Phil Health Care vs. Cir
Content
Republic of the Philippines
SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 167330 September 18, 2009
PHIIPPINE HE!TH C!RE PRO"I#ERS, INC., Petitioner
!s"
COMMISSIONER O$ INTERN! RE"ENUE, Respon#ent"
R E S O L $ T I O N
CORON!, J.:
ARTICLE II
Declaration of Principles an# State Policies
Section %&" The State shall protect an# pro'ote the ri(ht to health of the people an# instill health
consciousness a'on( the'"
ARTICLE )III
Social *ustice an# +u'an Ri(hts
Section %%" The State shall a#opt an inte(rate# an# co'prehensi!e approach to health #e!elop'ent ,hich
shall en#ea!or to 'a-e essential (oo#s health an# other social ser!ices a!ailable to all the people at
a.or#able cost" There shall be priorit/ for the nee#s of the un#erpri!ile(e# sic- el#erl/ #isable# ,o'en
an# chil#ren" The State shall en#ea!or to pro!i#e free 'e#ical care to paupers"
%
For resolution are a 'otion for reconsi#eration an# supple'ental 'otion for reconsi#eration #ate# *ul/ %0
1002 an# *ul/ %3 1002 respecti!el/ 4le# b/ petitioner Philippine +ealth Care Pro!i#ers Inc"
1
5e recall the facts of this case as follo,s6
Petitioner is a #o'estic corporation ,hose pri'ar/ purpose is 78t9o establish 'aintain con#uct an#
operate a prepai# (roup practice health care #eli!er/ s/ste' or a health 'aintenance or(ani:ation to ta-e
care of the sic- an# #isable# persons enrolle# in the health care plan an# to pro!i#e for the a#'inistrati!e
le(al an# 4nancial responsibilities of the or(ani:ation"7 In#i!i#uals enrolle# in its health care pro(ra's pa/
an annual 'e'bership fee an# are entitle# to !arious pre!enti!e #ia(nostic an# curati!e 'e#ical ser!ices
pro!i#e# b/ its #ul/ license# ph/sicians specialists an# other professional technical sta. participatin( in
the (roup practice health #eli!er/ s/ste' at a hospital or clinic o,ne# operate# or accre#ite# b/ it"
; ; ; ; ; ; ; ; ;
On *anuar/ 1< 1000 respon#ent Co''issioner of Internal Re!enue 8CIR9 sent petitioner a for'al #e'an#
letter an# the correspon#in( assess'ent notices #e'an#in( the pa/'ent of #e4cienc/ ta;es inclu#in(
surchar(es an# interest for the ta;able /ears %==> an# %==< in the total a'ount of P113<01>3%"%2" ;;;;
The #e4cienc/ 8#ocu'entar/ sta'p ta; ?DST@9 assess'ent ,as i'pose# on petitionerAs health care
a(ree'ent ,ith the 'e'bers of its health care pro(ra' pursuant to Section %2& of the %==< Ta; Co#e
;;;;
; ; ; ; ; ; ; ; ;
Petitioner proteste# the assess'ent in a letter #ate# Februar/ 1B 1000" As respon#ent #i# not act on the
protest petitioner 4le# a petition for re!ie, in the Court of Ta; Appeals ?CTA@ see-in( the cancellation of
the #e4cienc/ VAT an# DST assess'ents"
On April & 1001 the CTA ren#ere# a #ecision the #ispositi!e portion of ,hich rea#6
5+EREFORE in !ie, of the fore(oin( the instant Petition for Re!ie, is PARTIALLC DRANTED" Petitioner is
hereb/ ORDERED to PAC the #e4cienc/ VAT a'ountin( to P110&32B%"<& inclusi!e of 1&E surchar(e plus
10E interest fro' *anuar/ 10 %==< until full/ pai# for the %==> VAT #e4cienc/ an# PB%0=3%>B"2<
inclusi!e of 1&E surchar(e plus 10E interest fro' *anuar/ 10 %==2 until full/ pai# for the %==< VAT
#e4cienc/" Accor#in(l/ VAT Rulin( No" 81B%9F22 is #eclare# !oi# an# ,ithout force an# e.ect" The %==>
an# %==< #e4cienc/ DST assess'ent a(ainst petitioner is hereb/ CANCELLED AND SET ASIDE" Respon#ent
is ORDERED to DESIST fro' collectin( the sai# DST #e4cienc/ ta;"
SO ORDERED"
Respon#ent appeale# the CTA #ecision to the 8Court of Appeals ?CA@9 insofar as it cancelle# the DST
assess'ent" +e clai'e# that petitionerAs health care a(ree'ent ,as a contract of insurance subGect to
DST un#er Section %2& of the %==< Ta; Co#e"
On Au(ust %> 1003 the CA ren#ere# its #ecision" It hel# that petitionerAs health care a(ree'ent ,as in
the nature of a nonFlife insurance contract subGect to DST"
5+EREFORE the petition for re!ie, is DRANTED" The Decision of the Court of Ta; Appeals insofar as it
cancelle# an# set asi#e the %==> an# %==< #e4cienc/ #ocu'entar/ sta'p ta; assess'ent an# or#ere#
petitioner to #esist fro' collectin( the sa'e is REVERSED an# SET ASIDE"
Respon#ent is or#ere# to pa/ the a'ounts of P&&<3>B&1"%= an# P>23&01&2"<B as #e4cienc/
Docu'entar/ Sta'p Ta; for %==> an# %==< respecti!el/ plus 1&E surchar(e for late pa/'ent an# 10E
interest per annu' fro' *anuar/ 1< 1000 pursuant to Sections 132 an# 13= of the Ta; Co#e until the
sa'e shall ha!e been full/ pai#"
SO ORDERED"
Petitioner 'o!e# for reconsi#eration but the CA #enie# it" +ence petitioner 4le# this case"
; ; ; ; ; ; ; ; ;
In a #ecision #ate# *une %1 1002 the Court #enie# the petition an# aHr'e# the CAAs #ecision" 5e hel#
that petitionerAs health care a(ree'ent #urin( the pertinent perio# ,as in the nature of nonFlife insurance
,hich is a contract of in#e'nit/ citin( Blue Cross Healthcare, Inc. v. Olivares
B
an# Philamcare Health
Systems, Inc. v. CA"
3
5e also rule# that petitionerAs contention that it is a health 'aintenance or(ani:ation
?+MO@ an# not an insurance co'pan/ is irrele!ant because contracts bet,een co'panies li-e petitioner
an# the bene4ciaries un#er their plans are treate# as insurance contracts" Moreo!er DST is not a ta; on
the business transacte# but an e;cise on the pri!ile(e opportunit/ or facilit/ o.ere# at e;chan(es for the
transaction of the business"
$nable to accept our !er#ict petitioner 4le# the present 'otion for reconsi#eration an# supple'ental
'otion for reconsi#eration assertin( the follo,in( ar(u'ents6
?a@ The DST un#er Section %2& of the National Internal Re!enue of %==< is i'pose# onl/ on a
co'pan/ en(a(e# in the business of 4#elit/ bon#s an# other insurance policies" Petitioner
as an +MO is a ser!ice pro!i#er not an insurance co'pan/"
?b@ The Court in #is'issin( the appeal in CIR v. Philippine National Bank aHr'e# in e.ect
the CAAs #isposition that health care ser!ices are not in the nature of an insurance business"
?c@ Section %2& shoul# be strictl/ construe#"
?#@ Le(islati!e intent to e;clu#e health care a(ree'ents fro' ite's subGect to DST is clear
especiall/ in the li(ht of the a'en#'ents 'a#e in the DST la, in 1001"
