MANILA, Philippines — Starting next year, the Insurance Commission (IC) will require health maintenance organizations (HMOs) to comply with Philippine accounting standards to ensure the transparency of their agreements and contracts.
Insurance Commissioner Dennis Funa issued a circular requiring the application of the Philippine Financial Reporting Standards (PFRS) 4 and PFRS 15 for HMO agreements.
“There is a need to clarify what is the current accounting standard to be used for HMO contracts or agreements,” Funa said.
Under the circular, the PRFS 4 shall be applied to HMO agreements with membership fee-based benefits or with a fixed prepaid fee in the form of a membership fee, in which the risk is borne by the HMO.
On the other hand, HMO contracts with fund-based benefits or with a fixed prepaid fee in the form of the enrolment fee, administrative fee, or administrative services only cash fund – in which the risks are borne by the client – shall be reported under the PRFS 15 framework.
Reports for agreements with a combination of both membership-fee based and fund-based benefits shall be divided into two segments, with each component complying on the appropriate reporting standard.
“This circular shall be effective for annual and quarterly reporting periods starting Jan. 1, 2020, unless it is subsequently amended or changed by this commission,” Funa said.
Last year, the IC issued Circular Letter 2018-69, deferring the implementation of the International Financial Reporting Standard 17 until Jan. 1, 2023, one year later than the proposed effectivity date set by the International Accounting Standards Board.
The same circular also provided that all HMOs shall maintain the current reporting standards until further required by the commission.
The IFRS is a set of accounting standards that are recognized by at least 166 countries, including the Philippines, and provides a guide on how particular types of transactions and other events should be reported in financial statements.
Funa said there was a need for additional time, in addition to that proposed by the IASB, to prepare for the implementation of IFRS 17, as its rollout was faced with various challenges, such as tight budget, reporting and disclosure, and lack of information technology infrastructure.
However, Insurance deputy commissioner George Ongkeko earlier said some multinational insurance companies were likely to roll out the IFRS-17 earlier or by 2022.
Ongkeko said domestic insurance companies would then follow, and possibly take the systems implemented by multinational firms as model for their own IFRS 17 rollout.