Republic Act No.
8282 May 01, 1997 hold office until their successors shall have been appointed and duly
AN ACT FURTHER STRENGTHENING THE SOCIAL SECURITY SYSTEM THEREBY
AMENDING FOR THIS PURPOSE, REPUBLIC ACT NO. 1161, AS AMENDED,
OTHERWISE KNOWN AS THE SOCIAL SECURITY LAW
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled::
Section 1. Republic Act No. 1161, as amended, otherwise known as the "Social Security
Law", is hereby further amended to read as follows:
"SECTION 1. Short Title. - This Act shall be known as the "AN ACT
FURTHER STRENGTHENING THE SOCIAL SECURITY SYSTEM
THEREBY AMENDING FOR THIS PURPOSE, REPUBLIC ACT NO.
1161, AS AMENDED, OTHERWISE KNOWN AS THE SOCIAL
SECURITY LAW."
"SEC. 2. Declaration of Policy. - It is the policy of the Republic of the
Philippines to establish, develop, promote and perfect a sound and
viable tax-exempt social security service suitable to the needs of the
people throughout the Philippines which shall promote social justice
and provide meaningful protection to members and their beneficiaries
against the hazards of disability, sickness, maternity, old age, death,
and other contingencies resulting in loss of income or financial burden.
Towards this end, the State shall endeavor to extend social security
protection to workers and their beneficiaries.
"SEC. 3. Social Security System. - (a) To carry out the purposes of this
Act, the Social Security System, hereinafter referred to as 'SSS', a
corporate body, with principal place of business in Metro Manila,
Philippines is hereby created. The SSS shall be directed and controlled
by a Social Security Commission, hereinafter referred to as
'Commission', composed of the Secretary of Labor and Employment or
his duly designated undersecretary, the SSS president and seven (7)
appointive members, three (3) of whom shall represent the workers'
group, at least one of whom shall be a woman; three (3), the
employers' group, at least one (1) of whom shall be a woman; and one
(1), the general public whose representative shall have adequate
knowledge and experience regarding social security, to be appointed
by the President of the Philippines. The six (6) members representing
workers and employers shall be chosen from among the nominees of
workers' and employers' organizations, respectively. The Chairman of
the Commission shall be designated by the President of the Philippines
from among its members. The term of the appointive members shall be
three (3) years: Provided, That the terms of the first six (6) appointive
members shall be one (1), two (2) and three (3) years for every two
members, respectively: Provided, further, That they shall continue to
qualified. All vacancies, prior to the expiration of the term, shall be filled
for the unexpired term only. The appointive members of the
Commission shall receive at least two thousand five hundred pesos
(P2,500.00) per diem for each meeting actually attended by them but
not to exceed Ten thousand pesos (P10,000.00) a month:: Provided,
That members of the Commission shall also receive a per diem of at
least Two thousand five hundred pesos (P2,500.00) but not to exceed
Fifteen thousand pesos (P15,000.00) a month: Provided , further, That
said members of the Commission shall also receive reasonable
transportation and representation allowances as may be fixed by the
Commission, but not to exceed Ten thousand pesos (P10,000.00) a
month.
"(b) The general conduct of the operations and management functions
of the SSS shall be vested in the SSS President who shall serve as the
chief executive officer immediately responsible for carrying out the
program of the SSS and the policies of the Commission. The SSS
President shall be a person who has had previous experience in the
technical and administrative fields related to the purposes of this Act.
He shall be appointed by the President of the Philippines and shall
receive salary to be fixed by the Commission with the approval of the
President of the Philippines, payable from the funds of the SSS.
"(c) The Commission, upon the recommendation of the SSS President,
shall appoint an actuary, and such other personnel as may be deemed
necessary, fix their reasonable compensation, allowances and other
benefits, prescribe their duties and establish such methods and
procedures as may be necessary to insure the efficient, honest and
economical administration of the provisions and purposes of this Act:
Provided, however, That the personnel of the SSS below the rank of
Vice-President shall be appointed by the SSS President: Provided,
further, That the personnel appointed by the SSS President, except
those below the rank of assistant manager, shall be subject to the
confirmation by the Commission: Provided, further, That the personnel
of the SSS shall be selected only from civil service eligibles and be
subject to civil service rules and regulations: Provided, finally, That the
SSS shall be exempt from the provisions of Republic Act No. 6758 and
Republic Act No. 7430.
"SEC. 4. Powers and Duties of the Commission and SSS. - (a) The
Commission. - For the attainment of its main objectives as set forth in
Section 2 hereof, the Commission shall have the following powers and
duties:
"(1) To adopt, amend and rescind, subject to the approval of
the President of the Philippines, such rules and regulations as
may be necessary to carry out the provisions and purposes of
this Act;
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 "(2) To establish a provident fund for the members which will
consist of voluntary contributions of employers and/or
employees, self-employed and voluntary members and their
earnings, for the payment of benefits to such members or their
beneficiaries, subject to such rules and regulations as it may
promulgate and approved by the President of the Philippines;
"(3) To maintain a provident fund which consists of
contributions made by both the SSS and its officials and
employees and their earnings, for the payment of benefits to
such officials and employees or their heirs under such terms
and conditions as it may prescribe;
"(4) To approve restructuring proposals for the payment of
due but unremitted contributions and unpaid loan
amortizations under such terms and conditions as it may
prescribe;
"(5) To authorize cooperatives registered with the cooperative
development authority or associations registered with the
appropriate government agency to act as collecting agents of
the SSS with respect to their members: Provided, That the
SSS shall accredit the cooperative or association: Provided,
further, That the persons authorized to collect are bonded;
"(6) To compromise or release, in whole or in part, any
interest, penalty or any civil liability to SSS in connection with
the investments authorized under Section 26 hereof, under
such terms and conditions as it may prescribe and approved
by the President of the Philippines; and
"(7) To approve, confirm, pass upon or review any and all
actions of the SSS in the proper and necessary exercise of its
powers and duties hereinafter enumerated.
"(b) The Social Security System. - Subject to the provision of Section
four (4), paragraph seven (7) hereof, the SSS shall have the following
powers and duties:
"(1) To submit annually not later than April 30, a public report
to the President of the Philippines and to the Congress of the
Philippines covering its activities in the administration and
enforcement of this Act during the preceding year including
information and recommendations on broad policies for the
development and perfection of the program of the SSS;
"(2) To require the actuary to submit a valuation report on the
SSS benefit program every four (4) years, or more frequently
as may be necessary, to undertake the necessary actuarial
studies and calculations concerning increases in benefits
taking into account inflation and the financial stability of the
SSS, and to provide for feasible increases in benefits every
four (4) years, including the addition of new ones, under such
rules and regulations as the Commission may adopt, subject
to the approval of the President of the Philippines: Provided,
That the actuarial soundness of the reserve fund shall be
guaranteed: Provided, further, That such increases in benefits
shall not require any increase in the rate of contribution;
"(3) To establish offices of the SSS to cover as many
provinces, cities and congressional districts, whenever and
wherever it may be expedient, necessary and feasible, and to
inspect or cause to be inspected periodically such offices;
"(4) To enter into agreements or contracts for such service
and aid, as may be needed for the proper, efficient and stable
administration of the SSS;
"(5) To adopt, from time to time, a budget of expenditures
including salaries of personnel, against all funds available to
the SSS under this Act;
"(6) To set up its accounting system and provide the
necessary personnel therefor;
"(7) To require reports, compilations and analyses of statistical
and economic data and to make investigation as may be
needed for the proper administration and development of the
SSS;
"(8) To acquire and dispose of property, real or personal,
which may be necessary or expedient for the attainment of the
purposes of this Act;
"(9) To acquire, receive, or hold, by way of purchase,
expropriation or otherwise, public or private property for the
purpose of undertaking housing projects preferably for the
benefit of low-income members and for the maintenance of
hospitals and institutions for the sick, aged and disabled, as
well as schools for the members and their immediate families;
"(10) To sue and be sued in court; and
"(11) To perform such other corporate acts as it may deem
appropriate for the proper enforcement of this Act.
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"SEC. 5. Settlement of Disputes. - (a) Any dispute arising under this
Act with respect to coverage, benefits, contributions and penalties
thereon or any other matter related thereto, shall be cognizable by the
Commission, and any case filed with respect thereto shall be heard by
the Commission, or any of its members, or by hearing officers duly
authorized by the Commission and decided within twenty (20) days
after the submission of the evidence. The filing, determination and
settlement of disputes shall be governed by the rules and regulations
promulgated by the Commission.
"(b) Appeal to Courts. - Any decision of the Commission, in the
absence of an appeal therefrom as herein Provided, shall become final
and executory fifteen (15) days after the date of notification, and
judicial review thereof shall be permitted only after any party claiming
to be aggrieved thereby has exhausted his remedies before the
Commission. The Commission shall be deemed to be a party to any
judicial action involving any such decision, and may be represented by
an attorney employed by the Commission, or when requested by the
Commission, by the Solicitor General or any public prosecutors.
"(c) Court Review. - The decision of the Commission upon any
disputed matter may be reviewed both upon the law and the facts by
the Court of Appeals. For the purpose of such review, the procedure
concerning appeals from the Regional Trial Court shall be followed as
far as practicable and consistent with the purposes of this Act. Appeal
from a decision of the Commission must be taken within fifteen (15)
days from notification of such decision. If the decision of the
Commission involves only questions of law, the same shall be
reviewed by the Supreme Court. No appeal bond shall be required.
The case shall be heard in a summary manner, and shall take
precedence over all cases, except that in the Supreme Court, criminal
cases wherein life imprisonment or death has been imposed by the trial
court shall take precedence. No appeal shall act as a supersedeas or a
stay of the order of the Commission unless the Commission itself, or
the Court of Appeals or the Supreme Court, shall so order.
"(d) Execution of Decisions. - The Commission may, motu proprio or on
motion of any interested party, issue a writ of execution to enforce any
of its decisions or awards, after it has become final and executory, in
the same manner as the decision of the Regional Trial Court by
directing the city or provincial sheriff or the sheriff whom it may appoint
to enforce such final decision or execute such writ; and any person
who shall fail or refuse to comply with such decision, award or writ,
after being required to do so shall, upon application by the Commission
pursuant to Rule 71 of the Rules of Court, be punished for contempt.
