Philippine Health Insurance Corp. (PhilHealth) disbursed PHP210.09 billion in healthcare claim payments in the first half of 2026 – a 44.53% jump from the same period in 2025. But the data released September 3 is best read as a symptom of two deeper structural shifts now converging: a broken reimbursement model that leaves 98.8% of hospital claims underpaid by the state insurer, and a reform agenda – from diagnosis-related grouping (DRG) billing to a primary care pivot – that will fundamentally alter the risk landscape for private health insurers and their broker partners.
A 2025 study by the Philippine Institute for Development Studies (PIDS) found that PhilHealth’s all case rates (ACR) system, introduced in 2013, has not kept pace with rising hospital costs. Of 8,869 existing case rates, 99.9% had not been systematically updated since 2013. Between 2018 and 2023, average hospital charges increased 51%, from PHP23,852 to PHP36,130, while mean PhilHealth reimbursements remained around PHP11,000. By 2023, 98.8% of hospital claims had charges exceeding the applicable case rate, up from 76.7% in 2018.
Out-of-pocket payments account for about 44% of total health spending in the Philippines, according to PIDS, highlighting the financial burden that remains despite public health coverage. That has implications for private health insurers and brokers, particularly as PhilHealth’s H1 2026 claims data shows significant spending on conditions such as community-acquired pneumonia III, which accounted for PHP12.76 billion in claim payments, and cerebral infarction. PIDS has separately found that 98.8% of hospital claims had charges exceeding the applicable PhilHealth case rate in 2023, suggesting a continuing role for private coverage in helping patients manage costs not fully covered by the public system.
Medical inflation is compounding the pressure. WTW’s 2025 Global Medical Trends Survey projected Philippine healthcare costs would rise 18.3% in 2025 – the second-highest rate in Asia-Pacific – while Aon’s 2026 Global Medical Trend Rates Report projected a 14% gross medical trend rate for the Philippines in 2026, down from 15% in 2025. Aon identified high blood pressure and hypertension as the most significant driver of medical claims in the Philippines – a pattern it said was replicated across 18 other markets in its study, as reported by Philstar.
PhilHealth is transitioning from the ACR system to a DRG model, which classifies inpatient cases by diagnosis, treatment, clinical complexity, age, sex, and length of hospital stay. Then-PhilHealth president and CEO Edwin M. Mercado told Business Mirror that 2027 is “the soonest foreseeable year that the shift could be implemented fully,” contingent on data collection from hospitals. PhilHealth and PIDS aim to complete data analysis and pilot testing by Q4 2026.
PhilHealth Circular No. 2026-0012, published July 30 and effective August 1, sets the shadow billing framework currently in operation. Under the circular, submission of Claim Form 5 – capturing primary diagnosis, up to 12 secondary diagnoses, and up to 20 procedures – is mandatory for all inpatient claims. PhilHealth Advisory No. 2026-0036, signed June 18, separately confirmed that CF5 submission would become a mandatory attachment for claims of all patients discharged from August 1, 2026, onwards, with claims submitted without a valid CF5 no longer accepted for processing.
Then-PhilHealth Corporate Affairs Group Vice President Walter Bacareza said the DRG model would make benefit packages more responsive to patients’ needs. PIDS research has similarly found that DRGs can better account for differences in clinical complexity and resource use, potentially strengthening financial protection for patients. If PhilHealth’s eventual DRG rates result in higher reimbursements for complex inpatient cases, the change could alter the assumptions underpinning supplemental group and individual medical products. Brokers advising corporate clients may therefore want to stress-test plan designs against a 2027 scenario in which PhilHealth’s reimbursable share changes for complex inpatient care.
Separately, PIDS research presented in November 2025 found that around 33% of 2024 hospital admissions could have been avoided with timely access to primary care. A PIDS senior research fellow told the European Chamber of Commerce of the Philippines’ (ECCP) 2026 Healthcare Forum that an estimated PHP23 billion to PHP30 billion in PhilHealth reimbursements is currently being spent on ambulatory care-sensitive conditions (ACSC) – health issues that can be managed or prevented through appropriate outpatient care. In response, PhilHealth has said it aims to allocate 25% of its budget to primary care by 2028. Mercado also said the agency aims to reduce out-of-pocket health spending from 44.7% in 2023 to 25% to 30% in the medium term, according to Business World.
For private insurers and brokers, this trajectory has a direct commercial implication. If a material share of PhilHealth’s inpatient claims volume – currently anchored by respiratory illness, cardiovascular conditions, and infectious disease – migrates to outpatient management through expanded primary care access, group health claims frequency for those conditions will decline. That shifts the value proposition of supplemental health products toward catastrophic and complex-case coverage rather than routine inpatient events.
The transition period between now and 2028, however, will take place against continued financial pressure on the state insurer. PhilHealth posted a Q1 2026 net loss of PHP22.845 billion, up from PHP17.902 billion a year earlier. Benefit claims paid rose 44.53% year on year to PHP210.09 billion in the first half of 2026, while premium contributions increased 32.41% to PHP67.733 billion in Q1. The figures highlight the funding challenge PhilHealth faces as it expands benefits while claims growth continues to outpace contribution growth
For brokers, the actionable read from PhilHealth’s H1 2026 data is specific and time-bound: the current gap between what PhilHealth pays and what private hospital care costs remains fully open; DRG reform will not close it before 2027 at the earliest; and the primary care pivot will take longer still. The window for building supplemental coverage around that gap – structured for the conditions topping PhilHealth’s claims data – is not closing. It is, for now, widening.
