PCC approves AIA Philippines’ acquisition of MediCard

The Philippine Competition Commission has approved life insurer AIA Philippines Life and General Insurance Company Inc.’s acquisition of MediCard Philippines Inc., one of the top health maintenance organizations or HMOs in the country.

In a decision released on Tuesday, the PCC said it found that the proposed 100-percent takeover will not likely result in a substantial lessening of competition in the markets for individual and group health or medical coverage.

“There will be no significant shift in the share of the parties in the market and the number of players will remain unchanged post-transaction,” the decision read, which was signed by PCC OIC Chairperson Johannes Bernabe and Commissioners Emerson Aquende, Marah Victoria Querol, and Michael Peloton.

While Medicard held 16.93 percent of the market share in the Philippines, at the time of the merger it was competing with Maxicare HealthCare Corporation which holds 36.29 percent, Asalus Inc. (Intellicare) with 26.12 percent, PhilHealth Care Inc. with 4.89 percent, Value Care Health Systems Inc. with 4.20 percent, and other HMOs composing 11.57 percent of the remaining share in the market.

The decision said the PCC expects Medicard’s market share  to spread thinner when reviewed since it will compete not only with other HMOs but also with insurance companies offering similar services and health plans.

Currently, 29 health maintenance organizations and 30 life insurance companies compete in offering individual and group health or medical coverage.

In its market analysis, the PCC Mergers and Acquisitions Office also found that customers can switch easily to other health or medical coverage firms since most HMO plans run only for a year and policyholders are not barred from switching providers.

Moreover, with information on their product offerings readily available to the public, and agents constantly jockeying to secure a sale, customers can easily switch to another provider. This low barrier to switching to different competing firms is indicative of a competitive market.

“PCC also observed that customers looking for group health or medical coverage have high bargaining power and can negotiate with service providers for better terms. The high bargaining power of these customers poses sufficient competitive constraints as well for the merged firm,” said the PCC’s decision.

AIA Group Limited and its subsidiaries comprise one of the largest independent publicly listed pan-Asian life insurance groups, present in 18 markets including the Philippines, China, Hong Kong, Thailand, Singapore, Malaysia, Australia, Cambodia, Indonesia, Myanmar, New Zealand, South Korea, Sri Lanka, Taiwan (China), Vietnam, Brunei, and Macau SAR, and a joint venture in India.

In the Philippines, AIA Philippines, formerly known as Philippine American Life and General Insurance Company or AIA Philam Life, is a life insurance company.

On the other hand, Medicard is among the largest health maintenance organizations in the Philippines with over 920,000 members and nationwide coverage in 523 hospitals and 641 clinics comprising the services of 23,000 doctors and 817 dentists.

“As the country’s antitrust authority, PCC is mandated under the Philippine Competition Act to review mergers, acquisitions, and joint ventures of firms across all sectors that meet the threshold to ensure that these deals do not result in a monopoly or harm the interest of consumers,” the PCC said.

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