AN ACT INSTITUTING a NATIONAL HEALTH INSURANCE PROGRAM FOR ALL FILIPINOS AND ESTABLISHING THE PHILIPPINE HEALTH INSURANCE CORPORATION FOR THE PURPOSE

Tenth Congress
Third Regular Session

[ REPUBLIC ACT No. 7875, January 21, 1995 ]

AN ACT INSTITUTING a NATIONAL HEALTH INSURANCE PROGRAM FOR ALL FILIPINOS AND ESTABLISHING THE PHILIPPINE HEALTH INSURANCE CORPORATION FOR THE PURPOSE

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "National Health Insurance Act of 1995."

Article 1. GUIDING PRINCIPLES

Section 2. Declaration of Principles and Policies. - Section 11, Article XIII of the 1987 Constitution of the Republic of the Philippines declares that the State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. Priority for the needs of the underprivileged, sick, elderly, disabled, women, and children shall be recognized. Likewise, it shall be the policy of the State to provide free medical care to paupers.

In the pursuit of a National Health Insurance Program, this Act shall adopt the following guiding principles:

Section 3. General Objectives. - This Act seeks to:

Article II. DEFINITION OF TERMS

Section 4. Definition of Terms. - for the purpose of this Act, the following terms shall be defined as follows:

Article III. THE NATIONAL HEALTH INSURANCE PROGRAM

Section 5. Establishment and Purpose. - There is hereby created the National Health Insurance Program which shall provide health insurance coverage and ensure affordable, acceptable, available and accessible health care services for all citizens of the Philippines, in accordance with the policies and specific provisions of this Act. This social insurance program shall sense as the means for the healthy to help pay for the care of the sick and for those who can afford medical care to subsidize those who cannot. It shall initially consist of Programs I and II of Medicare and be expanded progressively to constitute one universal health insurance program for the entire population. the Program shall include a sustainable system of funds constitution, collection, management and disbursement for financing the availment of a basic minimum package and other supplementary packages of health insurance benefits by a progressively expanding proportion of the population. the Program shall be limited to paying for the utilization of health services by covered beneficiaries or to purchasing health services in behalf of such beneficiaries. It shall be prohibited from providing health care directly, from buying and dispensing drugs and pharmaceuticals, from employing physicians and other professionals for the purpose of directly rendering care, and from owning or investing in health care facilities.

Section 6. Coverage. - All citizens of the Philippines shall be covered by the National Health Insurance Program. in accordance with the principles of universality and compulsory coverage enunciated in Section 2 (b) and 2 (1) hereof, implementation of the Program shall, furthermore, be gradual and phased in over a period of not more than fifteen (15) years: Provided, That the Program shall not be made compulsory in certain provinces and cities until the Corporation shall be able to ensure that members in such localities shall have reasonable access to adequate and acceptable health care services.

Section 7. Enrollment. - the Program shall enroll beneficiaries in order for them to be placed under coverage that entitles them to avail of benefits with the assistance of the financial arrangements provided by the Program. the process of enrollment shall include the identification of beneficiaries, issuance of appropriate documentation specifying eligibility to benefits, and indicating how membership was obtained or is being maintained. the enrollment shall proceed in accordance with these specific policies:

All indigents not enrolled in the Program shall have priority in the use and availment of the services and facilities of government hospitals, health care personnel, and other health organizations: Provided, however, That such government health care providers shall ensure that said indigents shall subsequently be enrolled in the Program.

Section 8. Health Insurance ID Card - in conjunction with the enrollment provided above, the Corporation through its local office shall issue a health insurance ID which shall be used for purposes of identification, eligibility verification, and utilization recording. the issuance of this ID card shall be accompanied by a clear explanation to the enrollee of his rights, privileges and obligations as a member. a list of health care providers accredited by the Local Health Insurance Office shall likewise be attached thereto.

Section 9. Change of Residence. - a citizen can be under only one Local Health Insurance Office which shall be located in the province or city of his place of residence. a person who changes residence, becomes temporarily employed, or for other justifiable reasons, is transferred to another locality should inform said Office of such transfer and subsequently transfer his Program membership.

