I. Introduction

In the Philippines, employers are not generally required by law to provide private HMO or health insurance plans, but once they promise those benefits or establish them as a company practice, the obligation becomes legal, not merely moral.

This article walks through, in Philippine context:

What the law does mandate on health-related benefits
When HMO / health insurance promises become legally enforceable
How non-diminution of benefits applies
What employers can and cannot do in changing or withdrawing health benefits
Remedies if promises are not honored

II. Statutory vs. Contractual Health Benefits

First, it’s crucial to separate statutory benefits from contractual / voluntary benefits.

A. Statutory health-related benefits

Employers in the Philippines are required by law to:

Register employees with PhilHealth and remit both employer and employee contributions.
Register employees with other mandatory agencies (SSS, Pag-IBIG, and for certain risks, Employees’ Compensation under ECC), which provide sickness or disability benefits of various forms.

These are mandatory and exist even if not mentioned in the employment contract.

B. Private HMO / health insurance

By contrast, HMO cards, private medical insurance, hospitalization plans, and similar healthcare packages are generally voluntary:

They arise from employment contracts, CBAs, company policies, or long-standing practices, not from the Labor Code itself.
Once granted or promised under those instruments, they are treated as employment benefits protected by labor standards and jurisprudence.

III. Sources of Employer Obligations to Provide HMO / Health Insurance

An employer’s obligation regarding HMO or health insurance tends to come from four main sources:

1. Employment Contracts and Job Offers

If the employment contract or written job offer states that the employee will receive HMO or health insurance (sometimes specifying provider, coverage, or eligibility date), that benefit becomes part of the binding contract once the employee accepts and starts work.
Job advertisements and recruitment statements can also create expectations; once formalized in a contract or consistently implemented, they solidify into enforceable terms.

Key idea: If an HMO plan is clearly part of the offered compensation package, the employer is contractually bound to provide it according to the terms stated.

2. Collective Bargaining Agreements (CBAs)

For unionized workplaces:

Health benefits may be expressly provided in the CBA (e.g., “employer shall provide a medical insurance plan with at least ₱XXX annual coverage to all regular employees and their qualified dependents”).
CBAs have force of law between the parties. Health benefits under a CBA are demandable; non-compliance is a CBA violation and a labor standards issue.
Changes to CBA-provided health benefits must go through collective bargaining, not unilateral employer action.

3. Company Policies and Employee Handbooks

Many employers explain health benefits in company handbooks, HR manuals, or policy memos.
If these are communicated to employees and implemented, they form part of the terms and conditions of employment, especially when acknowledged in writing or consistently followed.
Even if the policy says “subject to management prerogative,” that prerogative is not absolute and can’t override mandatory labor standards or non-diminution once a benefit is established as demandable.

4. Company Practice

Even without written policies, an employer can become bound by company practice, where:

The grant of the benefit is consistent and deliberate
Given over a long period (typically years, not just a few months)
Enjoyed by employees as part of their regular compensation package

If HMO coverage, or employer-paid dependents’ coverage, has been given consistently and without clear conditions, it may be recognized as a benefit that cannot be unilaterally withdrawn or reduced.

IV. Legal Characterization of HMO / Health Insurance Benefits

Once established, HMO and health insurance benefits are legally treated as:

A form of benefit or privilege in favor of the employee
Often regarded as part of wage-related benefits or “fringe benefits” in a broad labor-law sense
Protected by the prohibition against elimination or diminution of benefits (often referred to by Article 100 of the Labor Code, now renumbered but still in force in substance)

Because of this, the employer:

Cannot simply say “we will stop providing HMO” if it has become a regular, established benefit
Cannot unilaterally downgrade coverage (e.g., from private room to ward, or removing dependents’ coverage) when employees have enjoyed the higher level consistently, unless there is a valid legal basis and usually with employee consent or bargaining

V. When Does a “Promise” Become Enforceable?

Not every statement about “great health benefits” during recruitment is automatically enforceable. But obligations can arise in several common scenarios:

A. Explicit Promise in Writing

Enforceable examples:

“Upon regularization, you will be enrolled in our HMO plan, with coverage of ₱150,000 per illness, including one dependent.”
“Health insurance will be provided to all employees after 6 months of service.”

Once the employee has worked under these conditions, those promises are binding. Failure to enroll or provide the promised benefit can be a breach of contract and a labor standards violation.

B. Implied by Consistent Practice

Even absent a written policy, if:

All employees who become regular are enrolled in an HMO
This has been done consistently for years
The employer applies it broadly (not sporadically)

Then a company practice is formed. A new employee who becomes regular may legitimately expect enrollment according to that practice and may insist on it as a right.