"SEC. 6. Auditor and Counsel. - (a) The Chairman of the Commission
on Audit shall be the ex-officio Auditor of the SSS. He or his
representative shall check and audit all the accounts, funds and
properties of the SSS in the same manner and as frequently as the
accounts, funds and properties of the government are checked and
audited under existing laws, and he shall have, as far as practicable,
the same powers and duties as he has with respect to the checking
and auditing of public accounts, funds and properties in general.
"(b) The Secretary of Justice shall be the ex-officio counsel of the SSS.
He or his representative shall act as legal adviser and counsel thereof.
"SEC. 7. Oaths, Witnesses, and Production of Records. - When
authorized by the Commission, an official or employee thereof shall
have the power to administer oath and affirmation, take depositions,
certify to official acts, and issue subpoena and subpoena duces tecum
to compel the attendance of witnesses and the production of books,
papers, correspondence and other records deemed necessary as
evidence in connection with any question arising under this Act. Any
case of contumacy shall be dealt with by the Commission in
accordance with law.
"SEC. 8. Terms Defined. - For purposes of this Act, the following terms
shall, unless the context indicates otherwise, have the following
meanings:
"(a) SSS - The Social Security System created by this Act.
"(b) Commission - The Social Security Commission as herein created.
"(c) Employer- Any person, natural or juridical, domestic or foreign, who
carries on in the Philippines any trade, business, industry, undertaking,
or activity of any kind and uses the services of another person who is
under his orders as regards the employment, except the Government
and any of its political subdivisions, branches or instrumentalities,
including corporations owned or controlled by the Government:
Provided, That a self-employed person shall be both employee and
employer at the same time.
"(d) Employee - Any person who performs services for an employer in
which either or both mental or physical efforts are used and who
receives compensation for such services, where there is an employer-
employee relationship: Provided, That a self-employed person shall be
both employee and employer at the same time.
"(e) Dependents - The dependents shall be the following:
"(1) The legal spouse entitled by law to receive support from
the member;
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 "(2) The legitimate, legitimated or legally adopted, and
illegitimate child who is unmarried, not gainfully employed,
and has not reached twenty-one (21) years of age, or if over
twenty-one (21) years of age, he is congenitally or while still a
minor has been permanently incapacitated and incapable of
self-support, physically or mentally; and
"(3) The parent who is receiving regular support from the
member.
"(f) Compensation - All actual remuneration for employment, including
the mandated cost-of-living allowance, as well as the cash value of any
remuneration paid in any medium other than cash except that part of
the remuneration in excess of the maximum salary credit as Provided
under Section Eighteen of this Act.
"(g) Monthly salary credit - The compensation base for contributions
and benefits as indicated in the schedule in Section Eighteen of this
Act.
"(h) Monthly - The period from one end of the last payroll period of the
preceding month to the end of the last payroll period of the current
month if compensation is on hourly, daily or weekly basis; if on any
other basis, 'monthly' shall mean a period of one (1) month.
"(i) Contribution - The amount paid to the SSS by and on behalf of the
members in accordance with Section Eighteen of this Act.
"(j) Employment - Any service performed by an employee for his
employer except:
"(1) Employment purely casual and not for the purpose of
occupation or business of the employer;
"(2) Service performed on or in connection with an alien
vessel by an employee if he is employed when such vessel is
outside the Philippines;
"(3) Service performed in the employ of the Philippine
Government or instrumentality or agency thereof;
"(4) Service performed in the employ of a foreign government
or international organization, or their wholly-owned
instrumentality: Provided, however, That this exemption
notwithstanding, any foreign government, international
organization or their wholly-owned instrumentality employing
workers in the Philippines or employing Filipinos outside of the
Philippines, may enter into an agreement with the Philippine
Government for the inclusion of such employees in the SSS
except those already covered by their respective civil service
retirement systems: Provided, further, That the terms of such
agreement shall conform with the provisions of this Act on
coverage and amount of payment of contributions and
benefits: Provided, finally, That the provisions of this Act shall
be supplementary to any such agreement; and
"(5) Such other services performed by temporary and other
employees which may be excluded by regulation of the
Commission. Employees of bona fide independent contractors
shall not be deemed employees of the employer engaging the
service of said contractors.
"(k) Beneficiaries - The dependent spouse until he or she remarries,
the dependent legitimate, legitimated or legally adopted, and
illegitimate children, who shall be the primary beneficiaries of the
member: Provided, That the dependent illegitimate children shall be
entitled to fifty percent (50%) of the share of the legitimate, legitimated
or legally adopted children: Provided, further, That in the absence of
the dependent legitimate, legitimated children of the member, his/her
dependent illegitimate children shall be entitled to one hundred percent
(100%) of the benefits. In their absence, the dependent parents who
shall be the secondary beneficiaries of the member. In the absence of
all the foregoing, any other person designated by the member as
his/her secondary beneficiary.
"(l) Contingency - The retirement, death, disability, injury or sickness
and maternity of the member.
"(m) Average monthly salary credit - The result obtained by dividing the
sum of the last sixty (60) monthly salary credits immediately preceding
the semester of contingency by sixty (60), or the result obtained by
dividing the sum of all the monthly salary credits paid prior to the
semester of contingency by the number of monthly contributions paid in
the same period, whichever is greater: Provided, That the injury or
sickness which caused the disability shall be deemed as the
permanent disability for the purpose of computing the average monthly
salary credit.
"(n) Average daily salary credit- The result obtained by dividing the sum
of the six (6) highest monthly salary credits in the twelve-month period
immediately preceding the semester of contingency by one hundred
eighty (180).
"(o) Semester - A period of two (2) consecutive quarters ending in the
quarter of contingency.
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"(p) Quarter - A period of three (3) consecutive calendar months ending
on the last day of March, June, September and December.
"(q) Credited years of service - For a member covered prior to January
nineteen hundred and eighty five (1985) minus the calendar year of
coverage plus the number of calendar years in which six (6) or more
contributions have been paid from January nineteen hundred and
eighty five (1985) up to the calendar year containing the semester prior
to the contingency. For a member covered in or after January nineteen
hundred and eighty five (1985), the number of calendar years in which
six (6) or more contributions have been paid from the year of coverage
up to the calendar year containing the semester prior to the
contingency: Provided, That the Commission may provide for a
different number of contributions in a calendar year for it to be
considered as a credited year of service.
"(r) Member - The worker who is covered under Section Nine and
Section Nine-A of this Act.
"(s) Self-employed - Any person whose income is not derived from
employment, as defined under this Act, as well as those workers
enumerated in Section Nine-A hereof.
"(t) Net earnings - Net income before income taxes plus non-cash
charges such as depreciation and depletion appearing in the regular
financial statement of the issuing or assuming institution.
"(u) Fixed charges - Recurring expense such as amortization of debt
discount or rentals for leased properties, including interest on funded
and unfunded debt.
"SEC. 9. Coverage. - (a) Coverage in the SSS shall be compulsory
upon all employees not over sixty (60) years of age and their
employers: Provided, That in the case of domestic helpers, their
monthly income shall not be less than One thousand pesos
(P1,000.00) a month: Provided, further, That any benefit already
earned by the employees under private benefit plans existing at the
time of the approval of this Act shall not be discontinued, reduced or
otherwise impaired: Provided, further, That private plans which are
existing and in force at the time of compulsory coverage shall be
integrated with the plan of the SSS in such a way where the employer's
contribution to his private plan is more than that required of him in this
Act, he shall pay to the SSS only the contribution required of him and
he shall continue his contribution to such private plan less his
contribution to the SSS so that the employer's total contribution to his
benefit plan and to the SSS shall be the same as his contribution to his
private benefit plan before the compulsory coverage: Provided, further,
That any changes, adjustments, modifications, eliminations or
improvements in the benefits to be available under the remaining
private plan, which may be necessary to adopt by reason of the
reduced contributions thereto as a result of the integration, shall be
subject to agreements between the employers and employees
concerned: Provided, further, That the private benefit plan which the
employer shall continue for his employees shall remain under the
employer's management and control unless there is an existing
agreement to the contrary: Provided, finally, That nothing in this Act
shall be construed as a limitation on the right of employers and
employees to agree on and adopt benefits which are over and above
those Provided under this Act.
"(b) Spouses who devote full time to managing the household and
family affairs, unless they are also engaged in other vocation or
employment which is subject to mandatory coverage, may be covered
by the SSS on a voluntary basis.
"(c) Filipinos recruited by foreign-based employers for employment
abroad may be covered by the SSS on a voluntary basis.
"SEC. 9-A. Compulsory Coverage of the Self-Employed. - Coverage in
the SSS shall also be compulsory upon such self-employed persons as
may be determined by the Commission under such rules and
regulations as it may prescribe, including but not limited to the
following:
"1. All self-employed professionals;
"2. Partners and single proprietors of businesses;
"3. Actors and actresses, directors, scriptwriters and news
correspondents who do not fall within the definition of the term
"employee" in Section 8 (d) of this Act;
"4. Professional athletes, coaches, trainers and jockeys; and
"5. Individual farmers and fishermen.
"Unless otherwise specified herein, all provisions of this Act applicable
to covered employees shall also be applicable to the covered self-
employed persons.
"SEC. 10. Effective Date of Coverage. - Compulsory coverage of the
employer shall take effect on the first day of his operation and that of
the employee on the day of his employment: Provided, That the
compulsory coverage of the self-employed person shall take effect
upon his registration with the SSS.
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"SEC. 11. Effect of Separation from Employment. - When an employee
under compulsory coverage is separated from employment, his
employer's contribution on his account and his obligation to pay
contributions arising from that employment shall cease at the end of
the month of separation, but said employee shall be credited with all
contributions paid on his behalf and entitled to benefits according to the
provisions of this Act. He may, however, continue to pay the total
contributions to maintain his right to full benefit.
"SEC. 11-A. Effect of Interruption of Business or Professional Income. -
If the self-employed realizes no income in any given month, he shall
not be required to pay contributions for that month. He may, however,
be allowed to continue paying contributions under the same rules and
regulations applicable to a separated employee member: Provided,
That no retroactive payment of contributions shall be allowed other
than as prescribed under Section Twenty-two-A hereof.
"SEC. 12. Monthly Pension. - (a) The monthly pension shall be the
highest of the following amounts:
"(1) The sum of the following:
"(i) Three hundred pesos (P300.00; plus
"(ii) Twenty percent (20%) of the average monthly
salary credit; plus
"(iii) Two percent (2%) of the average monthly salary
credit for each credited year of service in excess of
ten (10) years; or
"(2) Forth percent (40%) of the average monthly salary credit;
or
"(3) One thousand pesos (P1,000.00): Provided, That the
monthly pension shall in no case be paid for an aggregate
amount of less than sixty (60) months.
