The Philippine Health Insurance Corporation (PhilHealth) said it has acknowledged the decision of the Supreme Court (SC) affirming the Commission on Audit’s (COA) ruling that disallowed certain allowances given by the PhilHealth in 2014.
In a statement, PhilHealth also said it has immediately discontinued the subject allowances.
“We wish to inform the public that PhilHealth immediately discontinued the subject allowances after receipt of the Notice of Disallowance from COA. The subsequent benefits given to our employees have since been aligned with those prescribed under the Salary Standardization Law IV, and now with the Compensation and Position Classification System (CPCS) issued by the Governance Commission for Government-Owned and Controlled Corporations (GCG),” Atty. Eli Dino Santos, PhilHealth executive vice president and chief operating officer, in a statement, said.
Santos however noted that “we maintain, however, that those allowances were given in good faith, above board, not extravagant and most of all, well deserved by the hardworking officers and employees of the state insurer.”
The official added that PhilHealth “will be waiting for the decision of the Supreme Court on our Motion for Reconsideration filed last December 20, 2022” and that “PhilHealth will fully comply with the directive of the Court once issued with finality,”
The SC earlier sustained the notice of disallowances (NDs) issued by COA against the payment by the PhilHealth amounting to P83.06 million for educational assistance allowances and birthday gifts to its officials and employees in 2014.
In an en banc decision penned by Associate Justice Henri Jean Paul Inting and made public last Dec. 9, the SC resolved to dismiss PhilHealth’s petition which challenged COA’s ruling issued in 2018 and affirmed in 2019.
In upholding the NDs, the SC agreed with the COA ruling that while selected government entities are exempt from the application of the Salary Standardization Law (SSL), PhilHealth’s law under Republic Act No. 7875 does not contain the same express exemption.
The COA ruled that RA 7875 does not expressly grant fiscal autonomy to PhilHealth and the authority of its board of directors to fix the agency’s personnel compensation and classification is not absolute.
Besides, COA held that even if PhilHealth was expressly allowed by its charter to have its own position and compensation plans, it would still be required to report the same to the President through the Department of Budget and Management (DBM).
It said that EAAs and birthday gifts are not classified as benefits and allowances under the Collective Negotiation Agreement (CNA) incentives which are given for productivity and cost saving efforts by a government agency.
“The granting of benefits and allowances by virtue of the resolutions passed by PhilHealth in the exercise of its fiscal autonomy, no matter how long practiced, if done in violation of existing rules and regulations, is still considered unauthorized and should be disallowed,” the COA said.
It then ruled that “all approving/certifying officers and recipients of the subject benefits and allowances are liable for the disallowed amounts.”
It also held that “the approving/certifying officers cannot be deemed in good faith, inasmuch as the rules and regulations requiring the prior approval of the Office of the President and the DBM were already existing prior to the grant and payment of the subject benefits and allowances.
“In fact, several audit disallowances have been previously issued against PhilHealth which should have made it more conscious and mindful in paying out employee benefits and allowances. Thus, they are solidarily liable for the disallowed amounts. On the other hand, the payees must return what they have received to prevent unjust enrichment against the government,” it added.
This prompted PhilHealth to challenge COA’s decision before the SC. It pointed out that its fiscal autonomy and the power of its board of directors to fix compensation for its personnel justify the grant of EAAs and birthday gifts.
Among other justifications, PhilHealth said that the benefits and incentives given to its personnel were pursuant to the duly-executed CNA.
On the liability, PhilHealth invoked good faith on the part of the approving officers and employees who received the disallowed benefits.
COA, through the Office of the Solicitor General (OSG), refuted PhilHealth’s justifications, citing several SC decisions which ruled that without an express exemption in the PhilHealth law, the insurance agency should comply with the SSL and other rules and regulations, and at the time the benefits were granted “there were already existing rules and regulations requiring prior executive approval.”
COA also said that “good faith does not absolve the payees to refund the benefits erroneously taken.”
In ruling against the PhilHealth’s appeal, the SC said that “it is already settled that PhilHealth does not have absolute discretion in determining the compensation of its officials and personnel.”
The SC cited its several decisions which had rejected PhilHealth’s fiscal autonomy as justification for the payment of allowances and benefits.
“That PhilHealth’s fiscal autonomy had been purportedly confirmed by the Chief Executive and the OGCC (Office of the Government Corporate Counsel), as PhilHealth argues, cannot undermine the consistent and unequivocal Court pronouncements,” it said.
“At this point, there should no longer be any question that PhilHealth is not exempted from the application of the SSL. Its power to fix personnel compensation is limited and must necessarily yield to the state policy of ‘equal pay for equal work,” the SC added.
Thus, the SC stressed that any disbursement of allowances and other forms of employee compensation must conform with prevailing rules and regulations issued by the President and the DBM.
“To be sure, the resolutions of the Board of Directors granting the EAA and Birthday Gift sans executive/DBM review and approval as required under PD No. 985, as amended, PD No. 1597, the SSL, and RA No. 10149 are ultra vires acts, which rendered the subsequent disbursements illegal and irregular. These infractions are substantial,” the SC declared.
“All in all, the compendium of disallowance cases involving PhilHealth consistently rejects PhilHealth’s so-called fiscal autonomy as justification for the payment of benefits and allowances to its employees. To be valid, every allowance/benefit payment shall be supported by a DBM issuance expressly declaring it as non-integrated. Otherwise, succeeding payments of unauthorized allowances or benefits shall be subject to disallowance for being in violation of the general standardization rule under the SSL,” it said.
“The payees of the EAA and Birthday Gift and the officers who approved and/or certified the grant/payment thereof are liable for the disallowance,” the high court emphasized.