

1. Failure toacknowledge with reasonable promptness pertinent

communications with respect to claims/availments of healthcare benefits
stipulated in the HMO product;

2. Failure to adopt and implement reasonable standards for the prompt

investigation of disputes arising from claims/availments of healthcare
benefits in the HMO product;

3. Failure to provide the services to the members in accordance with terms

and conditions set forth in the HMO product without justifiable cause;

4. Denying to pay claims without conducting reasonable investigation based

on all available documentation, proof, or any other information relative to a
claim. The different findings by the doctorwho initially checked the member
and by the doctor whose diagnosis is relied upon by the HMO shall not be
considered material information. The HMO has the duty to prove, by
substantial evidence, that the denial be based on any valid grounds, such
as, but not limited to, concealment of material information or the claim is an
exclusion or limitation under the HMO product.

5. Failure to affirm or deny claims/availmentswithin a reasonable time after all

relevant and required documentation had been submitted by the member;

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6. Failure to issue or deny issuance of LOA within a reasonable time after all
relevant and required documentation had been submitted by the member;

7. Failure to provide within a reasonable time a reasonable explanation, based

on facts and/or applicable laws, for the offer of compromise settlement or
for the denial of a claim;

B. Not attempting in good faith to effectuate prompt, fair and equitable

settlement of claims submitted in which liability has become reasonably
clear;

9. Failure to promptly effectuate settlement of claims, where liability has

become reasonably clear under one portion of the HMO product coverage
in order to affect the settlement under other portions of the HMO product
coverage;

l0.Compelling members to institute suits to recover amounts due under its

HMO product by offering without justifiable reason substantially less than
the amounts ultimately recovered in suits brought by them;

11. Attempting to settle a claim for less than the amount to which a reasonable
person would have believed to be due to him or her by reference to written
or printed advertising material accompanying or made part of an HMO
product, which could have misled or misrepresented certain material
information about the HMO product, or doing an inequitable settlement
which includes offering a proposal without any legal or factual basis;

'12. Attempting to settle claims based on an HMO product which was unilaterally
altered or modified without notice, knowledge or consent of the client or
member, or its, or his or her authorized representatives;

13. Failure to accompany the claim payments with a formal and written
statement, served upon a member, setting forth the coverage under which
the payments are being made;

14. Delaying the investigation or payment of claims by requiring a member to

submit other set of documents which are deemed superfluous or irrelevant
due to the earlier submission of the member of documents that are
competent and substantial to establish a claim;

15. Directly advising a member not to obtain the services of an attorney with
respect to his or her valid claim;

16. Misleading a member with respect to the application of pre-existing

conditions, or applicable statute of limitations pertaining to his or her claim;
or

17. Surface bargaining

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 D. Misrepresentation in HMO applications or claims Making a false or
fraudulent statement or representation in or with reference to any HMO
application, including the total cost of claims/availments of the client-HMO or
member from its previous HMO vendor, by an agent, broker, or solicitor.

E. Failure to effectively contro! and superyise its agenUs. - Failure to maintain

reasonable standards of supervision and control over its agents, and, by such
reason, the agents committed or were permitted to commit an act or omission
which is prejudicial to its members or the public in general.

F. Failure to provide a copy of the HMO product. - Failure to provide a

complete copy of the HMO product, including a!l of its riders and/or
endorsements, within fifteen (15) days from receipt of payment of the premium.
A member must be provided with a printed copy or an electronic copy,
whichever the member may prefer.

G. Failure to respond to regulatory inquiries. - Unjustifiable failure to provide

substantial and reasonable response to an inquiry, directive, or order by the
Commission regarding the denial of claim or issuance of LOA; cancellation;
nonrenewal; or, any alleged violation of this Circular or other rules or regulation
of the Commission, within fifteen (15) days from receipt of the pertinent
communication, or if a period for submission of a response is specifically fixed
by the Commission, within such period. A response in compliance with this
paragraph shall not preclude the provision of additional information responsive
to the inquiry which must be answered within the same period as above
prescribed.