"(b) Notwithstanding the preceding paragraph, the minimum pension
shall be One thousand two hundred pesos (P1,200.00) for members
with at least ten (10) credited years of service and Two thousand four
hundred pesos (P2,400.00) for those with twenty (20) credited years of
service.
"SEC. 12-A. Dependents' Pension. - Where monthly pension is payable
on account of death, permanent total disability or retirement,
dependents' pension equivalent to ten percent (10%) of the monthly
pension or Two hundred fifty pesos (P250.00), whichever is higher,
shall also be paid for each dependent child conceived on or before the
date of the contingency but not exceeding five (5), beginning with the
youngest and without substitution: Provided, That where there are
legitimate or illegitimate children, the former shall be preferred.
SEC. 12-B. Retirement Benefits. - (a) A member who has paid at least
one hundred twenty (120) monthly contributions prior to the semester
of retirement and who: (1) has reached the age of sixty (60) years and
is already separated from employment or has ceased to be self-
employed; or (2) has reached the age of sixty-five (65) years, shall be
entitled for as long as he lives to the monthly pension: Provided, That
he shall have the option to receive his first eighteen (18) monthly
pensions in lump sum discounted at a preferential rate of interest to be
determined by the SSS.
"(b) A covered member who is sixty (60) years old at retirement and
who does not qualify for pension benefits under paragraph (a) above,
shall be entitled to a lump sum benefit equal to the total contributions
paid by him and on his behalf: Provided, That he is separated from
employment and is not continuing payment of contributions to the SSS
on his own.
"(c) The monthly pension shall be suspended upon the reemployment
or resumption of self-employment of a retired member who is less than
sixty-five (65) years old. He shall again be subject to Section Eighteen
and his employer to Section Nineteen of this Act.
"(d) Upon the death of the retired member, his primary beneficiaries as
of the date of his retirement shall be entitled to receive the monthly
pension: Provided, That if he has no primary beneficiaries and he dies
within sixty (60) months from the start of his monthly pension, his
secondary beneficiaries shall be entitled to a lump sum benefit
equivalent to the total monthly pensions corresponding to the balance
of the five-year guaranteed period, excluding the dependents' pension.
"(e) The monthly pension of a member who retires after reaching age
sixty (60) shall be the higher of either: (1) the monthly pension
computed at the earliest time he could have retired had he been
separated from employment or ceased to be self-employed plus all
adjustments thereto; or (2) the monthly pension computed at the time
when he actually retires.
"SEC. 13. Death Benefits. - Upon the death of a member who has paid
at least thirty-six (36) monthly contributions prior to the semester of
death, his primary beneficiaries shall be entitled to the monthly
pension: Provided, That if he has no primary beneficiaries, his
secondary beneficiaries shall be entitled to a lump sum benefit
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equivalent to thirty-six (36) times the monthly pension. If he has not "(e) If the disability is permanent partial, and such disability occurs
paid the required thirty-six (36) monthly contributions, his primary or before thirty-six (36) monthly contributions have been paid prior to the
secondary beneficiaries shall be entitled to a lump sum benefit semester of disability, the benefit shall be such percentage of the lump
equivalent to the monthly pension times the number of monthly sum benefit described in the preceding paragraph with due regard to
contributions paid to the SSS or twelve (12) times the monthly pension, the degree of disability as the Commission may determine.
whichever is higher.
"(f) If the disability is permanent total and such disability occurs after
"SEC. 13-A. Permanent Disability Benefits. - (a) Upon the permanent thirty-six (36) monthly contributions have been paid prior to the
total disability of a member who has paid at least thirty-six (36) monthly semester of disability, the benefit shall be the monthly pension for
contributions prior to the semester of disability, he shall be entitled to permanent total disability payable not longer than the period
the monthly pension: Provided, That if he has not paid the required designated in the following schedule:
thirty-six (36) monthly contributions, he shall be entitled to a lump sum
benefit equivalent to the monthly pension times the number of monthly
contributions paid to the SSS or twelve (12) times the monthly pension, Complete and permanent loss Number of
whichever is higher. A member who (1) has received a lump sum of use of Months
benefit; and (2) is reemployed or has resumed self-employment not One thumb 10
earlier than one (1) year from the date of his disability shall again be
One index finger 8
subject to compulsory coverage and shall be considered a new
member. One middle finger 6
One right finger 5
"(b) The monthly pension and dependents' pension shall be suspended One little finger 3
upon the reemployment or resumption of self-employment or the
recovery of the disabled member from his permanent total disability or One big toe 6
his failure to present himself for examination at least once a year upon One hand 39
notice by the SSS.
One arm 50
"(c) Upon the death of the permanent total disability pensioner, his One foot 31
primary beneficiaries as of the date of disability shall be entitled to One leg 46
receive the monthly pension: Provided, That if he has no primary
beneficiaries and he dies within sixty (60) months from the start of his One ear 10
monthly pension, his secondary beneficiaries shall be entitled to a lump Both ears 20
sum benefit equivalent to the total monthly pensions corresponding to
Hearing of one ear 10
the balance of the five-year guaranteed period excluding the
dependents' pension. Hearing of both ears 50
Sight of one eye 25
"(d) The following disabilities shall be deemed permanent total:
"(g) The percentage degree of disability which is equivalent to the ratio
"1. Complete loss of sight of both eyes; that the designated number of months of compensability bears to
seventy-five (75), rounded to the next higher integer, shall not be
"2. Loss of two limbs at or above the ankle or wrists; additive for distinct, separate and unrelated permanent partial
disabilities, but shall be additive for deteriorating and related
permanent partial disabilities to a maximum of one hundred percent
"3. Permanent complete paralysis of two limbs;
(100%), in which case, the member shall be deemed as permanently
totally disabled.
"4. Brain injury resulting to incurable imbecility or insanity; and
"(h) In case of permanent partial disability, the monthly pension benefit
"5. Such cases as determined and approved by the SSS. shall be given in lump sum if it is payable for less than twelve (12)
months.

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"(i) For the purpose of adjudicating retirement, death and permanent
total disability pension benefits, contributions shall be deemed paid for
the months during which the member received partial disability
pension: Provided, That such contributions shall be based on his last
contribution prior to his disability.
"(j) Should a member who is on partial disability pension retire or die,
his disability pension shall cease upon his retirement or death.
"SEC. 13-B. Funeral Benefit. - A funeral grant equivalent to Twelve
thousand pesos (P12,000.00) shall be paid, in cash or in kind, to help
defray the cost of funeral expenses upon the death of a member,
including permanently totally disabled member or retiree.
"SEC. 14. Sickness Benefit. - (a) A member who has paid at least three
(3) monthly contributions in the twelve-month period immediately
preceding the semester of sickness or injury and is confined therefor
for more than three (3) days in a hospital or elsewhere with the
approval of the SSS, shall, for each day of compensable confinement
or a fraction thereof, be paid by his employer, or the SSS, if such
person is unemployed or self-employed, a daily sickness benefit
equivalent to ninety percent (90%) of his average daily salary credit,
subject to the following conditions:
"(1) In no case shall the daily sickness benefit be paid longer than one
hundred twenty (120) days in one (1) calendar year, nor shall any
unused portion of the one hundred twenty (120) days of sickness
benefit granted under this section be carried forward and added to the
total number of compensable days allowable in the subsequent year;
"(2) The daily sickness benefit shall not be paid for more than two
hundred forty (240) days on account of the same confinement; and
"(3) The employee member shall notify his employer of the fact of his
sickness or injury within five (5) calendar days after the start of his
confinement unless such confinement is in a hospital or the employee
became sick or was injured while working or within the premises of the
employer in which case, notification to the employer is necessary:
Provided, That if the member is unemployed or self-employed, he shall
directly notify the SSS of his confinement within five (5) calendar days
after the start thereof unless such confinement is in a hospital in which
case notification is also not necessary: Provided, further, That in cases
where notification is necessary, the confinement shall be deemed to
have started not earlier than the fifth day immediately preceding the
date of notification.
"(b) The compensable confinement shall begin on the first day of
sickness, and the payment of such allowances shall be promptly made
by the employer every regular payday or on the fifteenth and last day of
each month, and similarly in the case of direct payment by the SSS, for
as long as such allowances are due and payable: Provided, That such
allowance shall begin only after all sick leaves of absence with full pay
to the credit of the employee member shall have been exhausted.
"(c) One hundred percent (100%) of the daily benefits Provided in the
preceding paragraph shall be reimbursed by the SSS to said employer
upon receipt of satisfactory proof of such payment and legality thereof:
Provided, That the employer has notified the SSS of the confinement
within five (5) calendar days after receipt of the notification from the
employee member: Provided, further, That if the notification to the SSS
is made by the employer beyond five (5) calendar days after receipt of
the notification from the employee member, said employer shall be
reimbursed only for each day of confinement starting from the tenth
calendar day immediately preceding the date of notification to the SSS:
Provided, finally, That the SSS shall reimburse the employer or pay the
unemployed member only for confinement within the one-year period
immediately preceding the date the claim for benefit or reimbursement
is received by the SSS, except confinement in a hospital in which case
the claim for benefit or reimbursement must be filed within one (1) year
from the last day of confinement.
"(d) Where the employee member has given the required notification
but the employer fails to notify the SSS of the confinement or to file the
claim for reimbursement within the period prescribed in this section
resulting in the reduction of the benefit or denial of the claim, such
employer shall have no right to recover the corresponding daily
allowance he advanced to the employee member as required in this
section.
"(e)The claim of reimbursement shall be adjudicated by the SSS within
a period of two (2) months from receipt thereof: Provided, That should
no payment be received by the employer within one (1) month after the
period prescribed herein for adjudication, the reimbursement shall
thereafter earn simple interest of one percent (1%) per month until
paid.
"(f) The provisions regarding the notification required of the member
and the employer as well as the period within which the claim for
benefit or reimbursement may be filed shall apply to all claims filed with
the SSS.