?e@ Assu'in( argueno that petitionerAs a(ree'ents are contracts of in#e'nit/ the/ are not
those conte'plate# un#er Section %2&"
?f@ Assu'in( argueno that petitionerAs a(ree'ents are a-in to health insurance health
insurance is not co!ere# b/ Section %2&"
?(@ The a(ree'ents #o not fall un#er the phrase 7other branch of insurance7 'entione# in
Section %2&"
?h@ The *une %1 1002 #ecision shoul# onl/ appl/ prospecti!el/"
?i@ Petitioner a!aile# of the ta; a'nest/ bene4ts un#er RA
&
=320 for the ta;able /ear 100&
an# all prior /ears" Therefore the Iuestione# assess'ents on the DST are no, ren#ere#
'oot an# aca#e'ic"
>
Oral ar(u'ents ,ere hel# in Ja(uio Cit/ on April 11 100=" The parties sub'itte# their 'e'oran#a on
*une 2 100="
In its 'otion for reconsi#eration petitioner re!eals for the 4rst ti'e that it a!aile# of a ta; a'nest/ un#er
RA =320
<
?also -no,n as the 7Ta; A'nest/ Act of 100<7@ b/ full/ pa/in( the a'ount of P&%1<%3="02
representin( &E of its net ,orth as of the /ear en#in( Dece'ber B% 100&"
2
5e 4n# 'erit in petitionerAs 'otion for reconsi#eration"
Petitioner ,as for'all/ re(istere# an# incorporate# ,ith the Securities an# E;chan(e Co''ission on *une
B0 %=2<"
=
It is en(a(e# in the #ispensation of the follo,in( 'e#ical ser!ices to in#i!i#uals ,ho enter into
health care a(ree'ents ,ith it6
Pre%e&t'%e 'e#ical ser!ices such as perio#ic 'onitorin( of health proble's fa'il/ plannin( counselin(
consultation an# a#!ices on #iet e;ercise an# other health/ habits an# i''uni:ationK
#'()&o*t'+ 'e#ical ser!ices such as routine ph/sical e;a'inations ;Fra/s urinal/sis fecal/sis co'plete
bloo# count an# the li-e an#
C,r(t'%e 'e#ical ser!ices ,hich pertain to the perfor'in( of other re'e#ial an# therapeutic processes in
the e!ent of an inGur/ or sic-ness on the part of the enrolle# 'e'ber"
%0
In#i!i#uals enrolle# in its health care pro(ra' pa/ an annual 'e'bership fee" Me'bership is on a /earFtoF
/ear basis" The 'e#ical ser!ices are #ispense# to enrolle# 'e'bers in a hospital or clinic o,ne# operate#
or accre#ite# b/ petitioner throu(h ph/sicians 'e#ical an# #ental practitioners un#er contract ,ith it" It
ne(otiates ,ith such health care practitioners re(ar#in( pa/'ent sche'es 4nancin( an# other
proce#ures for the #eli!er/ of health ser!ices" E;cept in cases of e'er(enc/ the professional ser!ices are
to be pro!i#e# onl/ b/ petitionerLs ph/sicians i.e" those #irectl/ e'plo/e# b/ it
%%
or ,hose ser!ices are
contracte# b/ it"
%1
Petitioner also pro!i#es hospital ser!ices such as roo' an# boar# acco''o#ation
laborator/ ser!ices operatin( roo's ;Fra/ facilities an# (eneral nursin( care"
%B
If an# ,hen a 'e'ber
a!ails of the bene4ts un#er the a(ree'ent petitioner pa/s the participatin( ph/sicians an# other health
care pro!i#ers for the ser!ices ren#ere# at preFa(ree# rates"
%3
To a!ail of petitionerAs health care pro(ra's the in#i!i#ual 'e'bers are reIuire# to si(n an# e;ecute a
stan#ar# health care a(ree'ent e'bo#/in( the ter's an# con#itions for the pro!ision of the health care
ser!ices" The sa'e a(ree'ent contains the !arious health care ser!ices that can be en(a(e# b/ the
enrolle# 'e'ber i.e. pre!enti!e #ia(nostic an# curati!e 'e#ical ser!ices" E;cept for the curati!e aspect
of the 'e#ical ser!ice o.ere# the enrolle# 'e'ber 'a/ actuall/ 'a-e use of the health care ser!ices
bein( o.ere# b/ petitioner at an/ ti'e"
He(-t. M('&te&(&+e Or)(&'/(t'o&* !re Not E&)()e0 I& T.e I&*,r(&+e 1,*'&e**
5e sai# in our *une %1 1002 #ecision that it is irrele!ant that petitioner is an +MO an# not an insurer
because its a(ree'ents are treate# as insurance contracts an# the DST is not a ta; on the business but an
e;cise on the pri!ile(e opportunit/ or facilit/ use# in the transaction of the business"
%&
Petitioner ho,e!er sub'its that it is of critical i'portance to characteri:e the business it is en(a(e# in
that is to #eter'ine ,hether it is an +MO or an insurance co'pan/ as this #istinction is in#ispensable in
turn to the issue of ,hether or not it is liable for DST on its health care a(ree'ents"
%>
A secon# har# loo- at the rele!ant la, an# Gurispru#ence con!inces the Court that the ar(u'ents of
petitioner are 'eritorious"
Section %2& of the National Internal Re!enue Co#e of %==< ?NIRC of %==<@ pro!i#es6
Section %2&" Stamp ta! on "elity #ons an other insurance policies" M O& (-- po-'+'e* o2 '&*,r(&+e or
bon#s or obli(ations o2 t.e &(t,re o2 '&0em&'t3 2or -o**, 0(m()e, or -'(b'-'t3 m(0e or re&e4e0 b3
(&3 per*o&, (**o+'(t'o& or +omp(&3 or +orpor(t'o& tr(&*(+t'&) t.e b,*'&e** o2 acci#ent 4#elit/
e'plo/erAs liabilit/ plate (lass stea' boiler bur(lar ele!ator auto'atic sprin-ler or ot.er br(&+. o2
'&*,r(&+e 5e6+ept -'2e, m(r'&e, '&-(&0, (&0 7re '&*,r(&+e8 an# all bon#s un#erta-in(s or
reco(ni:ances con#itione# for the perfor'ance of the #uties of an/ oHce or position for the #oin( or not
#oin( of an/thin( therein speci4e# an# on all obli(ations (uaranteein( the !ali#it/ or le(alit/ of an/ bon#
or other obli(ations issue# b/ an/ pro!ince cit/ 'unicipalit/ or other public bo#/ or or(ani:ation an# on
all obli(ations (uaranteein( the title to an/ real estate or (uaranteein( an/ 'ercantile cre#its ,hich 'a/
be 'a#e or rene,e# b/ an/ such person co'pan/ or corporation there shall be collecte# a #ocu'entar/
sta'p ta; of 4ft/ centa!os ?P0"&0@ on each four pesos ?P3"00@ or fractional part thereof of the pre'iu'
char(e#" ?E'phasis supplie#@
It is a car#inal rule in statutor/ construction that no ,or# clause sentence pro!ision or part of a statute
shall be consi#ere# surplusa(e or superNuous 'eanin(less !oi# an# insi(ni4cant" To this en# a
construction ,hich ren#ers e!er/ ,or# operati!e is preferre# o!er that ,hich 'a-es so'e ,or#s i#le an#
nu(ator/"
%<
This principle is e;presse# in the 'a;i' $t magis valeat %uam pereat that is ,e choose the
interpretation ,hich (i!es e.ect to the ,hole of the statute M its e!er/ ,or#"
%2
Fro' the lan(ua(e of Section %2& it is e!i#ent that t4o re9,'*'te* 'ust concur before the DST can
appl/ na'el/6 ?%@ the #ocu'ent 'ust be a po-'+3 o2 '&*,r(&+e or (& ob-')(t'o& '& t.e &(t,re o2