H. Analogous unsound acts. - The acts enumerated in this Circular are not an
exhaustive list of unsound acts by an HMO or HMO intermediary. ln the
exercise of his or her discretion, the Commissioner may now and then consider
an analogous conduct to the enumerated acts in this Section an unsound act
for purposes of preventing fraud or injury and protecting the rights of a
member/s.

Section 4. Penalties. lf, after an administrative hearing before the Regulation,

Enforcement and Prosecution Division (REPD), the Comrnission determines that the
person charged has engaged in an unfair business act as defined under this Circular,
the Commissioner shall issue a written Order, Resolution or Decision containing said
findings and sha!! include therein an order requiring such person to cease and desist
from engaging in such act and shall, in his discretion, impose the following fines:

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 A. First Offense
1. Php 10,000.00 for each and every conduct or violation but not to exceed an
aggregate fine of Php 50,000,00 in any cumulative conduct or violation
committed for the same purpose, in the same incident, and against the same
perso n.

2. lf the punishable conduct or violation was made deliberately or willfully; or

was made with his or its knowledge or should have been reasonably known
by him or it, a fine of Php 50,000.00 for each and every conduct or violation
but not to exceed an aggregate fine of Php 100,000.00 in any cumulative
conduct or violation committed for the same purpose, in the same incident,
and against the same person.

B. Second Offense

1. Php 50,000.00 for each and every conduct or violation but not to exceed an
aggregate fine of Php 100,000.00 in any cumulative conduct or violation
committed for the same purpose, in the same rncident, and against the same
person.

2. lf the punishable conduct or violation was made deliberately or willfully; or

was made with his or its knowledge or should have been reasonably known
by him or it, a fine of Php 100,000.00 for eaclr and every conduct or violation
but not to exceed an aggregate fine of Php 150,000.00 in any cumulative
conduct or violation committed for the same purpose, in the same incident,
and against the same person.

C. Third and Subsequent Offense

1. Php 100,000.00 for each and every conduct or violation but not to exceed
an aggregate fine of Php 150,000.00 in any cumulative conduct or vtolation
committed for the same purpose, in the same incident, and against the same
person.

2. !f the punishable conduct or violation was made deliberately or willfully; or

was made with his or its knowledge or should have been reasonably known
by him or it, a fine of Php 150,000.00 for each and every conduct or violation
but not to exceed an aggregate fine of Php 200,000.00 in any cumulative
conduct or violation committed for the same purpose, in the same incident,
and against the same person

Notwithstanding the foregoing, the Commission may impose either as independent or

accessory penalty, the revocation or suspension of the Certificate of Authority or
license of the adjudged HMO or HMO intermediary.

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[\Ioreover, this Circular is without prejudice to the application of RA No. 11765 or"The
Financial Products and Services Consumer Protection Act," its lmplementing Rules
and Regulations, and Circular L.etter tlo. 201 9-28.3

Further, the Commissioner may, at his discretion, modify the application of the
foregoing prescribed monetary penalties depending upon the severity of the offense,
the frequency of its commission, the gravity of the damage caused, the history of the
offender, or other circumstances which warrant imposition of a lower or a more severe
amount of fines and penalties than that prescribed in this Circular.

ln addition, the suspension or rernoval from office may also be imposed upon directors
and/or officers and/or employees of HfMO or intermediary found to have violated this
Circular as the circumstances would warrant,

Section 5. Separability Clause

Should any provision of this Circular or any part thereof be declared invalid, the other
provisions, insofar as they are separable from the invalid ones, shall remain in full
force and effect.

Section 6 Repealing and AmendinE Clause

All orders, rules ancl regulations, mennoranda and other issuances inconsistent with or
contrary to the provisions of this Circular are hereby repealed or amended accordingly

Section 7. Effectivity

This Clrcular shall take effect immediately

ffi
REY L . REGALADO
lnsurarrce Commissioner

i Entitled, "Guidelines on the lssuance of Cease and Desist Orders (CDOs) Against Health Maintenance Organizations
(HMCs)."
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