"SEC. 14-A. Maternity Leave Benefit. - A female member who has paid
at least three (3) monthly contributions in the twelve-month period
immediately preceding the semester of her childbirth or miscarriage
shall be paid a daily maternity benefit equivalent to one hundred
percent (100%) of her average daily salary credit for sixty (60) days or
8
seventy-eight (78) days in case of caesarian delivery, subject to the
following conditions:
"(a) That the employee shall have notified her employer of her
pregnancy and the probable date of her childbirth, which notice shall be
transmitted to the SSS in accordance with the rules and regulations it
may provide;
"(b) The full payment shall be advanced by the employer within thirty
(30) days from the filing of the maternity leave application;
"(c) That payment of daily maternity benefits shall be a bar to the
recovery of sickness benefits Provided by this Act for the same period
for which daily maternity benefits have been received;
"(d) That the maternity benefits Provided under this section shall be
paid only for the first four (4) deliveries or miscarriages;
"(e) That the SSS shall immediately reimburse the employer of one
hundred percent (100%) of the amount of maternity benefits advanced
to the employee by the employer upon receipt of satisfactory proof of
such payment and legality thereof; and
"(f) That if an employee member should give birth or suffer miscarriage
without the required contributions having been remitted for her by her
employer to the SSS, or without the latter having been previously
notified by the employer of the time of the pregnancy, the employer
shall pay to the SSS damages equivalent to the benefits which said
employee member would otherwise have been entitled to.
"SEC. 15. Non-Transferability of Benefits. - The SSS shall promptly pay
the benefits Provided in this Act to such persons as may be entitled
thereto in accordance with the provisions of this Act: Provided, That the
SSS shall pay the retirement benefits on the day of contingency to
qualified members who have submitted the necessary documents at
least six (6) months before: Provided, further, That the beneficiary who
is a national of a foreign country which does not extend benefits to a
Filipino beneficiary residing in the Philippines, or which is not
recognized by the Philippines, shall not be entitled to receive any
benefit under this Act: Provided, further, That notwithstanding the
foregoing, where the best interest of the SSS will be served, the
Commission may direct payments without regard to nationality or
country of residence: Provided, further, That if the recipient is a minor
or a person incapable of administering his own affairs, the Commission
shall appoint a representative under such terms and conditions as it
may deem proper: Provided, further, That such appointment shall not
be necessary in case the recipient is under the custody of or living with
the parents or spouse of the member in which case the benefits shall
be paid to such parents or spouse, as representative payee of the
recipient. Such benefits are not transferable and no power of attorney
or other document executed by those entitled thereto in favor of any
agent, attorney or any other person for the collection thereof on their
behalf shall be recognized, except when they are physically unable to
collect personally such benefits: Provided, further, That in case of
death benefits, if no beneficiary qualifies under this Act, said benefits
shall be paid to the legal heirs in accordance with the law of
succession.
"SEC. 16. Exemption from Tax, Legal Process and Lien. -- All laws to
the contrary notwithstanding, the SSS and all its assets and properties,
all contributions collected and all accruals thereto and income or
investment earnings therefrom as well as all supplies, equipment,
papers or documents shall be exempt from any tax, assessment, fee,
charge, or customs or import duty; and all benefit payments made by
the SSS shall likewise be exempt from all kinds of taxes, fees or
charges, and shall not liable to attachments, garnishments, levy or
seizure by or under any legal or equitable process whatsoever, either
before or after receipt by the person or persons entitled thereto, except
to pay any debt of the member to the SSS. No tax measure of
whatever nature enacted shall apply to the SSS, unless it expressly
revokes the declared policy of the State in Section 2 hereof granting
tax-exemption to the SSS. Any tax assessment imposed against the
SSS shall be null and void. (As amended by Sec. 9, P.D. No. 24, S.
1972; and Sec. 14, P. D. No. 735, S. 1975).
"SEC. 17. Fee of Agents, Attorneys, Etc. - No agent, attorney or other
person in charge of the preparation, filing or pursuing any claim for
benefit under this Act shall demand or charge for his services any fee,
and any stipulation to the contrary shall be null and void. The retention
or deduction of any amount from any benefit granted under this Act for
the payment of fees for such services is prohibited: Provided, however,
That any member of the Philippine Bar who appears as counsel in any
case heard by the Commission shall be entitled to attorneys' fees not
exceeding ten percent (10%) of the benefits awarded by the
Commission, which fees shall not be payable before the actual
payment of the benefits, and any stipulation to the contrary shall be null
and void.
"Any violation of the provisions of this Section shall be punished by a
fine of not less than Five hundred pesos (P500.00) nor more than Five
thousand pesos (P5,000.00), or imprisonment for not less than six (6)
months nor more than one (1) year, or both, at the discretion of the
court.
"SEC. 18. Employee's Contributions. - (a) Beginning as of the last day
of the calendar month when an employee's compulsory coverage takes
effect and every month thereafter during his employment, the employer
9
shall deduct and withhold from such employee's monthly salary, wage, contribution in accordance with the schedule indicated in Section
compensation or earnings, the employee's contribution in an amount Eighteen of this Act. Notwithstanding any contract to the contrary, an
corresponding to his salary, wage, compensation or earnings during employer shall not deduct, directly or indirectly, from the compensation
the month in accordance with the following schedule: of his employees covered by the SSS or otherwise recover from them
the employer's contributions with respect to such employees.
SALARY RANGE OF MONTHLY MONTHLY CONTRIBUTION
BRACKET COMPENSATION SALARY EMPLOYER EMPLOYEE "(b) The remittance of such contributions by the employer shall be
TOTAL
CREDIT supported by a quarterly collection list to be submitted to the SSS at
the end of each calendar quarter indicating the correct ID number of
I 1,000.00 - 1,249.99 1000 50.70 33.30 84.00
the employer, the correct names and the SSS numbers of the
II 1,250.00 - 1,749.99 1500 76.00 50.00 126.00 and the total contributions paid for their account during the
employees
III 1,750.00 - 2,249.99 2000 101.30 66.70 quarter.
168.00
IV 2,250.00 - 2,749.99 2500 126.70 83.30 210.00
V 2,750.00 - 3,249.99 3000 152.00 100.00 "SEC.
252.00 19-A. Contributions of the Self-Employed Member. - The
contributions to the SSS of the self-employed member shall be
VI 3,250.00 - 3,749.99 3500 177.30 116.70 294.00
determined in accordance with Section Eighteen of this Act: Provided,
VII 3,750.00 - 4,249.99 4000 202.70 133.30 336.00
That the monthly earnings declared by the self-employed member at
VIII 4,250.00 - 4,749.99 4500 228.00 150.00 the378.00
time of his registration with the SSS shall be considered as his
IX 4,750.00 - 5,249.99 5000 253.30 166.70 monthly
420.00compensation and he shall pay both the employer and the
employee contributions: Provided, further, That the contributions of
X 5,250.00 - 5,749.99 5500 278.70 183.70 462.40
self-employed persons earning One thousand pesos (P1,000.00)
XI 5,750.00 - 6,249.99 6000 304.00 200.00 504.00or below may be reduced by the Commission.
monthly
XII 6,250.00 - 6,749.99 6500 329.30 216.78 546.00
XIII 6,750.00 - 7,249.99 7000 354.70 233.30 "The monthly earnings declared by the self-employed member at the
588.00
time of his registration shall remain the basis of his monthly salary
XIV 7,250.00 - 7,749.99 7500 380.00 250.00 630.00
credit, unless he makes another declaration of his monthly earnings, in
XV 7,750.00 - 8.249.99 8000 403.30 266.70 672.00
which case such latest declaration becomes the new basis of his
XVI 8,250.00 - 8,749.99 8500 430.70 283.30 monthly
714.00salary credit.
XVII 8,750.00 - OVER 9000 456.00 300.00 756.00
"SEC. 20. Government Contribution. - As the contribution of the
Government to the operation of the SSS, Congress shall annually
"The foregoing schedule of contribution shall also apply to self-
appropriate out of any funds in the National Treasury not otherwise
employed and voluntary members.
appropriated, the necessary sum or sums to meet the estimated
expenses of the SSS for each ensuing year. In addition to this
"The maximum monthly salary credit shall be Nine thousand pesos contribution, Congress shall appropriate from time to time such sum or
(P9,000.00) effective January Nineteen hundred and ninety six (1996); sums as may be needed to assure the maintenance of an adequate
Provided, That it shall be increased by One thousand pesos working balance of the funds of the SSS as disclosed by suitable
(P1,000.00) every year thereafter until it shall have reached Twelve periodic actuarial studies to be made of the operations of the SSS.
thousand pesos (P12,000.00) by Nineteen hundred and ninety nine
(1999): Provided, further, That the minimum and maximum monthly
"SEC. 21. Government Guarantee. -- The benefits prescribed in this
salary credits as well as the rate of contributions may be fixed from
Act shall not be diminished and to guarantee said benefits the
time to time by the Commission through rules and regulations taking
Government of the Republic of the Philippines accepts general
into consideration actuarial calculations and rate of benefits, subject to
responsibility for the solvency of the SSS.
the approval of the President of the Philippines.

"SEC. 22. Remittance of Contributions. -- (a) The contributions

"SEC. 19. Employer's Contributions. - (a) Beginning as of the last day
imposed in the preceding Section shall be remitted to the SSS within
of the month when an employee's compulsory coverage takes effect
the first ten (10) days of each calendar month following the month for
and every month thereafter during his employment, his employer shall
which they are applicable or within such time as the Commission may
pay, with respect to such covered employee, the employer's
10
prescribe. Every employer required to deduct and to remit such
contributions shall be liable for their payment and if any contribution is
not paid to the SSS as herein prescribed, he shall pay besides the
contribution a penalty thereon of three percent (3%) per month from the
date the contribution falls due until paid. If deemed expedient and
advisable by the Commission, the collection and remittance of
contributions shall be made quarterly or semi-annually in advance, the
contributions payable by the employees to be advanced by their
respective employers: Provided, That upon separation of an employee,
any contribution so paid in advance but not due shall be credited or
refunded to his employer.
"(b) The contributions payable under this Act in cases where an
employer refuses or neglects to pay the same shall be collected by the
SSS in the same manner as taxes are made collectible under the
National Internal Revenue Code, as amended. Failure or refusal of the
employer to pay or remit the contributions herein prescribed shall not
prejudice the right of the covered employee to the benefits of the
coverage.
"The right to institute the necessary action against the employer may
be commenced within twenty (20) years from the time the delinquency
is known or the assessment is made by the SSS, or from the time the
benefit accrues, as the case may be.