'&0em&'t3 (&0 ?1@ t.e m(:er *.o,-0 be tr(&*(+t'&) t.e b,*'&e** o2 acci#ent 4#elit/ e'plo/erAs
liabilit/ plate (lass stea' boiler bur(lar ele!ator auto'atic sprin-ler or other branch of '&*,r(&+e
?e;cept life 'arine inlan# an# 4re insurance@"
Petitioner is a#'itte#l/ an +MO" $n#er RA <2<& ?or 7The National +ealth Insurance Act of %==&7@ an +MO
is 7an entit/ that pro!i#es o.ers or arran(es for co!era(e of #esi(nate# health ser!ices nee#e# b/ plan
'e'bers for a 4;e# prepai# pre'iu'"7
%=
The pa/'ents #o not !ar/ ,ith the e;tent freIuenc/ or t/pe of
ser!ices pro!i#e#"
The Iuestion is6 ,as petitioner as an +MO en(a(e# in the business of insurance #urin( the pertinent
ta;able /earsO 5e rule that it ,as not"
Section 1 ?1@ of PD
10
%3>0 ?other,ise -no,n as the Insurance Co#e@ enu'erates ,hat constitutes 7#oin(
an insurance business7 or 7transactin( an insurance business67
a@ 'a-in( or proposin( to 'a-e as insurer an/ insurance contractK
b@ 'a-in( or proposin( to 'a-e as suret/ an/ contract of suret/ship as a !ocation an# not
as 'erel/ inci#ental to an/ other le(iti'ate business or acti!it/ of the suret/K
c@ #oin( an/ -in# of business inclu#in( a reinsurance business speci4call/ reco(ni:e# as
constitutin( the #oin( of an insurance business ,ithin the 'eanin( of this Co#eK
#@ #oin( or proposin( to #o an/ business in substance eIui!alent to an/ of the fore(oin( in a
'anner #esi(ne# to e!a#e the pro!isions of this Co#e"
In the application of the pro!isions of this Co#e the fact that no pro4t is #eri!e# fro' the 'a-in( of
insurance contracts a(ree'ents or transactions or that no separate or #irect consi#eration is recei!e#
therefore shall not be #ee'e# conclusi!e to sho, that the 'a-in( thereof #oes not constitute the #oin( or
transactin( of an insurance business"
Various courts in the $nite# States ,hose Gurispru#ence has a persuasi!e e.ect on our #ecisions
1%
ha!e
#eter'ine# that +MOs are not in the insurance business" One test that the/ ha!e applie# is ,hether the
assu'ption of ris- an# in#e'ni4cation of loss ?,hich are ele'ents of an insurance business@ are the
principal obGect an# purpose of the or(ani:ation or ,hether the/ are 'erel/ inci#ental to its business" If
these are the principal obGecti!es the business is that of insurance" Jut if the/ are 'erel/ inci#ental an#
ser!ice is the principal purpose then the business is not insurance"
Appl/in( the 7principal obGect an# purpose test7
11
there is si(ni4cant A'erican case la, supportin( the
ar(u'ent that a corporation ?such as an +MO ,hether or not or(ani:e# for pro4t@ ,hose 'ain obGect is to
pro!i#e the 'e'bers of a (roup ,ith health ser!ices is not en(a(e# in the insurance business"
The rule ,as enunciate# in &oran v. 'roup Health Association
1B
,herein the Court of Appeals of the District
of Colu'bia Circuit hel# that Droup +ealth Association shoul# not be consi#ere# as en(a(e# in insurance
acti!ities since it ,as create# pri'aril/ for the #istribution of health care ser!ices rather than the
assu'ption of insurance ris-"
;;; Althou(h Droup +ealthAs acti!ities 'a/ be consi#ere# in one aspect as creatin( securit/ a(ainst loss
fro' illness or acci#ent 'ore trul/ the/ constitute the Iuantit/ purchase of ,ellFroun#e# continuous
'e#ical ser!ice b/ its 'e'bers" ;;; T.e 2,&+t'o&* o2 *,+. (& or)(&'/(t'o& (re &ot '0e&t'+(- 4't.
t.o*e o2 '&*,r(&+e or '&0em&'t3 +omp(&'e*" The latter are concerne# pri'aril/ if not e;clusi!el/
,ith ris- an# the conseIuences of its #escent not ,ith ser!ice or its e;tension in -in# Iuantit/ or
#istributionK ,ith the unusual occurrence not the #ail/ routine of li!in(" +a:ar# is pre#o'inant" O& t.e
ot.er .(&0, t.e +ooper(t'%e '* +o&+er&e0 pr'&+'p(--3 4't. )ett'&) *er%'+e re&0ere0 to 't*
member* (&0 0o'&) *o (t -o4er pr'+e* m(0e po**'b-e b3 9,(&t't3 p,r+.(*'&) (&0 e+o&om'e* '&
oper(t'o&. It* pr'm(r3 p,rpo*e '* to re0,+e t.e +o*t r(t.er t.(& t.e r'*: o2 me0'+(- +(re; to
bro(0e& t.e *er%'+e to t.e '&0'%'0,(- '& :'&0 (&0 9,(&t't3; to e&-(r)e t.e &,mber re+e'%'&) 't;
to re),-(r'/e 't (* (& e%er30(3 '&+'0e&t o2 -'%'&), -':e p,r+.(*'&) 2oo0 (&0 +-ot.'&) or o'- (&0
)(*, r(t.er t.(& mere-3 prote+t'&) ()('&*t t.e 7&(&+'(- -o** +(,*e0 b3 e6tr(or0'&(r3 (&0
,&,*,(- o++,rre&+e*, *,+. (* 0e(t., 0'*(*ter (t *e(, 7re (&0 tor&(0o. It is in this instance to
ta-e care of col#s or#inar/ aches an# pains 'inor ills an# all the te'porar/ bo#il/ #isco'forts as ,ell as
the 'ore serious an# unusual illness" To *,mm(r'/e, t.e 0'*t'&+t'%e 2e(t,re* o2 t.e +ooper(t'%e (re
t.e re&0er'&) o2 *er%'+e, 't* e6te&*'o&, t.e br'&)'&) o2 p.3*'+'(& (&0 p(t'e&t to)et.er, t.e
pre%e&t'%e 2e(t,re*, t.e re),-(r'/(t'o& o2 *er%'+e (* 4e-- (* p(3me&t, t.e *,b*t(&t'(-
re0,+t'o& '& +o*t b3 9,(&t't3 p,r+.(*'&) '& *.ort, )ett'&) t.e me0'+(- <ob 0o&e (&0 p('0 2or;
&ot, e6+ept '&+'0e&t(--3 to t.e*e 2e(t,re*, t.e '&0em&'7+(t'o& 2or +o*t (2ter t.e *er%'+e* '*
re&0ere0. E6+ept t.e -(*t, t.e*e (re &ot 0'*t'&+t'%e or )e&er(--3 +.(r(+ter'*t'+ o2 t.e '&*,r(&+e
(rr(&)eme&t. There is therefore a substantial #i.erence bet,een contractin( in this ,a/ for the
ren#erin( of ser!ice e!en on the contin(enc/ that it be nee#e# an# contractin( 'erel/ to stan# its cost
,hen or after it is ren#ere#"
That an inci#ental ele'ent of ris- #istribution or assu'ption 'a/ be present shoul# not out,ei(h all other
factors" If attention is focuse# onl/ on that feature the line bet,een insurance or in#e'nit/ an# other
t/pes of le(al arran(e'ent an# econo'ic function beco'es faint if not e;tinct" This is especiall/ true
,hen the contract is for the sale of (oo#s or ser!ices on contin(enc/" Jut ob!iousl/ it ,as not the purpose
of the insurance statutes to re(ulate all arran(e'ents for assu'ption or #istribution of ris-" That !ie,
,oul# cause the' to en(ulf practicall/ all contracts particularl/ con#itional sales an# contin(ent ser!ice
a(ree'ents" T.e 2(--(+3 '* '& -oo:'&) o&-3 (t t.e r'*: e-eme&t, to t.e e6+-,*'o& o2 (-- ot.er*
pre*e&t or t.e'r *,bor0'&(t'o& to 't. T.e 9,e*t'o& t,r&*, &ot o& 4.et.er r'*: '* '&%o-%e0 or
(**,me0, b,t o& 4.et.er t.(t or *omet.'&) e-*e to 4.'+. 't '* re-(te0 '& t.e p(rt'+,-(r p-(& '*
't* pr'&+'p(- ob<e+t p,rpo*e.