Section 10. Benefit Package. - Subject to the limitations specified in this Act and as may be determined by the Corporation, the following categories of personal health services granted to the member or his dependents as medically necessary or appropriate shall include:

Section 11. Excluded Personal Health Services. - the benefits granted under this Act shall not cover expenses for the services enumerated hereunder except when the Corporation, after actuarial studies, recommend their inclusion subject to the approval of the Board:

Section 12. Entitlement to Benefits. - a member whose premium contributions for at least three (3) months have been paid within the six (6) months prior to the first day of his or his dependents' availment, shall be entitled to the benefits of the Program: Provided, That such member can show that he contributes thereto with sufficient regularity, as evidenced in their health insurance ID card: and Provided, further, That he is not currently subject to legal penalties as provided for in Section 44 of this Act.

The following need not pay the monthly contributions to be entitled to the Program's benefits:

Section 13. Portability of Benefits. - the Corporation shall develop and enforce mechanisms and procedures to assure that benefits are portable across Offices.

Article IV. THE PHILIPPINE HEALTH INSURANCE CORPORATION

Section 14. Creation and nature of the Corporation. - There is hereby created a Philippine Health Insurance Corporation, which shall have the status of a tax-exempt government corporation attached to the Department of Health for policy coordination and guidance.

Section 15. Exemptions from Taxes and Duties. -The Corporation shall be exempt from the payment of taxes on all contributions thereto and all accruals on its income or investment earnings.

Any donation, contribution, bequest, subsidy or financial aid which may be made to the Corporation shall constitute as allowable deduction from the income of the donor for income tax purposes and shall be exempt from donor's tax, subject to such conditions as provided in the National Internal Revenue Code, as amended.

Section 16. Powers and Functions. - the Corporation shall have the following powers and functions:

Section 17. Quasi-Judicial Powers. - the Corporation, to carry out its tasks more effectively, shall be vested with the following powers:

The revocation of a health care provider's accreditation shall operate to disqualify him from obtaining another accreditation in his own name, under a different name, or through another person, whether natural or juridical.

The Corporation shall not be bound by the technical rules of evidence.

Section 18. the Board of Directors. -

a. Composition - the Corporation shall be governed by a Board of Directors hereinafter referred to as the Board. composed of eleven members as follows:

The SSS Administrator or his representative; the GSIS General Manager or his representative; a representative of the self-employed sector; and a representative of health care providers.

The Secretary of Health shall be the ex officio Chairperson while the President of the Corporation shall be the Vice Chairperson of the Board.

a. Appointment and Tenure - the President of the Philippines shall appoint the Members of the Board upon the recommendation of the Chairman of the Board and in consultation with the sectors concerned. Members of the Board shall have a term of four (4) years each, renewable for a maximum of two (2) years, except for members whose terms shall be co-terminous with their respective positions in government. Any vacancy in the Board shall be filled in the manner in which the original appointment was made and the appointee shall serve only the unexpired term of his predecessor.

b. Meetings and Quorum - the Board shall hold regular meetings at least once a month. Special meetings may be convened at the call of the Chairperson or by a majority of the members of the Board. the presence of six (6) voting members shall constitute a quorum. in the absence of the Chairperson and Vice Chairperson, a temporary presiding officer shall be designated by the majority of the quorum.

c. Allowances and Per Diems - the members of the Board shall receive a per diem for every meeting actually attended subject to the pertinent budgetary laws, rules and regulations on compensation, honoraria and allowances.

Section 19. the President of the Corporation. -

Section 20. Health Finance Policy Research. - Among the staff departments that will be established by the Corporation shall be the Health Finance Policy Research Department, which shall have the following duties and functions:

Section 21. Actuary of the Corporation. - An Office of Actuary shall be created within the Corporation to conduct the necessary actuarial studies and present recommendations on insurance premium, investments and other related matters.