"(c) Should any person, natural or juridical, default in any payment of
contributions, the Commission may also collect the same in either of
the following ways:
"1. By an action in court, which shall hear and dispose of the
case in preference to any other civil action; or
"2. By issuing a warrant to the Sheriff of any province or city
commanding him to levy upon and sell any real and personal
property of the debtor. The Sheriff's sale by virtue of said
warrant shall be governed by the same procedure prescribed
for executions against property upon judgments by a court of
record.
"(d) The last complete record of monthly contributions paid by the
employer or the average of the monthly contributions paid during the
past three (3) years as of the date of filing of the action for collection
shall be presumed to be the monthly contributions payable by and due
from the employer to the SSS for each of the unpaid month, unless
contradicted and overcome by other evidence: Provided, That the SSS
shall not be barred from determining and collecting the true and correct
contributions due the SSS even after full payment pursuant to this
paragraph, nor shall the employer be relieved of his liability under
Section Twenty-eight of this Act.
"SEC. 22-A. Remittance of Contributions of Self-Employed Member. -
Self-employed members shall remit their monthly contributions
quarterly on such dates and schedules as the Commission may specify
through rules and regulations: Provided, That no retroactive payment of
contributions shall be allowed, except as Provided in this Section.
"SEC. 23. Method of Collection and Payment. - The SSS shall require
a complete and proper collection and payment of contributions and
proper identification of the employer and the employee. Payment may
be made in cash, checks, stamps, coupons, tickets, or other
reasonable devices that the Commission may adopt.
"SEC. 24. Employment Records and Reports. - (a) Each employer shall
immediately report to the SSS the names, ages, civil status,
occupations, salaries and dependents of all his employees who are
subject to compulsory coverage: Provided, That if an employee subject
to compulsory coverage should die or become sick or disabled or reach
the age of sixty (60) without the SSS having previously received any
report or written communication about him from his employer, the said
employer shall pay to the SSS damages equivalent to the benefits to
which said employee member would have been entitled had his name
been reported on time by the employer to the SSS, except that in case
of pension benefits, the employer shall be liable to pay the SSS
damages equivalent to the accumulated pension due as of the date of
settlement of the claim or to the five (5) years' pension, including
dependents' pension: Provided, further, That if the contingency occurs
within thirty (30) days from the date of employment, the employer shall
be relieved of his liability for damages: Provided, further, That any
person or entity engaging the services of an independent contractor
shall be subsidiarily liable with such contractor for any civil liability
incurred by the latter under this Act: Provided, finally, That the same
person or entity engaging the services of an independent contractor
shall require such contractor to post a surety bond to guarantee the
payment of the worker's benefits.
"(b) Should the employer misrepresent the true date of employment of
the employee member or remit to the SSS contributions which are less
than those required in this Act or fail to remit any contribution due prior
to the date of contingency, resulting in a reduction of benefits, the
employer shall pay to the SSS damages equivalent to the difference
between the amount of benefit to which the employee member or his
beneficiary is entitled had the proper contributions been remitted to the
SSS and the amount payable on the basis of contributions actually
remitted: Provided, That if the employee member or his beneficiary is
entitled to pension benefits, damages shall be equivalent to the
accumulated pension due as of the date of settlement of the claim or to
11
the five (5) years' pension, whichever is higher, including dependents'
pension.
"In addition to the liability mentioned in the preceding paragraphs (a)
and (b) hereof, the employer shall also be liable for the corresponding
unremitted contributions and penalties thereon.
"(c) The records and reports duly accomplished and submitted to the
SSS by the employer or the member, as the case may be, shall be kept
confidential by the SSS except in compliance with a subpoena duces
tecum issued by the Court, shall not be divulged without the consent of
the SSS President or any official of the SSS duly authorized by him,
shall be presumed correct as to the data and other matters stated
therein, unless the necessary corrections to such records and reports
have been properly made by the parties concerned before the right to
the benefit being claimed accrues, and shall be made the basis for the
adjudication of the claim. If as a result of such adjudication the SSS in
good faith pays a monthly pension to a beneficiary who is inferior in
right to another beneficiary or with whom another beneficiary is entitled
to share, such payments shall discharge the SSS from liability unless
and until such other beneficiary notifies the SSS of his claim prior to the
payments.
"(d) Every employer shall keep true and accurate work records for such
period and containing such information as the Commission may
prescribe, in addition to an "Annual Register of New and Separated
Employees" which shall be secured from the SSS wherein the
employer shall enter on the first day of employment or on the effective
date of separation, the names of the persons employed or separated
from employment, their SSS numbers, and such other data that the
Commission may require and said annual register shall be submitted to
the SSS in the month of January of each year. Such records shall be
open for inspection by the SSS or its authorized representatives
quarterly or as often as the SSS may require.
"The SSS may also require each employer to submit, with respect to
the persons in his employ, reports needed for the effective
administration of this Act.
"(e) Each employer shall require, as a condition to employment, the
presentation of a registration number secured by the prospective
employee from the SSS in accordance with such procedure as the SSS
may adopt: Provided, That in case of employees who have been
assigned registration numbers by virtue of a previous employment,
such numbers originally assigned to them should be used for purposes
of this Section: Provided, further, That the issuance of such registration
numbers by the SSS shall not exempt the employer from complying
with the provisions of paragraph (a) of this Section.
"(f) Notwithstanding any law to the contrary, microfilm, or non-erasable
optical disk and other similar archival media copies of original SSS
records and reports, duly certified by the official custodian thereof, shall
have the same evidentiary value as the originals and be admissible as
evidence in all legal proceedings.
"(g) Notwithstanding any law to the contrary, local government units
shall, prior to issuing any annual business license or permit, require
submission of certificate of SSS coverage and compliance with the
provisions of this Act: Provided, That the certification or clearance shall
be issued by the SSS within five (5) working days from receipt of the
request.
"SEC. 24-A. Report and Registration of the Self-Employed Member. -
Each covered self-employed person shall, within thirty (30) days from
the first day he started the practice of his profession or business
operations register and report to the SSS his name, age, civil status,
and occupation, average monthly net income and his dependents.
"SEC. 25. Deposits and Disbursements. - All money paid to or
collected by the SSS every year under this Act, and all accruals thereto
shall be deposited, administered and disbursed in the same manner
and under the same conditions and requirements as Provided by law
for other public special funds: Provided, That not more than twelve
percent (12%) of the total yearly contributions plus three percent (3%)
of other revenues shall be disbursed for operational expenses such as
salaries and wages, supplies and materials, depreciation and the
maintenance of offices of the SSS: Provided, further, That if the
expenses in any year are less than the maximum amount permissible,
the difference shall not be availed of as additional expenses in the
following years.
"SEC. 26. Investment of Reserve Funds. - All revenues of the SSS that
are not needed to meet the current administrative and operational
expenses incidental to the carrying out of this Act shall be accumulated
in a fund to be known as the "Reserve Fund." Such portions of the
Reserve Fund as are not needed to meet the current benefit
obligations thereof shall be known as the "Investment Reserve Fund"
which the Commission shall manage and invest with the skill, care,
prudence and diligence necessary under the circumstances then
prevailing that a prudent man acting in like capacity and familiar with
such matters would exercise in the conduct of an enterprise of a like
character and with similar aims. Pursuant thereto, and in line with the
basic principles of safety, good yield and liquidity, the Commission
shall invest the funds to earn an annual income not less than the
average rates of treasury bills or any other acceptable market yield
indicator in any or in all of the following:
12
"(a) In bonds, securities, promissory notes or other evidence of
indebtedness of the Government of the Philippines, or in bonds,
securities, promissory notes or other evidence of indebtedness to
which the full faith, credit and unconditional guarantee of the
Government of the Philippines is pledged;
"(b) In bonds, securities, promissory notes or other evidence of
indebtedness of the Government of the Philippines, or any agencies or
instrumentalities to finance domestic infrastructure projects such as
roads, bridges, ports, telecommunications, and other similar projects:
Provided, That the instruments issued by an agency or instrumentality
of the government shall be guaranteed by the Government of the
Philippines or any government financial institution or acceptable
multilateral agency: Provided, further, That the SSS shall have priority
over the revenues of the projects: Provided, finally, That such
investments shall not exceed thirty percent (30%) of the Investment
Reserve Fund;
"(c) In bonds, securities, promissory notes or other evidence of
indebtedness of government financial institutions or government
corporations with acceptable credit or guarantee: Provided, That such
investments shall not exceed thirty percent (30%) of the Investment
Reserve Fund;
"(d) In bonds, securities, promissory notes or other evidence of
indebtedness of any bank doing business in the Philippines and in
good standing with the Bangko Sentral ng Pilipinas to finance loans to
private corporations doing business in the Philippines, including
schools, hospitals, small-and-medium scale industries, cooperatives
and non-governmental organizations, in which case the collaterals or
securities shall be assigned to the SSS under such terms and
conditions as the Commission may prescribe: Provided, That in the
case of bank deposits, they shall not exceed at any time the
unimpaired capital and surplus or total private deposits of the
depository bank, whichever is smaller: Provided, further, That said
bank shall first have been designated as a depository for this purpose
by the Monetary Board of the Bangko Sentral ng Pilipinas: Provided,
finally, That such investments shall not exceed forty percent (40%) of
the Investment Reserve Fund;
"(e) In bonds, securities, promissory notes or other evidence of
indebtedness of shelter agencies of the National Government or
financial intermediaries to finance housing loans of members; and in
long-term direct individual or group housing loans giving priority to the
low-income groups, up to a maximum of ninety percent (90%) of the
appraised value of the properties to be mortgaged by the borrowers;
and
"In short and medium term loans to members such as salary,
educational, livelihood, marital, calamity and emergency loans:
Provided, That not more than thirty five percent (35%) of the
Investment Reserve Fund at any time shall be invested for housing
purposes: Provided, further, That not more than ten percent (10%) of
the Investment Reserve Fund shall be invested in short and medium
term loans;
"(f) In bonds, securities, promissory notes or other evidence of
indebtedness of educational or medical institutions to finance the
construction, improvement and maintenance of schools and hospitals
and their equipment and facilities: Provided, That such investments
shall not exceed ten percent (10%) of the Investment Reserve Fund;
"(g) In real estate property, including shares of stocks involving real
estate property, and investment secured by first mortgages on real
estate or other collaterals acceptable to the SSS: Provided, That such
projects and investments shall, in the determination of the Commission,
redound to the benefit of the SSS, its members, as well as the general
public: Provided, further, That investment in real estate property,
including shares of stocks involving real estate property shall not
exceed five percent (5%) of the Investment Reserve Fund: Provided,
finally, That investments in other income earning projects and
investments secured by first mortgages or other collaterals shall not
exceed twenty five percent (25%) of the Investment Reserve Fund;
"(h) In bonds, debentures, securities, promissory notes or other
evidence of indebtedness of any prime corporation or multilateral
institutions to finance domestic projects: Provided, That the issuing or
assuming entity or its predecessors shall not have defaulted in the
payment of interest on any of its securities and that during each of any
three (3) including the last two (2) of the five (5) fiscal years next
preceding the date of acquisition by the SSS of such bonds,
debentures or other evidence of indebtedness, the net earnings of the
issuing or assuming institution available for its fixed charges, as
defined in this Act, shall have been not less than one and one-quarter
times the total of its fixed charges for such year: Provided, further, That
such investments shall not exceed thirty percent (30%) of the
Investment Reserve Fund;
"(i) In preferred or common shares of stocks listed or about to be listed
in the stock exchange or options or warrants to such stocks or, subject
to prior approval of the Bangko Sentral ng Pilipinas, such other risk
management instruments of any prime or solvent corporation or
financial institution created or existing under the laws of the Philippines
with proven track record of profitability over the last three (3) years and
payment of dividends at least once over the same period: Provided,
That such investments shall not exceed thirty percent (30%) of the
Investment Reserve Fund;
13
"(j) In domestic or foreign mutual funds in existence for at least three
(3) years; Provided, That such investments shall not exceed twenty
percent (20%) of the Investment Reserve Fund: Provided, further, That
investments in foreign mutual funds shall not exceed one percent (1%)
of the Investment Reserve Fund in the first year which shall be
increased by one percent (1%) for each succeeding year, but in no
case shall it exceed seven and one-half percent (7.5%) of the
Investment Reserve Fund;
"(k) In foreign currency deposits or triple "A" foreign currency
denominated debts, prime and non-speculative equities, and other
Bangko Sentral ng Pilipinas approved financial instruments or other
assets issued in accordance with the existing laws of the countries
where such financial instruments are issued: Provided, That these
instruments or assets are listed in bourses of the respective countries
where these instruments or assets are issued: Provided, further, That
the issuing company has proven track of record of profitability over the
last three (3) years and a record of regular dividend pay-out over the
same period: Provided, finally, That such investments shall not exceed
one percent (1%) of the Investment Reserve Fund in the first year
which shall be increased by one percent (1%) for each succeeding
year, but in no case shall it exceed seven and one-half percent (7.5%)
of the Investment Reserve Fund;
"(l) In loans secured by such collaterals like cash, government
securities or guarantees of multilateral institutions: Provided, That such
investments shall not exceed thirty percent (30%) of the Investment
Reserve Fund; and
"(m) In other Bangko Sentral ng Pilipinas approved investment
instruments with the same intrinsic quality as those enumerated in
paragraphs (a) to (l) hereof, subject to the policies and guidelines
which the Commission may formulate.