C. Verbal Assurances

Verbal promises can also bind the employer, but these raise evidentiary issues:

The employee must be able to prove the existence and terms of the promise (e.g., through witnesses, chat messages, recruitment emails).
Courts and tribunals may still recognize these if there is evidence and consistent behavior by management aligning with the promise.

VI. Employer Obligations Once HMO / Health Insurance is Established

Once a health benefit exists (by contract, CBA, policy, or practice), the employer typically has the obligation to:

Enroll Eligible Employees
- Follow agreed eligibility rules (e.g., upon hiring, upon regularization, or after a certain period).
- Avoid arbitrary exclusions (e.g., singling out certain employees without reasonable basis).
Maintain the Promised Level of Coverage
- If the contract or practice is to cover employees up to a certain amount or room type, the employer should maintain that level.
- If dependents are promised to be covered free, the employer can’t suddenly shift the cost to employees without a valid legal and consensual basis.
Pay the Agreed Employer Share of Premiums
- If the company promised to shoulder the full premium, it cannot later deduct part of it from wages unilaterally.
- If cost-sharing was agreed (e.g., 50–50 employer-employee), any change to the sharing arrangement normally requires agreement and must comply with rules on wage deductions (written authorization, etc.).
Avoid Unlawful Deductions
- Labor law restricts wage deductions. The employer cannot simply deduct HMO premiums beyond the agreed employee share without written and voluntary authorization and lawful basis.
Administer the Benefit Properly
- Timely issuance of HMO cards
- Proper endorsement to the provider of new employees and removal of separated ones
- Prompt processing of forms and documents so employees can actually use their coverage
Inform Employees of Terms and Changes
- While the HMO contract is between the employer and the provider, employees are third-party beneficiaries.
- Employers should inform employees about coverage, exclusions, limitations, and provider changes in a clear and timely manner.

VII. Changing or Discontinuing HMO/Health Benefits

Here we hit a major friction point: employers facing rising HMO costs vs. employees’ right to stable benefits.

A. Management Prerogative vs. Non-Diminution

Employers have management prerogative to run their business, choose vendors, and adjust programs.
However, this prerogative is limited by labor law protections, especially non-diminution of benefits.
If the HMO benefit has become a regular, demandable employee benefit, the employer cannot unilaterally withdraw or reduce it.

Key considerations:

Is the benefit clearly established and regular?
- Regularly granted for several years
- Consistently enjoyed by employees
- Not expressly labeled as “purely discretionary” or “one-time”
Is the change truly necessary and reasonable?
- Switching providers but keeping substantially similar or better coverage is generally acceptable (no diminution).
- Downgrading coverage or removing dependents’ coverage without fair compensation or substitution is usually problematic.

B. Lawful Changes

Employers can lawfully:

Change HMO providers if employees receive substantially the same or better benefits.
Restructure benefits as part of a renegotiated CBA where employees, through their union, agree to a different package (e.g., higher salary but slightly adjusted health coverage).
Modify discretionary benefits where the employer has been clear from the start that such benefits are non-regular, conditional, or subject to annual review, provided actual implementation supports that characterization.

C. Problematic or Unlawful Changes

Examples that can lead to legal issues:

Completely removing HMO coverage that employees have enjoyed for years without replacement or compensation.
Cutting dependents’ coverage fully borne by employer in the past and shifting the cost entirely to employees, without valid justification or agreement.
Introducing new conditions (e.g., only employees above a certain rank get HMO) that were not previously applied, especially if they are discriminatory or arbitrary.

Such actions can be challenged as:

Diminution of benefits
Violation of contract or CBA
Possibly contributing to constructive dismissal if the change is substantial and oppressive.

VIII. Equal Treatment and Classification Issues

Employers can classify employees and give different benefits to:

Managers vs. rank-and-file
Regular vs. probationary
Project vs. regular employees

…as long as the classifications are:

Based on reasonable distinctions (e.g., tenure, rank, responsibility)
Not based on prohibited forms of discrimination (e.g., sex, union membership, etc.)

However, if a particular group (say, all regular rank-and-file) has been consistently receiving HMO coverage, an employer cannot selectively remove that coverage for some individuals in the group without a reasonable basis, as this may violate principles of equal protection in employment and encourage accusations of unfair labor practice.

IX. Special Topics

1. Probationary Employees

If company policy or practice says HMO is only for regular employees, employers are generally allowed to restrict coverage to those who pass probation, provided this is clearly communicated and consistently applied.
If, however, the employer has consistently enrolled probationary employees in the HMO, that may evolve into a company practice, binding the employer to continue doing so.