13
?E'phasis supplie#@
In Cali(ornia Physicians) Service v. 'arrison
1&
the California court felt that after scrutini:in( the plan of
operation as a ,hole of the corporation it ,as ser!ice rather than in#e'nit/ ,hich stoo# as its principal
purpose"
There is another an# 'ore co'pellin( reason for hol#in( that the ser!ice is not en(a(e# in the insurance
business" !b*e&+e or pre*e&+e o2 (**,mpt'o& o2 r'*: or per'- '* &ot t.e *o-e te*t to be (pp-'e0 '&
0eterm'&'&) 't* *t(t,*. T.e 9,e*t'o&, more bro(0-3, '* 4.et.er, -oo:'&) (t t.e p-(& o2
oper(t'o& (* ( 4.o-e, =*er%'+e> r(t.er t.(& ='&0em&'t3> '* 't* pr'&+'p(- ob<e+t (&0 p,rpo*e.
Certainl/ the obGects an# purposes of the corporation or(ani:e# an# 'aintaine# b/ the California
ph/sicians ha!e a ,i#e scope in the 4el# of social ser!ice" Prob(b-3 t.ere '* &o more 'mpe--'&) &ee0
t.(& t.(t o2 (0e9,(te me0'+(- +(re o& ( %o-,&t(r3, -o4?+o*t b(*'* 2or per*o&* o2 *m(-- '&+ome.
T.e me0'+(- pro2e**'o& ,&'te0-3 '* e&0e(%or'&) to meet t.(t &ee0. U&9,e*t'o&(b-3 t.'* '*
=*er%'+e> o2 ( .'). or0er (&0 &ot ='&0em&'t3.>
1>
?E'phasis supplie#@
A'erican courts ha!e pointe# out that the 'ain #i.erence bet,een an +MO an# an insurance co'pan/ is
that +MOs un#erta-e to pro!i#e or arran(e for the pro!ision of 'e#ical ser!ices throu(h participatin(
ph/sicians ,hile insurance co'panies si'pl/ un#erta-e to in#e'nif/ the insure# for 'e#ical e;penses
incurre# up to a preFa(ree# li'it" Somerset Orthopeic Associates, P.A. v. Hori*on Blue Cross an Blue
Shiel o( Ne+ &ersey
1<
is clear on this point6
The basic #istinction bet,een 'e#ical ser!ice corporations an# or#inar/ health an# acci#ent insurers is
that the for'er un#erta-e to pro!i#e prepai# 'e#ical ser!ices t.ro,). p(rt'+'p(t'&) p.3*'+'(&*, thus
relie!in( subscribers of an/ further 4nancial bur#en ,hile the latter onl/ un#erta-e to in#e'nif/ an
insure# for 'e#ical e;penses up to but not be/on# the sche#ule of rates containe# in the polic/"
; ; ; ; ; ; ; ; ;
The pri'ar/ purpose of a 'e#ical ser!ice corporation ho,e!er is an un#erta-in( to pro!i#e ph/sicians
,ho ,ill ren#er ser!ices to subscribers on a prepai# basis" He&+e, '2 t.ere (re &o p.3*'+'(&*
p(rt'+'p(t'&) '& t.e me0'+(- *er%'+e +orpor(t'o&>* p-(&, &ot o&-3 4'-- t.e *,b*+r'ber* be
0epr'%e0 o2 t.e prote+t'o& 4.'+. t.e3 m').t re(*o&(b-3 .(%e e6pe+te0 4o,-0 be pro%'0e0 b,t
t.e +orpor(t'o& 4'--, '& e@e+t, be 0o'&) b,*'&e** *o-e-3 (* ( .e(-t. (&0 (++'0e&t '&0em&'t3
'&*,rer ,ithout ha!in( Iuali4e# as such an# ren#erin( itself subGect to the 'ore strin(ent 4nancial
reIuire'ents of the Deneral Insurance La,sP"
A participatin( pro!i#er of health care ser!ices is one ,ho a(rees in ,ritin( to ren#er health care ser!ices
to or for persons co!ere# b/ a contract issue# b/ health ser!ice corporation in return 2or 4.'+. t.e
.e(-t. *er%'+e +orpor(t'o& ()ree* to m(:e p(3me&t 0're+t-3 to t.e p(rt'+'p(t'&) pro%'0er"
12
?E'phasis supplie#@
ConseIuentl/ the 'ere presence of ris- ,oul# be insuHcient to o!erri#e the pri'ar/ purpose of the
business to pro!i#e 'e#ical ser!ices as nee#e# ,ith pa/'ent 'a#e #irectl/ to the pro!i#er of these
ser!ices"
1=
In short e!en if petitioner assu'es the ris- of pa/in( the cost of these ser!ices e!en if
si(ni4cantl/ 'ore than ,hat the 'e'ber has prepai# it ne!ertheless cannot be consi#ere# as bein(
en(a(e# in the insurance business"
J/ the sa'e to-en an/ in#e'ni4cation resultin( fro' the pa/'ent for ser!ices ren#ere# in case of
e'er(enc/ b/ nonFparticipatin( health pro!i#ers ,oul# still be inci#ental to petitionerAs purpose of
pro!i#in( an# arran(in( for health care ser!ices an# #oes not transfor' it into an insurer" To ful4ll its
obli(ations to its 'e'bers un#er the a(ree'ents petitioner is reIuire# to set up a s/ste' an# the
facilities for the #eli!er/ of such 'e#ical ser!ices" This in#ubitabl/ sho,s that in#e'ni4cation is not its
sole obGect"
In fact a substantial portion of petitionerAs ser!ices co!ers pre!enti!e an# #ia(nostic 'e#ical ser!ices
inten#e# to -eep 'e'bers fro' #e!elopin( 'e#ical con#itions or #iseases"
B0
As an +MO it is its obli(ation
to 'aintain the (oo# health of its 'e'bers" !++or0'&)-3, 't* .e(-t. +(re pro)r(m* (re 0e*')&e0 to
pre%e&t or to m'&'m'/e t.e po**'b'-'t3 o2 (&3 (**,mpt'o& o2 r'*: o& 't* p(rt. Thus its un#erta-in(
un#er its a(ree'ents is not to in#e'nif/ its 'e'bers a(ainst an/ loss or #a'a(e arisin( fro' a 'e#ical
con#ition but on the contrar/ to pro!i#e the health an# 'e#ical ser!ices nee#e# to pre!ent such loss or
#a'a(e"
B%
O!erall petitioner appears to pro!i#e insuranceFt/pe bene4ts to its 'e'bers ?,ith respect to its +,r(t'%e
'e#ical ser!ices@ but these are inci#ental to the principal acti!it/ of pro!i#in( the' 'e#ical care" The
7insuranceFli-e7 aspect of petitionerAs business is 'iniscule co'pare# to its noninsurance acti!ities"
Therefore since it substantiall/ pro!i#es health care ser!ices rather than insurance ser!ices it cannot be
consi#ere# as bein( in the insurance business"
It is i'portant to e'phasi:e that in a#optin( the 7principal purpose test7 use# in the abo!eFIuote# $"S"
cases ,e are not sa/in( that petitionerAs operations are i#entical in e!er/ respect to those of the +MOs or
health pro!i#ers ,hich ,ere parties to those cases" 5hat ,e are statin( is that for the purpose of
#eter'inin( ,hat 7#oin( an insurance business7 'eans ,e ha!e to scrutini:e the operations of the
business as a ,hole an# not its 'ere co'ponents" This is of course onl/ pru#ent an# appropriate ta-in(
into account the bur#enso'e an# strict la,s rules an# re(ulations applicable to insurers an# other entities
en(a(e# in the insurance business" Moreo!er ,e are also not un'in#ful that there are other A'erican
authorities ,ho ha!e foun# particular +MOs to be actuall/ en(a(e# in insurance acti!ities"
B1
Lastl/ it is si(ni4cant that petitioner as an +MO is not part of the insurance in#ustr/" This is e!i#ent fro'
the fact that it is not super!ise# b/ the Insurance Co''ission but b/ the Depart'ent of +ealth"
BB
In fact
in a letter #ate# Septe'ber B 1000 the Insurance Co''issioner con4r'e# that petitioner is not en(a(e#
in the insurance business" This #eter'ination of the co''issioner 'ust be accor#e# (reat ,ei(ht" It is
,ellFsettle# that the interpretation of an a#'inistrati!e a(enc/ ,hich is tas-e# to i'ple'ent a statute is
accor#e# (reat respect an# or#inaril/ controls the interpretation of la,s b/ the courts" The reason behin#
this rule ,as e;plaine# in Nestle Philippines, Inc. v. Court o( Appeals6
B3
The rationale for this rule relates not onl/ to the e'er(ence of the 'ultifarious nee#s of a 'o#ern or
'o#erni:in( societ/ an# the establish'ent of #i!erse a#'inistrati!e a(encies for a##ressin( an#
satisf/in( those nee#sK it also relates to the accu'ulation of e;perience an# (ro,th of speciali:e#
capabilities b/ the a#'inistrati!e a(enc/ char(e# ,ith i'ple'entin( a particular statute" In Asturias Sugar
Central, Inc. vs. Commissioner o( Customs
B&
the Court stresse# that e;ecuti!e oHcials are presu'e# to
ha!e fa'iliari:e# the'sel!es ,ith all the consi#erations pertinent to the 'eanin( an# purpose of the la,
an# to ha!e for'e# an in#epen#ent conscientious an# co'petent e;pert opinion thereon" The courts (i!e
'uch ,ei(ht to the (o!ern'ent a(enc/ oHcials char(e# ,ith the i'ple'entation of the la, their