"No portion of the Investment Reserve Fund or income thereof shall
accrue to the general fund of the National Government or to any of its
agencies or instrumentalities, including government-owned or
controlled corporations, except as may be allowed under this Act:
Provided, That no portion of the Investment Reserve Fund shall be
invested for any purpose or in any instrument, institution or industry
over and above the prescribed cumulative ceilings as follows:
40% in private securities
35% in housing
30% in real estate related investments
10% in short and medium-term member loans
30% in government financial institutions and corporations
30% in infrastructure projects
15% in any particular industry
7.5% in foreign-currency denominated investments
"SEC. 26-A. Fund Managers. - As part of its investment operations, the
SSS may appoint local or, in the absence thereof, foreign fund
managers to manage the Investment Reserve Fund, as it may deem
appropriate.
"SEC. 26-B. Mortgagor Insurance Account. - (a) As part of its
investment operations, the SSS shall act as insurer of all or part of its
interest on SSS properties mortgaged to the SSS, or lives of
mortgagors whose properties are mortgaged to the SSS. For this
purpose, the SSS shall establish a separate account to be known as
the "Mortgagors' Insurance Account." All amounts received by the SSS
in connection with the aforesaid insurance operations shall be placed in
the Mortgagors' Insurance Account. The assets and liabilities of the
Mortgagors' Insurance Account shall at all times be clearly identifiable
and distinguishable from the assets and liabilities in all other accounts
of the SSS. Notwithstanding any provision of law to the contrary, the
assets held in the Mortgagors' Insurance Account shall not be
chargeable with the liabilities arising out of any other business the SSS
may conduct but shall be held and applied exclusively for the benefit of
the owners or beneficiaries of the insurance contracts issued by the
SSS under this paragraph.
"(b) The SSS may insure any of its interest or part thereof with any
private company or reinsurer. The Insurance Commission or its
authorized representatives shall make an examination into the financial
condition and methods of transacting business of the SSS at least once
in two (2) years, but such examination shall be limited to the insurance
operation of the SSS as authorized under this paragraph and shall not
embrace the other operations of the SSS; and the report of said
examination shall be submitted to the Commission and a copy thereof
shall be furnished the Office of the President of the Philippines within a
reasonable time after the close of the examination: Provided, That for
each examination, the SSS shall pay to the Insurance Commission an
amount equal to the actual expense of the Insurance Commission in
the conduct of examination, including the salaries of the examiners and
of the actuary of the Insurance Commission who have been assigned
to make such examination for the actual time spent in said
examination: Provided, further, That the general law on insurance and
14
the rules and regulations promulgated thereunder shall have suppletory
application insofar as it is not in conflict with this Act and its rules and
regulations.
"SEC. 27. Records and Reports. - The SSS President shall keep and
cause to keep records of operations of the funds of the SSS and of
disbursements thereof and all accounts of payments made out of said
funds. During the month of January of each year, the SSS President
shall prepare for submission to the President of the Philippines and to
Congress of the Philippines a report of operations of the SSS during
the preceding year, including statistical data on the number of persons
covered and benefited, their occupations and employment status, the
duration and amount of benefits paid, the finances of the SSS at the
close of the said year, and recommendations. He shall also cause to
be published in two (2) newspapers of general circulation in the
Philippines a synopsis of the annual report, showing in particular the
status of the finances of the SSS and the benefits administered.
"SEC. 28. Penal Clause. - (a) Whoever, for the purpose of causing any
payment to be made under this Act, or under an agreement
thereunder, where none is authorized to be paid, shall make or cause
to be made false statement or representation as to any compensation
paid or received or whoever makes or causes to be made any false
statement of a material fact in any claim for any benefit payable under
this Act, or application for loan with the SSS, or whoever makes or
causes to be made any false statement, representation, affidavit or
document in connection with such claim or loan, shall suffer the
penalties Provided for in Article One hundred seventy-two of the
Revised Penal Code.
"(b) Whoever shall obtain or receive any money or check under this Act
or any agreement thereunder, without being entitled thereto with intent
to defraud any member, employer or the SSS, shall be fined not less
than Five thousand pesos (P5,000.00) nor more than Twenty thousand
pesos (P20,000.00) and imprisoned for not less than six (6) years and
one (1) day nor more than twelve (12) years.
"(c) Whoever buys, sells, offers for sale, uses, transfers or takes or
gives in exchange, or pledges or gives in pledge, except as authorized
in this Act or in regulations made pursuant thereto, any stamp, coupon,
ticket, book or other device, prescribed pursuant to Section Twenty-
three hereof by the Commission for the collection or payment of
contributions required herein, shall be fined not less than Five
thousand pesos (P5,000.00) nor more than Twenty thousand pesos
(P20,000.00), or imprisoned for not less than six (6) years and one (1)
day nor more than twelve (12) years, or both, at the discretion of the
court.
"(d) Whoever, with intent to defraud, alters, forges, makes or
counterfeits any stamp, coupon, ticket, book or other device prescribed
by the Commission for the collection or payment of any contribution
required herein, or uses, sells, lends, or has in his possession any such
altered, forged or counterfeited materials, or makes, uses, sells or has
in his possession any such altered, forged, material in imitation of the
material used in the manufacture of such stamp, coupon, ticket, book
or other device, shall be fined not less than Five thousand pesos
(P5,000.00) non more than Twenty thousand pesos (P20,000.00) or
imprisoned for not less than six years (6) and one (1) day nor more
than twelve (12) years, or both, at the discretion of the court.
"(e) Whoever fails or refuses to comply with the provisions of this Act or
with the rules and regulations promulgated by the Commission, shall
be punished by a fine of not less than Five thousand pesos (P5,000.00)
nor more than Twenty thousand pesos (P20,000.00), or imprisonment
for not less than six (6) years and one (1) day nor more than twelve
(12) years, or both, at the discretion of the court: Provided, That where
the violation consists in failure or refusal to register employees or
himself, in case of the covered self-employed or to deduct contributions
from the employees' compensation and remit the same to the SSS, the
penalty shall be a fine of not less Five thousand pesos (P5,000.00) nor
more than Twenty thousand pesos (P20,000.00) and imprisonment for
not less than six (6) years and one (1) day nor more than twelve (12)
years.
"(f) If the act or omission penalized by this Act be committed by an
association, partnership, corporation or any other institution, its
managing head, directors or partners shall be liable for the penalties
Provided in this Act for the offense.
"(g) Any employee of the SSS who receives or keeps funds or property
belonging, payable or deliverable to the SSS and who shall appropriate
the same, or shall take or misappropriate, or shall consent, or through
abandonment or negligence, shall permit any other person to take such
property or funds, wholly or partially, or shall otherwise be guilty of
misappropriation of such funds or property, shall suffer the penalties
Provided in Article Two hundred seventeen of the Revised Penal Code.
"(h) Any employer who, after deducting the monthly contributions or
loan amortizations from his employee's compensation, fails to remit the
said deduction to the SSS within thirty (30) days from the date they
became due, shall be presumed to have misappropriated such
contributions or loan amortizations and shall suffer the penalties
Provided in Article Three hundred fifteen of the Revised Penal Code.
"(i) Criminal action arising from a violation of the provisions of this Act
may be commenced by the SSS or the employee concerned either
under this Act or in appropriate cases under the Revised Penal Code:
15
 Provided, That such criminal action may be filed by the SSS in the city
or municipality where the SSS office is located, if the violation was
committed within its territorial jurisdiction or in Metro Manila, at the
option of the SSS.

