AIA Acquisition of Medicard Gets Approval of Antitrust Body

AIA Philippines Life and General Insurance Company Inc. can proceed with its acquisition of 100 percent shares of MediCard Philippines Inc. (MediCard), one of the country’s top health maintenance organizations (HMOs), the Philippine Competition Commission (PCC) announced. 

In a decision released on Friday (January 6), the PCC found that the proposed takeover will not likely result in substantial lessening of competition in the markets for individual and group health or medical coverage. After the transaction, PCC notes that other health plan companies offering the same services remain to pose substantial competitive constraints on the merged firms.  

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“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 stated, as cleared by PCC OIC Chairperson Johannes R. Bernabe, Commissioners Emerson B. Aquende, Marah Victoria S. Querol, and Michael B. Peloton.  

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 was formerly known as Philippine American Life and General Insurance Company or AIA Philam Life.

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

Medicard is among the top health maintenance organizations (HMOs) in the Philippines at the time of the merger, holding 16.93 percent of the market share. It competes with Maxicare HealthCare Corporation that 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 PCC said that it expects the current concentration of Medicard’s market shares will spread thinner when reviewed to compete with not only other HMOs but also insurance companies offering similar services and health plans. There are 29 HMOs and 30 life insurance companies that compete in providing individual and group health or medical coverage.   

According to the PCC Mergers and Acquisitions Office’s market analysis, customers are able to switch easily to other health or medical coverage firms, since majority of 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 switch 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 pose sufficient competitive constraints as well for the merged firm.