The Insurance Commission has extended a lifeline to health maintenance organizations (HMOs) by revising the required acid test ratio from 1% to 0.75%.
The acid test ratio, also referred to as the quick ratio, serves as a gauge of a company’s most liquid assets in relation to its immediate liabilities.
A ratio of 1% typically signifies a company’s ability to meet its short-term financial obligations, while a ratio falling below 1% signals potential challenges in fulfilling such obligations.
Insurance Commissioner Reynaldo A. Regalado clarified that this adjustment to the acid test ratio will impact the interim financial statements of HMOs from September 30, 2023, through September 30, 2024, unless further modifications are introduced by the Insurance Commission.
Regalado cited the P1.44 billion net loss reported in the 2022 HMO Industry Performance Report, underscoring the ongoing surge in both claim volumes and per-claim costs.
He also pointed out that the escalating healthcare expenses in the current year compound the challenges for HMOs in maintaining the 1% acid test ratio.
The IC emphasizes its commitment to providing HMOs with ample time to recover.
On October 18, 2023, the Insurance Commission issued a cease and desist order against Carehealth Plus Systems International Inc., instructing the company to discontinue the sale of new HMO products. However, the order stipulates that Carehealth must continue servicing existing contracts with its members and clients.
Carehealth currently faces 66 complaints lodged with the commission from various entities, including the Department of Agrarian Reform Employees Association Regional Office X, the Office of the Solicitor General Provident Fund, and the Office of the President-Presidential Management Staff.