Companies and Their HMOs Must Comply with Accounting Standards

The Philippine Star reported that the Insurance Commission (IC) released a circular requiring Health Maintenance Organizations (HMOs) to issue contracts compliant with Philippine accounting standards. The circular, which was intended for transparency purposes, shall apply to the annual as well as quarterly reporting periods beginning January 1, 2020.

Companies should then make sure that by that time next year, HMOs contracts are compliant with the law. One of the principles that must be followed are contained in the Philippine Financial Reporting Standards (PFRS) 4 which is acknowledged as the current insurance accounting standard in the country. Another reporting framework HMO agreements must follow is the PFRS 15. This framework, on the other hand, details the accounting principles governing revenues from contracts with customers.

The reporting standard that must be observed will be based on the benefit structure of the HMO agreement in question. For instance, those with membership fee-based benefits must comply with the PFRS 4. In this kind of agreement, it is the HMO who bears the risk. The membership fee serves as the fixed prepaid fee.

As for HMO agreements with fund-based benefits or fixed prepaid fee, the PFRS 15 standard will apply. In this case, the client bears the risk. A fixed prepaid fee can be any of the following: administrative only cash fund, administrative fee or enrolment fee.

Additionally, there are HMO agreements that incorporate both types of benefit structure. Reports made for such agreements must then have two parts. Each section must be in accordance with the relevant framework.

The IC, headed by Commissioner Dennis Funa, is the Philippine government’s regulator that strives to improve the efficiency and effectivity of the HMO industry’s operations. It also protects the welfare of HMO members.

To best serve your needs, make sure that your company remains compliant with the law and updated with the latest developments in the industry. If you need further expert assistance on accounting matters, reach out to our team by phone +63 2 8247961 or +63 906 5586469. You can also email your concerns to As a trusted accounting services Philippines provider, we will tailor our services to suit your unique business needs.

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