The Asian Development Bank (ADB) said the government should consider reinsurance to reduce the government’s exposure to healthcare costs during epidemics and pandemics.
“Reinsurance would allow a category of risk (such as pandemic risk) or part of the claims risk to be transferred from PhilHealth’s portfolio,” the ADB said in an article published on December 24.
It also added that reinsurance options are commercially available to mitigate the risk of pandemics and epidemics.
The ADB said one of the common options for pandemics and epidemics is the stop-loss reinsurance, which provides coverage when claims exceed a certain threshold, protecting PhilHealth from sudden increases in claims during such events.
“Under this model, PhilHealth and the reinsurer would share proportionately in all premiums and losses resulting from a pandemic or epidemic,” the ADB said.
It added that reinsurance leads to pandemic risk modeling, risk-based pricing, capital relief and more.
The ADB highlighted several benefits of reinsurance, including access to pandemic risk models, risk-based pricing and capital reduction.
At the same time, it also emphasized the need for PhilHealth to have a clear coverage policy for pandemics and epidemics in order to effectively manage its premiums and reserves.
PhilHealth said it has set aside P281 billion in reserves to pay benefits for two years and a surplus of P150 billion as of October.
It also had an investment portfolio of P489 billion as of November.
The ADB said that while PhilHealth was able to provide policyholders with coronavirus disease 2019 (COVID-19) benefits as a result of significant reserves, this may not always be the case and is an “unreliable method of approaching disaster risk financing .”
Social insurers often exclude coverage for pandemic-related prevention, treatment and immunization due to insufficient data on their severity and frequency, the report said.
However, during the COVID-19 pandemic, PhilHealth was ordered to expand benefits to close the protection gap.
Last week, the bicameral conference committee stripped PhilHealth of its subsidy for the proposed 2025 budget.
In response, Emmanuel R. Ledesma, Jr., President and Chief Executive Officer of PhilHealth, assured that users will still have “uninterrupted access” to the benefits.fits and no reduction despite zero subsidies for next year. — Aubrey Rose A. Inosante