2. Project / Seasonal / Fixed-Term Employees

Employers can decide whether to extend HMO to these categories.
But once extended regularly, particularly for recurrent project workers, similar practice-based rights may arise.

3. Dependents’ Coverage

If dependents (spouse, children, sometimes parents) have been regularly covered at the employer’s expense, that component is also a benefit protected by non-diminution.
Employers need strong, legally acceptable grounds—and usually employee consent or negotiated agreement—to reduce or remove dependents’ coverage.

4. Retirees and Separated Employees

Some employers extend health coverage to retirees or allow them to stay on the group HMO plan.
If this is written in a retirement plan or CBA, it is enforceable according to its terms.
If purely voluntary and irregular, it may not form a demandable right, but long-standing and consistent extension of such coverage can still be argued as a practice.

5. Data Privacy and Medical Information

Employers and HMOs handle sensitive personal information (medical history, diagnoses).
Under the Data Privacy Act, employers must ensure that employees’ medical information is handled confidentially and only for legitimate purposes, with appropriate safeguards.

X. Non-Compliance: Remedies and Enforcement

If an employer fails to provide HMO or health insurance benefits as promised or withdraws them unlawfully, employees have several avenues:

A. Internal Grievance and HR Channels

Many policies and CBAs provide for an internal grievance process.
Employees should document the issue (emails, policy copies, payslips, prior HMO cards) and raise it formally.

B. DOLE and NLRC

DOLE Single-Entry Approach (SEnA)
- A mandatory conciliation-mediation step before formal complaints, aiming for a quick settlement.
NLRC Complaints (Money Claims / Benefits)
- Employees can file complaints for non-payment or underpayment of benefits, including health benefits that are monetary in nature.
- They may claim the value of HMO coverage unlawfully withheld, or reimbursement of expenses that the HMO was supposed to cover.
Illegal Deduction Complaints
- If the employer deducts unauthorized HMO premiums or cost-sharing amounts, employees can challenge such deductions.
Constructive Dismissal Claims

If the withdrawal or substantial downgrading of health benefits is:

Arbitrary
Discriminatory
Seriously prejudicial

…employees may argue that it forms part of constructive dismissal, especially when combined with other oppressive changes.

C. Claims vs. the HMO Provider

The contract is usually between the employer and the HMO company, but employees are third-party beneficiaries.
If the HMO refuses coverage that should be available under the policy, employees may have recourse via:
- The employer (for enforcing the contract)
- Direct complaints / dispute resolution mechanisms provided by the HMO and regulating bodies

D. Prescription (Time Limits)

Labor money claims generally prescribe in three (3) years from the date the cause of action accrued (e.g., from the time the benefit should have been given but was withheld).
For continuous or repeated violations (e.g., monthly failure to enroll or repeated improper deductions), each instance may give rise to its own cause of action, subject to the 3-year period.

XI. Best Practices for Employers

To avoid disputes and legal exposure, employers should:

Define and Document the Benefit Clearly
- Eligibility (position, employment status, length of service)
- Coverage (employee-only vs. dependents, room type, annual limit)
- Cost-sharing (how much the employee pays, if any)
Align Recruitment Materials with Reality
- Job ads and offers should match what is actually provided.
- Avoid exaggerations like “unlimited health coverage” unless genuinely accurate.
Include Clear but Fair Disclaimers
- If benefits are subject to review or are discretionary, say so clearly—but note that actual practice can still convert them into regular demandable benefits.
Consult Before Changing Providers or Plans
- Engage employees or the union when changing HMO providers or plan designs.
- Aim to maintain or improve the overall level of benefits; if any downgrade is unavoidable, seek agreement and consider compensating measures.
Ensure Lawful Wage Deductions
- Always obtain written consent for any employee share of HMO costs.
- Make sure deductions are voluntary, clear, and documented.
Maintain Transparent Communication
- Inform employees of coverage details, changes, and procedures for using their health benefits.
- Provide easy access to policy documents and contact points for questions or disputes.

XII. Practical Takeaways

No blanket legal requirement exists to provide private HMO plans; the legal obligation arises from what the employer commits to or consistently does.
Once HMO or health insurance is part of the compensation package, the employer is not free to take it back or downgrade it unilaterally.
The prohibition against diminution of benefits is a central protection: long-enjoyed, regular health benefits cannot simply be removed because of cost concerns without legal and negotiated justification.
Employees who rely on promised or long-established HMO benefits can pursue contractual and labor remedies if these are not honored.

For both employers and employees, the safest path is clarity, documentation, and consistency. In the Philippine legal framework, once a health benefit is established as part of the employment relationship, it tends to stay there—unless both sides agree, through the proper process, to change it.