"SEC. 29. Government Aid. - The establishment of the SSS shall not
disqualify the members and employers from receiving such
government assistance, financial or otherwise, as may be Provided.

"SEC. 30. Transitory Clause. - Any employer who is delinquent or has

not remitted all contributions due and payable to the SSS may, within
six (6) months from the effectivity of this Act, remit said contributions or
submit a proposal to pay the same in installment within a period of not
more than twelve (12) months from the effectivity of this Act without
incurring the prescribed penalty, subject to the implementing rules and
regulations which the Commission may prescribe: Provided, That the
employer submits the corresponding collection lists together with the
remittance or proposal to pay in installments: Provided, further, That in
case the employer fails to remit contributions within the six-month
grace period or defaults in the payment of any amortization Provided
the approved proposal, the prescribed penalty shall be imposed from
the time the contributions first became due as Provided in Section 22
(a) hereof."

Section 2. Separability Clause. - If any provision of this Act is declared invalid, the other
provisions not affected thereby shall remain valid.

Section 3. Repealing Clause. - All laws, proclamations, executive orders, rules and
regulations or parts thereof inconsistent with this Act are hereby repealed, modified or
amended accordingly: Provided, That no person shall be deemed to be vested with any
property or other right by virtue of the enactment or operation of this Act.

Section 4. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least two (2) national newspapers of
general circulation whichever comes earlier.

Approved: May 01, 1997

16
Republic Act No. 8291 May 30, 1997
AN ACT AMENDING PRESIDENTIAL DECREE NO. 1146, AS AMENDED, EXPANDING
AND INCREASING THE COVERAGE AND BENEFITS OF THE GOVERNMENT
SERVICE INSURANCE SYSTEM, INSTITUTING REFORMS THEREIN AND FOR
OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled::
Section 1. Presidential Decree No. 1146, as amended, otherwise known as the "Revised
Government Service Insurance Act of 1977", is hereby further amended to read as
follows:
"SECTION 1. Title. - The title of this Act shall be: "The Government Service Insurance
System Act of 1997."
"A. DEFINITIONS
"SEC. 2. Definition of terms.- Unless the context otherwise indicates, the following terms
shall mean:
"(a) GSIS- The Government Service Insurance System created by Commonwealth Act
No. 186;
"(b) Board- The Board of Trustees of the Government Service Insurance System;
"(c) Employer- The national government, its political subdivisions, branches, agencies or
instrumentalities, including government-owned or controlled corporations, and financial
institutions with original charters, the constitutional commissions and the judiciary;
"(d) Employee or Member- Any person receiving compensation while in the service of an
employer as defined herein, whether by election or appointment, irrespective of status of
appointment, including barangay and Sanggunian officials;
"(e) Active Member- A member who is not separated from the service;
"(f) Dependents- Dependents shall be the following: (a) the legitimate spouse dependent
for support upon the member or pensioner; (b) the legitimate, legitimated, legally adopted
child, including the illegitimate child, who is unmarried, not gainfully employed, not over
the age of majority, or is over the age of majority but incapacitated and incapable of self-
support due to a mental or physical defect acquired prior to age of majority; and (c) the
parents dependent upon the member for support;
"(g) Primary beneficiaries- The legal dependent spouse until he/she remarries and the
dependent children;
"(h) Secondary beneficiaries- The dependent parents and, subject to the restrictions on
dependent children, the legitimate descendants;
"(i) Compensation- The basic pay or salary received by an employee, pursuant to his
election/appointment, excluding per diems, bonuses, overtime pay, honoraria, allowances
and any other emoluments received in addition to the basic pay which are not integrated
into the basic pay under existing laws;
"(j) Contribution- The amount payable to the GSIS by the member and the employer in
accordance with Section 5 of this Act;
"(k) Current Daily Compensation- The actual daily compensation or the actual monthly
compensation divided by the number of working days in the month of contingency but not
to exceed twenty-two (22) days;
"(l) Average Monthly Compensation (AMC)- The quotient arrived at after dividing the
aggregate compensation received by the member during his last thirty-six (36) months of
service preceding his separation/retirement/ disability/death by thirty-six (36), or by the
number of months he received such compensation if he has less than thirty-six (36)
months of service: Provided, That the average monthly compensation shall in no case
exceed the amount and rate as may be respectively set by the Board under the rules and
regulations implementing this Act as determined by the actuary of the GSIS: Provided,
further, That initially the average monthly compensation shall not exceed Ten thousand
pesos (P10,000.00), and premium shall be nine percent (9%) and twelve percent (12%)
for employee and employer covering the AMC limit and below and two percent (2%) and
twelve percent (12%) for employee and employer covering the compensation above the
AMC limit;
"(m) Revalued average monthly compensation- An amount equal to one hundred seventy
percent (170%) of the first One thousand pesos (P1,000.00) of the average monthly
compensation plus one hundred percent (100%) of the average monthly compensation in
excess of One thousand pesos (P1,000.00);
"(n) Lump sum- The basic monthly pension multiplied by sixty (60);
"(o) Pensioner- Any person receiving old-age permanent total disability pension or any
person who has received the lump sum excluding one receiving survivorship pension
benefits as defined in Section 20 of this Act;
"(p) Gainful Occupation- Any productive activity that provided the member with income at
least equal to the minimum compensation of government employees;
"(q) Disability- Any loss or impairment of the normal functions of the physical and/or
mental faculty of a member which reduces or eliminates his/her capacity to continue with
his/her current gainful occupation or engage in any other gainful occupation;
17
"(r) Total Disability- Complete incapacity to continue with his present employment or "SEC. 5. Contributions. - (a) It shall be mandatory for the member and employer to pay
engage in any gainful occupation due to the loss or impairment of the normal functions of
the physical and/or mental faculties of the member;
"Monthly Compensation Percentage of Monthly Compensation
"(s) Permanent Total Disability- Accrues or arises when recovery from the impairment Payable by
mentioned in Section 2 (Q) is medically remote;
Member Employer
"(t) Temporary Total Disability- Accrues or arises when the impaired physical and/or
mental faculties can be rehabilitated and/or restored to their normal functions;
I. Maximum Average
"(u) Permanent Partial Disability- Accrues or arises upon the irrevocable loss or Monthly Compensation
impairment of certain portion/s of the physical faculties, despite which the member is able (AMC) Limit and Below 9.0% 12.0%
to pursue a gainful occupation.
II. Over the Maximum AMC Limit
"B. MEMBERSHIP IN THE GSIS
-Up to the Maximum AMC Limit 9.0% 12.0%
"SEC. 3. Compulsory Membership. - Membership in the GSIS shall be compulsory for all
employees receiving compensation who have not reached the compulsory retirement
age, irrespective of employment status, except members of the Armed Forces of the -In Excess of the AMC Limit 2.0% 12.0%
Philippines and the Philippine National Police, subject to the condition that they must
settle first their financial obligation with the GSIS, and contractuals who have no the monthly contributions specified in the following schedule:
employer and employee relationship with the agencies they serve.
"Members of the judiciary and constitutional commissioners shall pay three percent (3%)
"Except for the members of the judiciary and constitutional commissions who shall have of their monthly compensation as personal share and their employers a corresponding
life insurance only, all members of the GSIS shall have life insurance, retirement, and all three percent (3%) share for their life insurance coverage.
other social security protections such as disability, survivorship, separation, and
"(b) The employer shall include in its annual appropriation the necessary amounts for its
unemployment benefits.
share of the contributions indicated above, plus any additional premiums that may be
"SEC. 4. Effect of Separation from the Service. - A member separated from the service required on account of the hazards or risks of its employees occupation.
shall continue to be a member, and shall be entitled to whatever benefits he has qualified
"(c) It shall be mandatory and compulsory for all employers to include the payment of
to in the event of any contingency compensable under this Act.
contributions in their annual appropriations. Penal sanctions shall be imposed upon
"C. SOURCES OF FUNDS employers who fail to include the payment of contributions in their annual appropriations
or otherwise fail to remit the accurate/exact amount of contributions on time, or delay the
remittance of premium contributions to the GSIS. The heads of offices and agencies shall
be administratively liable for non-remittance or delayed remittance of premium
contributions to the GSIS.

"SEC. 6. Collection and Remittance of Contributions. - (a) The employer shall report to
the GSIS the names of all its employees, their corresponding employment status,
positions, salaries and such other pertinent information, including subsequent changes
therein, if any, as may be required by the GSIS; the employer shall deduct each month
from the monthly salary or compensation of each employee the contribution payable by
him in accordance with the schedule prescribed in the rules and regulations implementing
this Act.

18
"(b) Each employer shall remit directly to the GSIS the employees and employers
contributions within the first ten (10) days of the calendar month following the month to
which the contributions apply. The remittance by the employer of the contribution to the
GSIS shall take priority over and above the payment of any and all obligations, except
salaries and wages of its employees.
"SEC. 7. Interest on Delayed Remittances. - Agencies which delay the remittance of any
and all monies due the GSIS shall be charged interests as may be prescribed by the
Board but not less than two percent (2%) simple interest per month. Such interest shall
be paid by the employers concerned.
"SEC. 8. Government Guarantee. - The government of the Republic of the Philippines
hereby guarantees the fulfillment of the obligations of the GSIS to its members as and
when they fall due.
"D. BENEFITS
"SEC. 9. Computation of the Basic Monthly Pension. - (a) The basic monthly pension is
equal to:
"1) thirty-seven and one-half percent (37.5%) of the revalued average monthly
compensation; plus
"2) two and one-half percent (2.5%) of said revalued average monthly compensation for
each year of service in excess of (15) years: Provided, That the basic monthly pension
shall not exceed ninety percent (90%) of the average monthly compensation.
"(b) The basic monthly pension may be adjusted upon the recommendation of the
President and General Manager of the GSIS and approved by the President of the
Philippines in accordance with the rules and regulations prescribed by the GSIS:
Provided, however, that the basic monthly pension shall not be less than One thousand
and three hundred pesos (P1,300.00): Provided, further, that the basic monthly pension
for those who have rendered at least twenty (20) years of service after the effectivity of
this Act shall not be less than Two thousand four hundred pesos (P2,400.00) a month.
"SEC. 10. Computation of Service. - (a) The computation of service for the purpose of
determining the amount of benefits payable under this Act shall be from the date of
original appointment/election, including periods of service at different times under one or
more employers, those performed overseas under the authority of the Republic of the
Philippines, and those that may be prescribed by the GSIS in coordination with the Civil
Service Commission.
