SC to PhilHealth: Public health comes first over employee allowances

MANILA, Philippines – The Supreme Court reminded the Philippine Health Insurance Corporation (PhilHealth) of its obligation to make sure funds are available for Filipino healthcare services instead of diverting them to their employees’ compensation.

In a 15-page ruling penned by Associate Justice Filomena Singh, the Court upheld the notices of disallowances issued by the Commission on Audit (COA) over PhilHealth granting new allowances for employees in 2010. The allowances totaled P43.8 million and were given without the approval of the President.

The Court also denied PhilHealth’s petition to set aside COA’s decision dated December 28, 2016 and its January 31, 2020 resolution, which denies the state insurer’s petition to review the notice for what they deemed was a lack of merit.

The SC said COA did not commit grave abuse of discretion when it dismissed PhilHealth’s petition for review, noting that it correctly ruled the insurance firm’s authority to fix compensation for employees as allowed by law.

In the ruling, the High Court said PhilHealth “must ensure the availability of funds and must carry out its fiduciary responsibility through effective stewardship, proper management, and maintenance of reserves.”

“Hence, it is only proper if not imperative, for [PhilHealth] to be more circumspect in utilizing the funds for the salaries and allowances of its employees,” the court said.

PhilHealth’s arguments

In defending its decision to disburse additional allowances, PhilHealth noted that it was granted fiscal autonomy under Republic Act 7875, which is the law that created the agency in the first place.

Under the law, Article IV, Section 16(n), states that the state insurer will be allowed to “organize its office, fix the compensation of, and appoint personnel as may be deemed necessary and upon the recommendation of the president of the corporation.”

It further argued that this privilege of being allowed to set its own rules on pay and compensation was backed by former President Gloria Macapagal-Arroyo in two documents:

• First, in the letter dated September 18, 2006, where ex-Health secretary Francisco Duque III requested the early approval of PhilHealth’s Rationalization Plan, which was then given the go signal by Arroyo in her marginal note,
• And in Duque’s letter on March 7, 2008, where he sought confirmation of the Arroyo’s approval of the plan.

For PhilHealth, these two letters are proof that even Arroyo recognized the state insurer’s fiscal independence.

‘Untenable’ arguments

However, the Court views these arguments as “untenable,” noting that the agency’s independence has been settled in the 2016 case of PhilHealth vs. COA. The Court ruled then that the law does not give PhilHealth unbridled authority to fix the compensation of its employees and unilaterally provide allowances.

It adopted the same position in the 2018 case.

“Simply put, the Court has consistently ruled that the fiscal autonomy provision under [PhilHealth’s] charter is not without limitations and should be read in conjunction with applicable laws ‘and regulations,'” the SC said.

The Court also countered PhilHealth’s arguments that Arroyo supposedly backed their fiscal autonomy, noting that the former chief executive only approved their rationalization plan and that doing so does not equate to the disbursement of disallowed allowances.

Failing to follow orders

PhilHealth also failed to follow some administrative orders on allowances. For instance, the SC noted that the Collective Negotiation Agreement (CAN) Incentive included in computing their Productivity Incentive Bonus for 2008 went against Administrative Order (AO) 135, Series of 2015 and Department of Budget Management (DBM) Circular No. 2006-1.

AO 135 mandates that the CNA incentive should only amount to the agency’s savings, while DBM Circular No. 2006-1 provides that individual CNA incentives will “not be predetermined” since, again, the amount depends on the savings the agency has generated.

PhilHealth received P10.47 million on March 29, 2010.

The SC said the CNA that was referenced in computing their bonus was a “fixed amount with a yearly increase,” and it also failed to note where the funds for their benefits came from. – Rappler.com