Article V. LOCAL HEALTH INSURANCE OFFICE

Section 22. Establishment. - the Corporation shall establish a Local Health Insurance Office, hereinafter referred to as the Office, in every province or chartered city, or wherever it is deemed practicable, to bring its services closer to members of the Program. However, one office may serve the needs of more than one province or city when the merged operations will result in lower administrative cost and greater cross-subsidy between rich and poor localities.

Provinces and cities where prospective members are organized shall receice priority in the establishment of local health insurance offices.

Section 23. Functions. - Each Office shall have the following powers and functions:

Article VI. THE NATIONAL HEALTH INSURANCE FUND

Section 24. Creation of the National Health Insurance Fund. - There is hereby created a National Health Insurance Fund, hereinafter referred to as the Fund, that shall consist of.

Section 25. Components of the National Health Insurance Fund. -The National Health Insurance Fund shall have the following components:

Section 26. Financial Management. - the use, disposition, investment, disbursement, administration and management of the National Health Insurance Fund, including any subsidy, grant or donation received for program operations shall be governed by resolution of the Board of Directors of the Corporation, subject to the following limitations:

Section 27. Reserve Fund - the Corporation shall set aside a portion of its accumulated revenues not needed to meet the cost of the current year's expenditures as reserve funds: Provided, That the total amount of reserves shall not exceed a ceiling equivalent to the amount actuarially estimated for two years' projected Program expenditures: Provided, further, That whenever actual reserves exceed the required ceiling at the end of the Corporation's fiscal year, the Program's benefits shall be increased or member contributions decreased prospectively in order to adjust expenditures or revenues to meet the required ceiling for reserve funds. Such portions of the reserve fund as are not needed to meet the current expenditure obligations shall be invested in short-term investments to earn an average annual income at prevailing rates of interest and shall be known as the "Investment Reserve Fund" which shall be invested in any or all of the following:

Article VII. FINANCING

Section 28. Contributions. - All members of the Program shall contribute to the Fund. in accordance with a reasonable, equitable and progressive contribution schedule to be determined by the Corporation on the basis of applicable actuarial studies and in accordance with the following guidelines:

Section 29. Payment for Indigent Contributions. - Contributions for indigent members shall be subsidized partially by the local government unit where the member resides. the Corporation shall provide counterpart financing equal to the LGU's subsidy for indigents: Provided, That in the case of fourth, fifth and sixth class LGUS, the National Government shall provide up to ninety percent (90%) of the subsidy for indigents for a period not exceeding five (5) years. the share of the LGUs shall be progressively increased until such time that its share becomes equal to that of the National Government.

Article VIII. HEALTH CARE PROVIDERS

Section 30. Free Choice of Health Facility, Medical or Dental Practitioner. - Beneficiaries requiring treatment or confinement shall be free to choose from accredited health care providers. Such choice shall, however, be subject to limitations based on the area of jurisdiction of the concerned Office and on the appropriateness of treatment in the facility chosen or by the desired provider.

Section 31. Authority to Grant Accreditation. - the Corporation shall have the authority to grant to health care providers accreditation which confers the privilege of participating in the Program.

Section 32. Accreditation Eligibility. - All health care providers, as enumerated in Sec. 4(o) hereof and operating for at least three (3) years may apply for accreditation.

Section 33. Minimum Requirements for Accreditation. - the minimum accreditation requirements for health care providers are as follows:

Section 34. Provider Payment Mechanisms. -The following mechanisms for public and private providers shall be allowed in the Program:

Each shall recommend the appropriate payment mechanism within its jurisdiction for approval by the Corporation. Special consideration shall be given to payment for services rendered by public and private health care providers Office serving remote or medically underserved areas.

Section 35. Fee-for-service Payments and Payments in General. - Fee-for-service payments may be made separately for professional fees and hospital charges, or both, based on arrangements with health care providers. This fee shall be based on a schedule to be established by the Board which shall be reviewed every three (3) years. Fees paid for professional services rendered by salaried public providers shall be allowed to be retained by the health facility in which services are rendered and be pooled and distributed among health personnel. Charges paid to public facilities shall be allowed to be retained by the individual facility in which services were rendered and for which payment was made. Such revenues shall be used to defray operating costs other than salaries, to maintain or upgrade equipment, plant or facility, and to maintain or improve the quality of service in the public sector.