co'petence e;pertness e;perience an# infor'e# Gu#('ent an# the fact that the/ freIuentl/ are the
#rafters of the la, the/ interpret"
B>
! He(-t. C(re !)reeme&t I* Not !& I&*,r(&+e Co&tr(+t Co&temp-(te0 U&0er Se+t'o& 18A O2
T.e NIRC o2 1997
Section %2& states that DST is i'pose# on 7all policies of insuranceP or obli(ations of the nature of
in#e'nit/ for loss #a'a(e or liabilit/P"7 In our #ecision #ate# *une %1 1002 ,e rule# that petitionerAs
health care a(ree'ents are contracts of in#e'nit/ an# are therefore insurance contracts6
It is P incorrect to sa/ that the health care a(ree'ent is not base# on loss or #a'a(e because un#er the
sai# a(ree'ent petitioner assu'es the liabilit/ an# in#e'ni4es its 'e'ber for hospital 'e#ical an#
relate# e;penses ?such as professional fees of ph/sicians@" The ter' 7loss or #a'a(e7 is broa# enou(h to
co!er the 'onetar/ e;pense or liabilit/ a 'e'ber ,ill incur in case of illness or inGur/"
$n#er the health care a(ree'ent the ren#ition of hospital 'e#ical an# professional ser!ices to the
'e'ber in case of sic-ness inGur/ or e'er(enc/ or his a!ail'ent of soFcalle# 7outFpatient ser!ices7
?inclu#in( ph/sical e;a'ination ;Fra/ an# laborator/ tests 'e#ical consultations !accine a#'inistration
an# fa'il/ plannin( counselin(@ is the contin(ent e!ent ,hich (i!es rise to liabilit/ on the part of the
'e'ber" In case of e;posure of the 'e'ber to liabilit/ he ,oul# be entitle# to in#e'ni4cation b/
petitioner"
Further'ore the fact that petitioner 'ust relie!e its 'e'ber fro' liabilit/ b/ pa/in( for e;penses arisin(
fro' the stipulate# contin(encies belies its clai' that its ser!ices are prepai#" The e;penses to be incurre#
b/ each 'e'ber cannot be pre#icte# beforehan# if the/ can be pre#icte# at all" Petitioner assu'es the
ris- of pa/in( for the costs of the ser!ices e!en if the/ are si(ni4cantl/ an# substantiall/ 'ore than ,hat
the 'e'ber has 7prepai#"7 Petitioner #oes not bear the costs alone but #istributes or sprea#s the' out
a'on( a lar(e (roup of persons bearin( a si'ilar ris- that is a'on( all the other 'e'bers of the health
care pro(ra'" This is insurance"
B<
5e reconsi#er" 5e shall Iuote once a(ain the pertinent portion of Section %2&6
Section %2&" Stamp ta! on "elity #ons an other insurance policies" M O& (-- po-'+'e* o2 '&*,r(&+e or
bon#s or ob-')(t'o&* o2 t.e &(t,re o2 '&0em&'t3 2or -o**, 0(m()e, or -'(b'-'t3 'a#e or rene,e# b/
an/ person association or co'pan/ or corporation transactin( the business of acci#ent 4#elit/
e'plo/erAs liabilit/ plate (lass stea' boiler bur(lar ele!ator auto'atic sprin-ler or other branch of
insurance ?e;cept life 'arine inlan# an# 4re insurance@ ;;;; ?E'phasis supplie#@
In construin( this pro!ision ,e shoul# be (ui#e# b/ the principle that ta; statutes are strictl/ construe#
a(ainst the ta;in( authorit/"
B2
This is because ta;ation is a #estructi!e po,er ,hich interferes ,ith the
personal an# propert/ ri(hts of the people an# ta-es fro' the' a portion of their propert/ for the support
of the (o!ern'ent"
B=
+ence ta; la,s 'a/ not be e;ten#e# b/ i'plication be/on# the clear i'port of their
lan(ua(e nor their operation enlar(e# so as to e'brace 'atters not speci4call/ pro!i#e#"
30
5e are a,are that in Blue Cross an# Philamcare the Court pronounce# that a health care a(ree'ent is in
the nature of nonFlife insurance ,hich is pri'aril/ a contract of in#e'nit/" +o,e!er those cases #i# not
in!ol!e the interpretation of a ta; pro!ision" Instea# the/ #ealt ,ith the liabilit/ of a health ser!ice
pro!i#er to a 'e'ber un#er the ter's of their health care a(ree'ent" Such contracts as contracts of
a#hesion are liberall/ interprete# in fa!or of the 'e'ber an# strictl/ a(ainst the +MO" For this reason ,e
reconsi#er our rulin( that Blue Cross an# Philamcare are applicable here"
Section 1 ?%@ of the Insurance Co#e #e4nes a contract of insurance as an a(ree'ent ,hereb/ one
un#erta-es for a consi#eration to in#e'nif/ another a(ainst loss #a'a(e or liabilit/ arisin( fro' an
un-no,n or contin(ent e!ent" An insurance contract e;ists ,here the follo,in( ele'ents concur6
%" The insure# has an insurable interestK
1" The insure# is subGect to a ris- of loss b/ the happenin( of the #esi(ne# perilK
B" The insurer assu'es the ris-K
3" Such assu'ption of ris- is part of a (eneral sche'e to #istribute actual losses a'on( a
lar(e (roup of persons bearin( a si'ilar ris- an#
&" In consi#eration of the insurerAs pro'ise the insure# pa/s a pre'iu'"
3%
Do the a(ree'ents bet,een petitioner an# its 'e'bers possess all these ele'entsO The/ #o not"
,irst" In our Guris#iction a co''entator of our insurance la,s has pointe# out that e!en if a contract
contains all the ele'ents of an insurance contract if its pri'ar/ purpose is the ren#erin( of ser!ice it is
not a contract of insurance6
It #oes not necessaril/ follo, ho,e!er that a contract containin( all the four ele'ents 'entione# abo!e
,oul# be an insurance contract" T.e pr'm(r3 p,rpo*e o2 t.e p(rt'e* '& m(:'&) t.e +o&tr(+t m(3
&e)(te t.e e6'*te&+e o2 (& '&*,r(&+e +o&tr(+t" For e;a'ple a la, 4r' ,hich enters into contracts
,ith clients ,hereb/ in consi#eration of perio#ical pa/'ents it pro'ises to represent such clients in all
suits for or a(ainst the' is not en(a(e# in the insurance business" Its contracts are si'pl/ for the purpose
of ren#erin( personal ser!ices" On the other han# a contract b/ ,hich a corporation in consi#eration of a
stipulate# a'ount a(rees at its o,n e;pense to #efen# a ph/sician a(ainst all suits for #a'a(es for
'alpractice is one of insurance an# the corporation ,ill be #ee'e# as en(a(e# in the business of
insurance" $nli-e the la,/erAs retainer contract the essential purpose of such a contract is not to ren#er
personal ser!ices but to in#e'nif/ a(ainst loss an# #a'a(e resultin( fro' the #efense of actions for
'alpractice"
31
?E'phasis supplie#@
Secon" Not all the necessar/ ele'ents of a contract of insurance are present in petitionerAs a(ree'ents"
To be(in ,ith there is no loss #a'a(e or liabilit/ on the part of the 'e'ber that shoul# be in#e'ni4e# b/
petitioner as an +MO" $n#er the a(ree'ent the 'e'ber pa/s petitioner a pre#eter'ine# consi#eration in
e;chan(e for the hospital 'e#ical an# professional ser!ices ren#ere# b/ the petitionerAs ph/sician or
aHliate# ph/sician to hi'" In case of a!ail'ent b/ a 'e'ber of the bene4ts un#er the a(ree'ent
petitioner #oes not rei'burse or in#e'nif/ the 'e'ber as the latter #oes not pa/ an/ thir# part/" Instea#
it is the petitioner ,ho pa/s the participatin( ph/sicians an# other health care pro!i#ers for the ser!ices
ren#ere# at preFa(ree# rates" The 'e'ber #oes not 'a-e an/ such pa/'ent"
In other ,or#s there is nothin( in petitionerLs a(ree'ents that (i!es rise to a 'onetar/ liabilit/ on the part
of the 'e'ber to an/ thir# part/Fpro!i#er of 'e#ical ser!ices ,hich 'i(ht in turn necessitate
in#e'ni4cation fro' petitioner" The ter's 7in#e'nif/7 or 7in#e'nit/7 presuppose that a liabilit/ or clai'
has alrea#/ been incurre#" There is no in#e'nit/ precisel/ because the 'e'ber 'erel/ a!ails of 'e#ical
ser!ices to be pai# or alrea#/ pai# in a#!ance at a preFa(ree# price un#er the a(ree'ents"
-hir" Accor#in( to the a(ree'ent a 'e'ber can ta-e a#!anta(e of the bul- of the bene4ts an/ti'e e.g.
