SEC sets probe on investment solicitations of HMO firm

The Securities and Exchange Commission (SEC) has asked the Department of Health to look into the investment solicitation activities being made by Caritas Health Shield Inc., a health maintenance organization (HMO).

In a letter to Health Secretary Manuel Dayrit, SEC Chairman Lilia R. Bautista said the commission has received numerous queries from private individuals whether Caritas is licensed to solicit investments from the public.

Bautista said the Philippine Federation of Pre-need Plan Companies (PFPPC) itself has asked the government to scrutinize the operations of Caritas, which has integrated pre-need pension plan features in its HMO plan.

The PFPPC claimed that Caritas has no license to solicit investments from the public nor has it set up a trust fund to guarantee the delivery of the promised benefits and services to clients. It alleged that Caritas has a paid-up capital of only P17 million.

Under SEC rules, companies offering pre-need products must have a required paid-up capital of at least P50 million.

Bautista said while the SEC had tried to look into Caritas’ operations, the HMO’s legal counsel had insisted that Caritas, being an HMO is under the administrative jurisdiction of the DOH and not the SEC.

Caritas claimed that "all its health care programs have been submitted to and passed upon by the DOH which has always asserted regulatory jurisdiction over HMOs."

"We understand that market conditions prompt HMO companies to introduce innovations in their products.

In the case of Caritas, it has integrated pre-need features in its HMO plans," Bautista said.

The SEC said there was nothing wrong with this as long as the necessary safeguards have been put in place.

Most HMOs have introduced new features to their traditional products to lure in more clients and at the same time augment their income.

Several HMOs suffered mounting losses in the late 1990s when the peso devaluation and the Asian economic crisis led to soaring hospital- and health-related expenditures.

HMOs that suffered from financial difficulties would often result in failure to provide patients with due care, the non-renewal of memberships, and non-payment to accredited doctors.