Section 36. Capitation Payments.-Capitation payments may be paid to public or private providers according to rates of capitation payments based on annual capitation rate guidelines to be issued by the Corporation.

Section 37. Quality Assurance. - Under the guidelines approved by the Corporation and in collaboration with their respective Offices, health care providers shall take part in programs of quality assurance, utilization review, and technology assessment that have the following objectives:

Section 38. Safeguards Against Over and Under Utilization. - It is incumbent upon the Corporation to set up a monitoring mechanism to be operationalized through a contract with health care providers to ensure that there are safeguards against:

The Corporation may deny or reduce the payment for claims when such claims are attended by false or incorrect information and when the claimant fails without justifiable cause to comply with the pertinent rules and regulations of this Act.

Article IX. GRIEVANCE AND APPEAL

Section 39. Grievance System. - a system of grievance is hereby established, wherein members, dependents, or healthcare providers of the Program who believe they have been aggrieved by any decision of the implementors of the Program, may seek redress of the grievance in accordance with the provisions of this Article.

Section 40. Grounds for Grievances. - the following acts shall constitute valid grounds for grievance action:

Section 41. Grievance and Appeal Procedures. - a member, his dependent, or a health care provider may file a complaint for grievance based on any of the above grounds, in accordance with the following procedures:

Section 42. Grievance and Appeal Review Committee. -The Board shall create a Grievance and Appeal Review Committee, composed of three (3) to five (5) members, hereinafter referred to as the Committee, which, subject to the procedures enumerated above, shall receive and recommend appropriate action on complaints from members and health care providers relative to this Act and its implementing rules and regulations.

Section 43. Hearing Procedures of the Committee. - Upon the filing of the complaint, the Grievance and Appeal Review Committee, from a consideration of the allegations thereof, may dismiss the case outright due to lack of verification, failure to state the cause of action, or any other valid ground for the dismissal of the complaint after consultation with the Board; or require the respondent to file a verified answer within five (5) days from service of summons.

Should the defendant fail to answer the complaint within the reglamentary five-day period herein provided, the Committee, motu proprio or upon motion of the complainant, shall render judgment as may be warranted by the facts alleged in the complaint and limited to what is prayed for therein.

After an answer is filed and the issues are joined, the Committee shall require the parties to submit, within ten (10) days from receipt of the order, the affidavits of witnesses and other evidence on the factual issues defined therein, together with a brief statement of their, positions setting forth the law and the facts relied upon by them. in the event the Committee finds, upon consideration of the pleadings, the affidavits and other evidence, and position statements submitted by the parties, that a judgment may be rendered thereon without need of a formal hearing, it may proceed to render judgment not later than ten (10) days from the submission of the position statements of the parties.

In cases where the Committee deems it necessary to hold a hearing to clarify specific factual matters before rendering judgment, it shall set the case for hearing for the purpose. At such hearing, witnesses whose affidavits were previously submitted may be asked clarificatory questions by the proponent and by the Committee and may be cross-examined by the adverse party. the order setting the case for hearing shall specify the witnesses who will be called to testify, and the matters on which their examination will deal. the hearing shall be terminated within fifteen (I 5) days, and the case decided by the Committee within fifteen (15) days from such termination.

The decision of the Committee shall become final and executory fifteen (15) days after notice thereof: Provided, however, that it is appealable to the Board by filing the appellant's memorandum of appeal within fifteen (I 5) days from receipt of the copy of the judgment appealed from. the appellees shall be given fifteen (15) days from notice to file the appellee's memorandum after which the Board shall decide the appeal within thirty (30) days from the submittal of the said pleadings.

The decision of the Board shall also become final and executory fifteen (15) days after notice thereof: Provided, however, that it is reviewable by the Supreme Court on purely questions of law in accordance with the Rules of Court.