laborator/ ser!ices ;Fra/ routine annual ph/sical e;a'ination an# consultations !accine a#'inistration
as ,ell as fa'il/ plannin( counselin( e!en in the absence of an/ peril loss or #a'a(e on his or her part"
,ourth" In case of e'er(enc/ petitioner is obli(e# to rei'burse the 'e'ber ,ho recei!es care fro' a nonF
participatin( ph/sician or hospital" +o,e!er this is onl/ a !er/ 'inor part of the list of ser!ices a!ailable"
The assu'ption of the e;pense b/ petitioner is not con4ne# to the happenin( of a contin(enc/ but
inclu#es inci#ents e!en in the absence of illness or inGur/"
In .ichigan Poiatric .eical Association v. National ,oot Care Program, Inc.
3B
althou(h the health care
contracts calle# for the #efen#ant to partiall/ rei'burse a subscriber for treat'ent recei!e# fro' a nonF
#esi(nate# #octor this #i# not 'a-e #efen#ant an insurer" Citin( &oran the Court #eter'ine# that 7the
pri'ar/ acti!it/ of the #efen#ant ?,as@ the pro!ision of po#iatric ser!ices to subscribers in consi#eration of
prepa/'ent for such ser!ices"7
33
Since in#e'nit/ of the insure# ,as not the focal point of the a(ree'ent
but the e;tension of 'e#ical ser!ices to the 'e'ber at an a.or#able cost it #i# not parta-e of the nature
of a contract of insurance"
,i(th" Althou(h ris- is a pri'ar/ ele'ent of an insurance contract it is not necessaril/ true that ris- alone
is suHcient to establish it" Al'ost an/one ,ho un#erta-es a contractual obli(ation al,a/s bears a certain
#e(ree of 4nancial ris-" ConseIuentl/ there is a nee# to #istin(uish prepai# ser!ice contracts ?li-e those of
petitioner@ fro' the usual insurance contracts"
In#ee# petitioner as an +MO un#erta-es a business ris- ,hen it o.ers to pro!i#e health ser!ices6 the ris-
that it 'i(ht fail to earn a reasonable return on its in!est'ent" Jut it is not the ris- of the t/pe peculiar
onl/ to insurance co'panies" Insurance ris- also -no,n as actuarial ris- is the ris- that the cost of
insurance clai's 'i(ht be hi(her than the pre'iu's pai#" The a'ount of pre'iu' is calculate# on the
basis of assu'ptions 'a#e relati!e to the insure#"
3&
+o,e!er assu'in( that petitionerAs co''it'ent to pro!i#e 'e#ical ser!ices to its 'e'bers can be
construe# as an acceptance of the ris- that it ,ill shell out 'ore than the prepai# fees it still ,ill not
Iualif/ as an insurance contract because petitionerAs obGecti!e is to pro!i#e 'e#ical ser!ices at re#uce#
cost not to #istribute ris- li-e an insurer"
In su' an e;a'ination of petitionerAs a(ree'ents ,ith its 'e'bers lea#s us to conclu#e that it is not an
insurance contract ,ithin the conte;t of our Insurance Co#e"
T.ere B(* No e)'*-(t'%e I&te&t To Impo*e #ST O& He(-t. C(re !)reeme&t* O2 HMO*
Further'ore 'ilitatin( in con!incin( fashion a(ainst the i'position of DST on petitionerAs health care
a(ree'ents un#er Section %2& of the NIRC of %==< is the pro!isionAs le(islati!e histor/" The te;t of Section
%2& ca'e into $"S" la, as earl/ as %=03 ,hen +MOs an# health care a(ree'ents ,ere not e!en in
e;istence in this Guris#iction" It ,as i'pose# un#er Section %%> Article )I of Act No" %%2= ?other,ise
-no,n as the 7Internal Re!enue La, of %=037@
3>
enacte# on *ul/ 1 %=03 an# beca'e e.ecti!e on Au(ust
% %=03" E;cept for the rate of ta; Section %2& of the NIRC of %==< is a !erbati' repro#uction of the
pertinent portion of Section %%> to ,it6
ARTICLE )I
St(mp T(6e* on Speci4e# ObGects
Section %%>" There shall be le!ie# collecte# an# pai# for an# in respect to the se!eral bon#s #ebentures
or certi4cates of stoc- an# in#ebte#ness an# other #ocu'ents instru'ents 'atters an# thin(s
'entione# an# #escribe# in this section or for or in respect to the !ellu' parch'ent or paper upon
,hich such instru'ent 'atters or thin(s or an/ of the' shall be ,ritten or printe# b/ an/ person or
persons ,ho shall 'a-e si(n or issue the sa'e on an# after *anuar/ 4rst nineteen hun#re# an# 4!e the
se!eral ta;es follo,in(6
; ; ; ; ; ; ; ; ;
Thir# ;;; 5+8 o& (-- po-'+'e* o2 '&*,r(&+e or bo&0 or ob-')(t'o& o2 t.e &(t,re o2 '&0em&'t3 2or
-o**, 0(m()e, or -'(b'-'t3 m(0e or re&e4e0 b3 (&3 per*o&, (**o+'(t'o&, +omp(&3, or
+orpor(t'o& tr(&*(+t'&) t.e b,*'&e** o2 (++'0e&t, 70e-'t3, emp-o3er>* -'(b'-'t3, p-(te )-(**,
*te(m bo'-er, b,r)-(r, e-e%(tor, (,tom(t'+ *pr'&:-e, or ot.er br(&+. o2 '&*,r(&+e 5e6+ept -'2e,
m(r'&e, '&-(&0, (&0 7re '&*,r(&+e8 ;;;; ?E'phasis supplie#@
On Februar/ 1< %=%3 Act No" 1BB= ?the Internal Re!enue La, of %=%3@ ,as enacte# re!isin( an#
consoli#atin( the la,s relatin( to internal re!enue" The aforecite# pertinent portion of Section %%> Article
)I of Act No" %%2= ,as co'pletel/ repro#uce# as Section B0 ?l@ Article III of Act No" 1BB=" The !er/
#etaile# an# e;clusi!e enu'eration of ite's subGect to DST ,as thus retaine#"
On Dece'ber B% %=%> Section B0 ?l@ Article III of Act No" 1BB= ,as a(ain repro#uce# as Section %>03 ?l@
Article IV of Act No" 1>&< ?A#'inistrati!e Co#e@" $pon its a'en#'ent on March %0 %=%< the pertinent
DST pro!ision beca'e Section %33= ?l@ of Act No" 1<%% other,ise -no,n as the A#'inistrati!e Co#e of
%=%<"
Section %33= ?%@ e!entuall/ beca'e Sec" 111 of Co''on,ealth Act No" 3>> ?the NIRC of %=B=@ ,hich
co#i4e# all the internal re!enue la,s of the Philippines" In an a'en#'ent intro#uce# b/ RA 30 on October
% %=3> the DST rate ,as increase# but the pro!ision re'aine# substantiall/ the sa'e"
Thereafter on *une B %=<< the sa'e pro!ision ,ith the sa'e DST rate ,as repro#uce# in PD %%&2 ?NIRC
of %=<<@ as Section 1B3" $n#er PDs %3&< an# %=&= enacte# on *une %% %=<2 an# October %0 %=23
respecti!el/ the DST rate ,as a(ain increase#"/avvphi/
E.ecti!e *anuar/ % %=2> pursuant to Section 3& of PD %==3 Section 1B3 of the NIRC of %=<< ,as
renu'bere# as Section %=2" An# un#er Section 1B of EO
3<
1<B #ate# *ul/ 1& %=2< it ,as a(ain
