THE INSURANCE COMMISSION (IC) has required health maintenance organizations (HMOs) and mutual benefit associations (MBAs) to adopt new financial reporting standards within the next six years.
All HMOs must adopt the Philippine Financial Reporting Standards 17 (PFRS 17) in their audited financial statements by Jan. 1, 2027, while the deadline for MBAs is on Jan. 1, 2030, based on separate circulars issued by the IC dated Oct. 17.
The deadline for HMOs was moved from the original January 2025 implementation date.
Under the new circular, HMOs will have to submit a PFRS 17 preparedness assessment report every quarter from Jan. 15, 2025 to Jan. 15, 2026.
“The Commission is presently working on a new prudential framework for HMOs, which we believe will further improve their solvency positions. The forthcoming framework will go hand-in-hand with the industry’s transition to PFRS 17 in 2027,” Insurance Commissioner Reynaldo A. Regalado said in a statement.
“We see that the shift to PFRS 17 will ultimately benefit HMO customers. The new accounting standard will usher in a more accurate assessment of an HMO’s solvency position at a given timeframe. Consequently, the commission will be at a more informed position to ensure that an HMO will be able to respond to its obligations under its HMO agreements,” Mr. Regalado said.
The International Accounting Standards Board (IASB) in 2017 prescribed International Financial Reporting Standard (IFRS) 17 for insurance contracts. The standards provide updated principles for the recognition, measurement, presentation and disclosure of insurance contracts in firms’ financial statements.
PFRS 17 is the local adoption of the IFRS 17 as approved by the IASB in 2018.
“IFRS 17 differs from IFRS 4, its predecessor, by introducing a more uniform and transparent approach to determine insurance contract liabilities, emphasizing the use of current values and risk adjustments; by introducing Contractual Service Margin, which promotes a more systematic and consistent approach to recognizing profits over time; and by establishing clear guidelines for the presentation of insurance contract revenues and expenses, thus enhancing comparability and transparency,” the IC said.
The IC in July issued an advisory seeking industry comments on a possible increase in HMOs’ minimum paid-up capital requirement, which will be implemented over 10 years.
Under the proposal, from the current P10-million requirement, existing HMOs will need to have at least P50 million in paid-up capital by end-2024, while new HMOs will need to put up at least P100 million in capital.
By end-2025, all HMOs should have at least P100 million in capital. This will be increased to P200 million by end-2028, P350 million by end-2031, and to P500 million by end-2034.
The HMO industry booked a combined net income of P636.6 million at end-June versus the P1.19-billion net loss booked in the same period last year, according to IC data based on the unaudited financial statements of 25 companies.
Only six out of the 25 licensed HMO companies recorded net losses in the period, according to the report, with all firms meeting the current P10-million capital requirement. — AMCS