The Committee and the Board, in the exercise of their quasi-judicial function, as specified in Section 17 hereof, can administer oaths, certify, to official acts and issue subpoena to compel the attendance and testimony of witnesses, and subpoena duces tecum ad testificandum to enjoin the production of books, papers and other records and to testify therein on any question arising out ofthis Act. Any case of contumacy shall be dealt with in accordance with the provisions of the Revised Administrative Code and the Rules of Court. the Board or the Committee, as the case may be, shall prescribe the necessary administrative sanctions such as fines, warnings, suspension or revocation of the right to participate in the Program.

In all its proceedings, the Committee and the Board shall not be bound by the technical rules of evidence: Provided, however, that the Rules of Court shall apply with suppletory effect.

Article X. PENALTIES

Section 44. Penal Provisions. - Any violation of the provisions of this Act, after due notice and hearing, shall suffer the following penalties:

A fine of not less than Ten thousand pesos (P10,000) nor more than Fifty thousand pesos (P50,000) in case the violation is committed by the hospital management or provider. in addition, its accreditation shall be suspended or revoked from three (3) months to the whole term of accreditation: Provided, however, That recidivists may not anymore be accredited as a participant of the Program;

A fine of not less than Five hundred pesos (P500) nor more than Five thousand pesos (P5,000) and imprisonment of not less than six (6) months nor more than one (1) year in case the violation is committed by the member.

Where the violations consist of failure or refusal to deduct contributions from the employee's compensation or to remit the same to the Corporation, the penalty shall be a fine of not less than Five hundred pesos (P500) but not more than One thousand pesos (P1,000) multiplied by the total number of employees employed by the firm and imprisonment of not less than six (6) months but not more than one (1) year: Provided, further, That in the case of self-employed members, failure to remit one's own contribution shall be penalized with a fine of not less than Five hundred pesos (P500) but not more than One thousand pesos (P1,000).

Any employer or any officer authorized to collect contributions under this Act who, after collecting or deducting the monthly contributions from his employees' compensation, fails to remit the said contributions to the Corporation within thirty (30) days from the date they become due shall be presumed to have misappropriated such contributions and shall suffer the penalties provided for in Article 315 of the Revised Penal Code.

Any employer who shall deduct directly or indirectly from the compensation of the covered employees or otherwise recover from them his own contribution on behalf of such employees shall be punished by a fine not exceeding One thousand pesos (P1, 000) multiplied by the total number of employees employed by the firm, or imprisonment not exceeding one (1) year, or both fine and imprisonment, at the discretion of the Court.

If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing directors or partners or president or general manager, or other persons responsible for the commission of the said act shall be liable for the penalties provided for in this Act and other laws for the offense.

Any employee of the Corporation who receives or keeps funds or property belonging, payable or deliverable to the Corporation, and who shall appropriate the same, or shall take or misappropriate or shall consent, or through abandonment or negligence shall permit any other person to take such property or funds wholly or partially, shall likewise be liable for misappropriation of funds or property and shall suffer imprisonment of not less than six (6) years and not more than twelve (12) years and a fine of not less than Ten thousand pesos (P10,000.00) nor more than Twenty thousand pesos (P20,000). Any shortage of the funds or loss of the property upon audit shall be deemed prima facie evidence of the offense.

All other violations involving funds of the Corporation shall be governed by the applicable provisions of the Revised Penal Code or other laws, taking into consideration the rules on collection, remittances, and investment of funds as may be promulgated by the Corporation.

Article XI. APPROPRIATIONS

Section 45. Initial Appropriation. - the unexpended portion of the budget of the Philippine Medical Care Commission (PMCC) for the year during which this Act was approved shall be utilized for establishing the Corporation and initiating its operations, including the formulation of the rules and regulations necessary for the implementation of this Act. in addition, initial funding shall come from any unappropriated but available fund of the Government.

Section 46. Subsequent Appropriations. - Starting 1995 and thereafter, twenty-five percent (25%) of the increment in total revenue collected under Republic Act No. 7654 shall be appropriated in the General Appropriations Act solely for the National Health Insurance Fund.