renu'bere# an# beca'e Section %2&"
On Dece'ber 1B %==B un#er RA <>>0 Section %2& ,as a'en#e# but a(ain onl/ ,ith respect to the rate
of ta;"
Not,ithstan#in( the co'prehensi!e a'en#'ent of the NIRC of %=<< b/ RA 2313 ?or the NIRC of %==<@ the
subGect le(al pro!ision ,as retaine# as the present Section %2&" In 1003 a'en#'ents to the DST
pro!isions ,ere intro#uce# b/ RA =13B
32
but Section %2& ,as untouche#"
On the other han# the concept of an +MO ,as intro#uce# in the Philippines ,ith the for'ation of Janco'
+ealth Care Corporation in %=<3" The sa'e pioneer +MO ,as later reor(ani:e# an# rena'e# Inte(rate#
+ealth Care Ser!ices Inc" ?or Intercare@" +o,e!er there are those ,ho clai' that +ealth Maintenance Inc"
is the +MO in#ustr/ pioneer ha!in( set foot in the Philippines as earl/ as %=>& an# ha!in( been for'all/
incorporate# in %==%" After,ar#s +MOs proliferate# Iuic-l/ an# currentl/ there are B> re(istere# +MOs
,ith a total enroll'ent of 'ore than 1 'illion"
3=
5e can clearl/ see fro' these t,o histories ?of the DST on the one han# an# +MOs on the other@ that
,hen the la, i'posin( the DST ,as 4rst passe# +MOs ,ere /et un-no,n in the Philippines" +o,e!er
,hen the !arious a'en#'ents to the DST la, ,ere enacte# the/ ,ere alrea#/ in e;istence in the
Philippines an# the ter' ha# in fact alrea#/ been #e4ne# b/ RA <2<&" If it ha# been the intent of the
le(islature to i'pose DST on health care a(ree'ents it coul# ha!e #one so in clear an# cate(orical ter's"
It ha# 'an/ opportunities to #o so" Jut it #i# not" The fact that the NIRC containe# no speci4c pro!ision on
the DST liabilit/ of health care a(ree'ents of +MOs at a ti'e the/ ,ere alrea#/ -no,n as such belies an/
le(islati!e intent to i'pose it on the'" !* ( m(tter o2 2(+t, pet't'o&er 4(* (**e**e0 't* #ST -'(b'-'t3
o&-3 o& C(&,(r3 27, 2000, (2ter more t.(& ( 0e+(0e '& t.e b,*'&e** (* (& HMO.
&0
Consi#erin( that Section %2& #i# not chan(e since %=03 ?e;cept for the rate of ta;@ it ,oul# be safe to sa/
that health care a(ree'ents ,ere ne!er at an/ ti'e reco(ni:e# as insurance contracts or #ee'e#
en(a(e# in the business of insurance ,ithin the conte;t of the pro!ision"
T.e Po4er To T(6 I* Not T.e Po4er To #e*tro3
As a (eneral rule the po,er to ta; is an inci#ent of so!erei(nt/ an# is unli'ite# in its ran(e
ac-no,le#(in( in its !er/ nature no li'its so that securit/ a(ainst its abuse is to be foun# onl/ in the
responsibilit/ of the le(islature ,hich i'poses the ta; on the constituenc/ ,ho is to pa/ it"
&%
So potent
in#ee# is the po,er that it ,as once opine# that 7the po,er to ta; in!ol!es the po,er to #estro/"7
&1
Petitioner clai's that the assesse# DST to #ate ,hich a'ounts to PB<> 'illion
&B
is ,a/ be/on# its net
,orth of P1&= 'illion"
&3
Respon#ent ne!er #ispute# these assertions" Di!en the realities on the (roun#
i'posin( the DST on petitioner ,oul# be hi(hl/ oppressi!e" It is not the purpose of the (o!ern'ent to
throttle pri!ate business" On the contrar/ the (o!ern'ent ou(ht to encoura(e pri!ate enterprise"
&&
Petitioner Gust li-e an/ concern or(ani:e# for a la,ful econo'ic acti!it/ has a ri(ht to 'aintain a
le(iti'ate business"
&>
As aptl/ hel# in Ro!as, et al. v. C-A, et al.6
&<
The po,er of ta;ation is so'eti'es calle# also the po,er to #estro/" Therefore it shoul# be e;ercise# ,ith
caution to 'ini'i:e inGur/ to the proprietar/ ri(hts of a ta;pa/er" It 'ust be e;ercise# fairl/ eIuall/ an#
unifor'l/ lest the ta; collector -ill the 7hen that la/s the (ol#en e(("7
&2
Le(iti'ate enterprises enGo/ the constitutional protection not to be ta;e# out of e;istence" Incurrin( losses
because of a ta; i'position 'a/ be an acceptable conseIuence but -illin( the business of an entit/ is
another 'atter an# shoul# not be allo,e#" It is counterFpro#ucti!e an# ulti'atel/ sub!ersi!e of the
nationAs thrust to,ar#s a better econo'/ ,hich ,ill ulti'atel/ bene4t the 'aGorit/ of our people"
&=
Pet't'o&er>* T(6 '(b'-'t3 B(* E6t'&),'*.e0 U&0er T.e Pro%'*'o&* O2 R! 98D0
Petitioner asserts that re(ar#less of the ar(u'ents the DST assess'ent for ta;able /ears %==> an# %==<
beca'e 'oot an# aca#e'ic
>0
,hen it a!aile# of the ta; a'nest/ un#er RA =320 on Dece'ber %0 100<" It
pai# P&%1<%3="02 representin( &E of its net ,orth as of the /ear en#e# Dece'ber B% 100& an#
co'plie# ,ith all reIuire'ents of the ta; a'nest/" $n#er Section >?a@ of RA =320 it is entitle# to i''unit/
fro' pa/'ent of ta;es as ,ell as a##itions thereto an# the appurtenant ci!il cri'inal or a#'inistrati!e
penalties un#er the %==< NIRC as a'en#e# arisin( fro' the failure to pa/ an/ an# all internal re!enue
ta;es for ta;able /ear 100& an# prior /ears"
>%
Far fro' #isa(reein( ,ith petitioner respon#ent 'anifeste# in its 'e'oran#u'6
Section > of 8RA =2309 pro!i#es that a!ail'ent of ta; a'nest/ entitles a ta;pa/er to i''unit/ fro'
pa/'ent of the ta; in!ol!e# inclu#in( the ci!il cri'inal or a#'inistrati!e penalties pro!i#e# un#er the
%==< 8NIRC9 for ta; liabilities arisin( in 100& an# the prece#in( /ears"
In !ie, of petitionerAs a!ail'ent of the bene4ts of 8RA =2309 an# ,ithout conce#in( the 'erits of this case
as #iscusse# abo!e re*po&0e&t +o&+e0e* t.(t *,+. t(6 (m&e*t3 e6t'&),'*.e* t.e t(6 -'(b'-'t'e*
o2 pet't'o&er" This a#'ission ho,e!er is not 'eant to preclu#e a re!ocation of the a'nest/ (rante# in
case it is foun# to ha!e been (rante# un#er circu'stances a'ountin( to ta; frau# un#er Section %0 of sai#
a'nest/ la,"
>1
?E'phasis supplie#@
Further'ore ,e hel# in a recent case that DST is one of the ta;es co!ere# b/ the ta; a'nest/ pro(ra'
un#er RA =320"
>B
There is no other conclusion to #ra, than that petitionerAs liabilit/ for DST for the ta;able
/ears %==> an# %==< ,as totall/ e;tin(uishe# b/ its a!ail'ent of the ta; a'nest/ un#er RA =320"