In addition, starting 1996 and thereafter, twenty-five percent (25%) of the incremental revenue from the increase in the documentary stamp taxes under Republic Act No. 7660 shall likewise be appropriated solely for the said fund,

Section 47. Additional Appropriations. - the Corporation may request Congress to appropriate supplemental funding to meet targetted milestones of the Program in accordance with Section 10(d) of this Act.

Article XII. TRANSITORY PROVISIONS

Section 48. Appointment of Board Members. - Within thirty (30) days from the date of effectivity of this Act, the President of the Philippines shall appoint the members of the Board and the President of the Corporation.

Section 49. Implementing Rules and Regulations. - Within thirty (30) days from the completion of such appointments, the Board shall convene to formulate the rules and regulations necessary for the implementation of this Act.

Section 50. Promulgation. - Within one (1) year from its initial meeting, the Board shall promulgate the aforementioned rules and regulations in at least two (2) national newspapers of general circulation. But until such time that the Corporation shall have promulgated said rules and regulations, the existing rules and regulations of the PMCC shall be followed. the present Medicare Program shall continue to be so administered, until the Corporation's Board deems the new system as ready, for implementation in accordance with the provisions of this Act.

Section 51. Merger. - Within sixty (60) days from the promulgation of the implementing rules and regulations, all functions and assets of the Philippine Medical Care Commission shall be merged with those of the Corporation without need of conveyance, transfer or assignment. the PMCC shall thereafter cease to exit.

The liabilities of the PMCC shall be treated in accordance with existing laws and pertinent rules and regulations.

To the greatest extent possible and in accordance with existing laws, all employees of the PMCC shall be absorbed by the Corporation.

Section 52. Transfer of Health Insurance Funds of the SSS and GSIS. - the Health Insurance Funds being administered by the SSS and GSIS shall be transferred to the Corporation within sixty (60) days from the promulgation of the implementing rules and regulations. the SSS and GSIS shall, however, continue to perform Medicare functions under contract with the Corporation until such time that such functions are assumed by the Corporation, in accordance with the following Section.

Section 53. Transfer of the Medicare Functions of the SSS and GSIS. - Within five (5) years from the promulgation of the implementing rules and regulations, the functions, assets, equipment, records, operating systems, and liabilities, if any of the Medicare operations of the SSS and GSIS shall be transferred to the Corporation: Provided, however, That the SSS and GSIS shall continue performing its Medicare functions beyond the stipulated five-year period if such extension will benefit Program members, as determined by the Corporation.

Personnel of the Medicare departments of the SSS and GSIS shall be given priority in the hiring of the Corporation's employees.

Article XIII. MISCELLANEOUS PROVISIONS

Section 54. Oversight Provision.- Congress shall conduct a regular review of the National Health Insurance Program which shall entail a systematic evaluation of the Program's performance, impact or accomplishments with respect to its objectives or goals. Such review shall be undertaken by the Committees of the Senate and the House of Representatives which have legislative jurisdiction over the Program.

Section 55. Information Campaign. - There shall be provided a substantial period of time to undertake an intensive public information campaign prior to the implementation of the rules and regulations of this Act.

Section 56. Separability Clause. - in the event any provision of this Act or the application of such provision to any person or circumstances is declared invalid, the remainder of this Act or the application of said provisions to other persons or circumstances shall not be affected by such declaration.

Section 57. Repealing Clause. - Executive Order 119, Presidential Decree 1519 and other laws currently applying to the administration of Medicare are hereby repealed. All other laws, executive orders, administrative rules and regulations or parts thereof which are inconsistent with the provisions of this Act are also hereby amended, modified, or repealed accordingly.

Section 58. Government Guarantee. - the Government of the Philippines guarantees the financial viability of the Program.

Section 59. Effectivity. - This Act shall take effect fifteen days after its publication in at last three (3) national newspapers of general circulation.

Approved,

This Act, which is a consolidation of Senate Bill No. 1738 and House Bill No. 14225, was finally passed by the Senate and the House of Representatives on February 7, 1995.

Approved, JANUARY 21, 1995

(Sgd.) FIDEL V. RAMOS
President of the Philippines