I* T.e Co,rt 1o,&0 13 ! M'&,te Re*o-,t'o& I& !&ot.er C(*eE
Petitioner raises another interestin( issue in its 'otion for reconsi#eration6 ,hether this Court is boun# b/
the rulin( of the CA
>3
in CIR v. Philippine National Bank
>&
that a health care a(ree'ent of Phila'care +ealth
S/ste's is not an insurance contract for purposes of the DST"
In support of its ar(u'ent petitioner cites the Au(ust 1= 100% 'inute resolution of this Court #is'issin(
the appeal in Philippine National Bank ?D"R" No" %32>20@"
>>
Petitioner ar(ues that the #is'issal of D"R" No"
%32>20 b/ 'inute resolution ,as a Gu#('ent on the 'eritsK hence the Court shoul# appl/ the CA rulin(
there that a health care a(ree'ent is not an insurance contract"
It is true that althou(h containe# in a 'inute resolution our #is'issal of the petition ,as a #isposition of
the 'erits of the case" 5hen ,e #is'isse# the petition ,e e.ecti!el/ aHr'e# the CA rulin( bein(
Iuestione#" As a result our rulin( in that case has alrea#/ beco'e 4nal"
><
5hen a 'inute resolution
#enies or #is'isses a petition for failure to co'pl/ ,ith for'al an# substanti!e reIuire'ents the
challen(e# #ecision to(ether ,ith its 4n#in(s of fact an# le(al conclusions are #ee'e# sustaine#"
>2
Jut
,hat is its e.ect on other casesO
5ith respect to the sa'e subGect 'atter an# the sa'e issues concernin( the sa'e parties it constitutes
res 0uicata"
>=
+o,e!er if other parties or another subGect 'atter ?e!en ,ith the sa'e parties an# issues@
is in!ol!e# the 'inute resolution is not bin#in( prece#ent" Thus in CIR v. Baier1Nickel
<0
the Court note#
that a pre!ious case CIR v. Baier1Nickel
<%
'&%o-%'&) t.e *(me p(rt'e* (&0 t.e *(me '**,e* ,as
pre!iousl/ #ispose# of b/ the Court thru a 'inute resolution #ate# Februar/ %< 100B sustainin( the rulin(
of the CA" Nonetheless the Court rule# that t.e pre%'o,* +(*e F.(508 &o be(r'&)F on the latter case
because the t,o cases in!ol!e# #i.erent subGect 'atters as the/ ,ere concerne# ,ith the ta;able inco'e
of #i.erent ta;able /ears"
<1
Jesi#es there are substantial not si'pl/ for'al #istinctions bet,een a 'inute resolution an# a #ecision"
The constitutional reIuire'ent un#er the 4rst para(raph of Section %3 Article VIII of the Constitution that
the facts an# the la, on ,hich the Gu#('ent is base# 'ust be e;presse# clearl/ an# #istinctl/ applies onl/
to #ecisions not to 'inute resolutions" A 'inute resolution is si(ne# onl/ b/ the cler- of court b/ authorit/
of the Gustices unli-e a #ecision" It #oes not reIuire the certi4cation of the Chief *ustice" Moreo!er unli-e
#ecisions 'inute resolutions are not publishe# in the Philippine Reports" Finall/ the pro!iso of Section 3?B@
of Article VIII spea-s of a #ecision"
<B
In#ee# as a rule this Court la/s #o,n #octrines or principles of la,
,hich constitute bin#in( prece#ent in a #ecision #ul/ si(ne# b/ the 'e'bers of the Court an# certi4e# b/
the Chief *ustice"
Accor#in(l/ since petitioner ,as not a part/ in D"R" No" %32>20 an# since petitionerAs liabilit/ for DST on
its health care a(ree'ent ,as not the subGect 'atter of D"R" No" %32>20 petitioner cannot successfull/
in!o-e the 'inute resolution in that case ?,hich is not e!en bin#in( prece#ent@ in its fa!or" Nonetheless in
!ie, of the reasons alrea#/ #iscusse# this #oes not #etract in an/ ,a/ fro' the fact that petitionerAs
health care a(ree'ents are not subGect to DST"
! $'&(- Note
Ta-in( into account that health care a(ree'ents are clearl/ not ,ithin the a'bit of Section %2& of the NIRC
an# there ,as ne!er an/ le(islati!e intent to i'pose the sa'e on +MOs li-e petitioner the sa'e shoul#
not be arbitraril/ an# unGustl/ inclu#e# in its co!era(e"
It is a 'atter of co''on -no,le#(e that there is a (reat social nee# for a#eIuate 'e#ical ser!ices at a
cost ,hich the a!era(e ,a(e earner can a.or#" +MOs arran(e or(ani:e an# 'ana(e health care
treat'ent in the furtherance of the (oal of pro!i#in( a 'ore eHcient an# ine;pensi!e health care s/ste'
'a#e possible b/ Iuantit/ purchasin( of ser!ices an# econo'ies of scale" The/ o.er a#!anta(es o!er the
pa/FforFser!ice s/ste' ?,herein in#i!i#uals are char(e# a fee each ti'e the/ recei!e 'e#ical ser!ices@
inclu#in( the abilit/ to control costs" The/ protect their 'e'bers fro' e;posure to the hi(h cost of
hospitali:ation an# other 'e#ical e;penses brou(ht about b/ a Nuctuatin( econo'/" Accor#in(l/ the/ pla/
an i'portant role in societ/ as partners of the State in achie!in( its constitutional 'an#ate of pro!i#in( its
citi:ens ,ith a.or#able health ser!ices"
The rate of DST un#er Section %2& is eIui!alent to %1"&E of the pre'iu' char(e#"
<3
Its i'position ,ill
ele!ate the cost of health care ser!ices" This ,ill in turn necessitate an increase in the 'e'bership fees
resultin( in either placin( health ser!ices be/on# the reach of the or#inar/ ,a(e earner or #ri!in( the
in#ustr/ to the (roun#" At the en# of the #a/ neither si#e ,ins consi#erin( the in#ispensabilit/ of the
ser!ices o.ere# b/ +MOs"
BHERE$ORE the 'otion for reconsi#eration is GR!NTE#" The Au(ust %> 1003 #ecision of the Court of
Appeals in CAFD"R" SP No" <03<= is RE"ERSE# an# SET !SI#E" The %==> an# %==< #e4cienc/ DST
assess'ent a(ainst petitioner is hereb/ C!NCEE# an# SET !SI#E. Respon#ent is or#ere# to #esist
fro' collectin( the sai# ta;"
No costs"
SO OR#ERE#.
REN!TO C. CORON!
Associate *ustice
BE CONCURG
REHN!TO S. PUNO
Chief *ustice
Chairperson
MINIT! ". CHICO?N!I!RIO
Q
Associate *ustice
TERESIT! C. EON!R#O?#E C!STRO
Associate *ustice
UC!S P. 1ERS!MIN
Associate *ustice
C E R T I F I C A T I O N
Pursuant to Section %B Article VIII of the Constitution I certif/ that the conclusions in the abo!e resolution
ha# been reache# in consultation before the case ,as assi(ne# to the ,riter of the opinion of the CourtAs
Di!ision"
REHN!TO S. PUNO
Chief *ustice