"(b) All service credited for retirement, resignation or separation for which corresponding
benefits have been awarded under this Act or other laws shall be excluded in the
computation of service in case of reinstatement in the service of an employer and
subsequent retirement or separation which is compensable under this Act.
"For the purpose of this section, the term service shall include full-time service with
compensation: Provided, that part-time and other services with compensation may be
included under such rules and regulations as may be prescribed by the GSIS.
"SEPARATION BENEFITS
"SEC. 11. Separation Benefits. - The separation benefits shall consist of: (a) a cash
payment equivalent to one hundred percent (100%) of his average monthly
compensation for each year of service he paid contributions, but not less than Twelve
thousand pesos (P12,000) payable upon reaching sixty (60) years of age upon
separation, whichever comes later: Provided, that the member resigns or separates from
the service after he has rendered at least three (3) years of service but less than fifteen
(15) years; or
"(b) a cash payment equivalent to eighteen (18) times his basic monthly pension at the
time of resignation or separation, plus an old-age pension benefit equal to the basic
monthly pension payable monthly for life upon reaching the age of sixty (60): Provided,
that the member resigns or separates from the service after he has rendered at least
fifteen (15) years of service and is below sixty (60) years of age at the time of resignation
or separation.
"SEC. 12. Unemployment or Involuntary Separation Benefits. - Unemployment benefits in
the form of monthly cash payments equivalent to fifty percent (50%) of the average
monthly compensation shall be paid to a permanent employee who is involuntarily
separated from the service due to the abolition of his office or position usually resulting
from reorganization: Provided, That he has been paying integrated contributions for at
least one (1) year prior to separation. Unemployment benefits shall be paid in accordance
with the following schedules:
"Contributions Made Benefit Duration
1 year but less than 3 years 2 months
3 or more years but less than 6 years 3 months
6 or more years but less than 9 years 4 months
9 or more years but less than 11 years 5 months
11 or more years but less than 15 years 6 months
"The first payment shall be equivalent to two (2) monthly benefits. A seven-day (7)
waiting period shall be imposed on succeeding monthly payments.
19
"All accumulated unemployment benefits paid to the employee during his entire
membership with the GSIS shall be deducted from voluntary separation benefits.
"The GSIS shall prescribe the detailed guidelines in the operationalization of this section
in the rules and regulations implementing this Act.
"RETIREMENT BENEFITS
"SEC. 13. Retirement Benefits. - (a) Retirement benefits shall be:
"(1) the lump sum payment as defined in this Act payable at the time of retirement plus an
old-age pension benefit equal to the basic monthly pension payable monthly for life,
starting upon expiration of the five-year (5) guaranteed period covered by the lump sum;
or
"(2) cash payment equivalent to eighteen (18) months of his basic monthly pension plus
monthly pension for life payable immediately with no five-year (5) guarantee.
"(b) Unless the service is extended by appropriate authorities, retirement shall be
compulsory for an employee of sixty-five (65) years of age with at least fifteen (15) years
of service: Provided, That if he has less than fifteen (15) years of service, he may be
allowed to continue in the service in accordance with existing civil service rules and
regulations.
"SEC. 13-A. Conditions for Entitlement. - A member who retires from the service shall be
entitled to the retirement benefits enumerated in paragraph (a) of Section 13 hereof:
Provided, That:
(1) he has rendered at least fifteen years of service;
(2) he is at least sixty (60) years of age at the time of retirement; and
(3) he is not receiving a monthly pension benefit from permanent total disability.
"SEC. 14. Periodic Pension Adjustment. - The monthly pension of all pensioners
including all those receiving survivorship pension benefits shall be periodically adjusted
as may be recommended by the GSIS actuary and approved by the Board in accordance
with the rules and regulations prescribed by the GSIS.
"PERMANENT DISABILITY BENEFITS
"SEC. 15. General Conditions for Entitlement. - A member who suffers permanent
disability for reasons not due to his grave misconduct, notorious negligence, habitual
intoxication, or willful intention to kill himself or another, shall be entitled to the benefits
provided for under Sections 16 and 17 immediately following, subject to the
corresponding conditions thereof.
"SEC. 16. Permanent Total Disability Benefits. - (a) If the permanent disability is total, he
shall receive a monthly income benefit for life equal to the basic monthly pension
effective from the date of disability: Provided, That:
(1) he is in the service at the time of disability; or
(2) if separated from the service, he has paid at least thirty-six (36) monthly contributions
within the five (5) year period immediately preceding disability, or has paid a total of at
least one hundred eighty (180) monthly contributions, prior to his disability: Provided,
further, That if at the time of disability, he was in the service and has paid a total of at
least one hundred eighty (180) monthly contributions, in addition to the monthly income
benefit, he shall receive a cash payment equivalent to eighteen (18) times his basic
monthly pension: Provided, finally, That a member cannot enjoy the monthly income
benefit for permanent disability and the old-age retirement simultaneously.
"(b) If a member who suffers permanent total disability does not satisfy conditions (1) and
(2) in paragraph (a) of this section but has rendered at least three (3) years of service at
the time of his disability, he shall be advanced the cash payment equivalent to one
hundred percent (100%) of his average monthly compensation for each year of service
he paid contributions, but not less than Twelve thousand pesos (P12,000.00) which
should have been his separation benefit.
"(c) Unless the member has reached the minimum retirement age, disability benefit shall
be suspended when:
"(1) he is reemployed; or
"(2) he recovers from his disability as determined by the GSIS, whose decision shall be
final and binding; or
"(3) he fails to present himself for medical examination when required by the GSIS.
"(d) The following disabilities shall be deemed total and permanent:
"(1) complete loss of sight of both eyes;
"(2) loss of two (2) limbs at or above the ankle or wrist;
"(3) permanent complete paralysis of two (2) limbs;
"(4) brain injury resulting in incurable imbecility or insanity; and
"(5) such other cases as may be determined by the GSIS.
20
"SEC. 17. Permanent Partial Disability Benefits. - (a) If the disability is partial, he shall
receive a cash payment in accordance with a schedule of disabilities to be prescribed by
the GSIS: Provided, That he satisfies either conditions (1) or (2) of Section 16 (a);
"(b) The following disabilities shall be deemed permanent partial:
"(1) complete and permanent loss of the use of:
(i) any finger
(ii) any toe
(iii) one arm
(iv) one hand
(v) one foot
(vi) one leg
(vii) one or both ears
(viii) hearing of one or both ears
(ix) sight of both eyes
"(2) such other cases as my be determined by the GSIS.
"TEMPORARY DISABILITY BENEFITS
"SEC. 18. Temporary Total Disability Benefits. - (a) A member who suffers temporary
total disability for reasons not due to any of the conditions enumerated in Section 15
hereof shall be entitled to seventy-five percent (75%) of his current daily compensation
for each day or fraction thereof of temporary disability benefit not exceeding one hundred
twenty (120) days in one calendar year after exhausting all his sick leave credits and
collective bargaining agreement sick leave benefits, if any, but not earlier than the fourth
day of his temporary total disability: Provided, That:
"(1) he is in the service at the time of his disability; or
"(2) if separated, he has rendered at least three (3) years of service and has paid at least
six (6) monthly contributions in the twelve-month period immediately preceding his
disability.
"Provided, however, That a member cannot enjoy the temporary total disability benefit
and sick leave pay simultaneously: Provided, further, That if the disability requires more
extensive treatment that lasts beyond one hundred twenty (120) days, the payment of the
temporary total disability benefit may be extended by the GSIS but not to exceed a total
of two hundred forty (240) days.
"(b) The temporary total disability benefit shall in no case be less than Seventy pesos
(P70.00) a day.
"(c) The notices required of the member and the employer, the mode of payment, and the
other requirements for entitlement to temporary total disability benefits shall be provided
in the rules and regulations to be prescribed by the GSIS.
"SEC. 19. Non-scheduled Disability. - For injuries or illnesses resulting in a disability not
listed in the schedule of partial/total disability provided herein, the GSIS shall determined
the nature of the disability and the corresponding benefits therefor.
"SURVIVORSHIP BENEFITS
"SEC. 20. Survivorship Benefits. - When a member or pensioner dies, the beneficiaries
shall be entitled to survivorship benefits provided in Sections 21 and 22 hereunder
subject to the conditions therein provided for. The survivorship pension shall consist of:
(1) the basic survivorship pension which is fifty percent (50%) of the basic monthly
pension; and
(2) the dependent childrens pension not exceeding fifty percent (50%) of the basic
monthly pension
"SEC. 21. Death of a Member. - (a) Upon the death of a member, the primary
beneficiaries shall be entitled to:
(1) survivorship pension: Provided, That the deceased:
(i) was in the service at the time of his death; or
(ii) if separated from the service, has at least three (3) years of service at the time of his
death and has paid thirty-six (36) monthly contributions within the five-year period
immediately preceding his death; or has paid a total of at least one hundred eighty (180)
monthly contributions prior to his death; or
(2) the survivorship pension plus a cash payment equivalent to one hundred percent
(100%) of his average monthly compensation for every year of service: Provided, That
the deceased was in the service at the time of his death with at least three (3) years of
service; or
(3) a cash payment equivalent to one hundred percent (100%) of his average monthly
compensation for each year of service he paid contributions, but not less than Twelve
thousand pesos (P12,000.00): Provided, That the deceased has rendered at least three
21
(3) years of service prior to his death but does not qualify for the benefits under item (1)
or (2) of this paragraph.
(b) The survivorship pension shall be paid as follows:
(1) when the dependent spouse is the only survivor, he/she shall receive the basic
survivorship pension for life or until he/she remarries;
(2) when only dependent children are the survivors, they shall be entitled to the basic
survivorship pension for as long as they are qualified, plus the dependent childrens
pension equivalent to ten percent (10%) of the basic monthly pension for every
dependent child not exceeding five (5), counted from the youngest and without
substitution;
(3) when the survivors are the dependent spouse and the dependent children, the
dependent spouse shall receive the basic survivorship pension for life or until he/she
remarries, and the dependent children shall receive the dependent childrens pension
mentioned in the immediately preceding paragraph (2) hereof.
(c) In the absence of primary beneficiaries, the secondary beneficiaries shall be entitled
to:
(1) the cash payment equivalent to one hundred percent (100%) of his average monthly
compensation for each year of service he paid contributions, but not less than Twelve
thousand pesos (P12,000.00): Provided, That the member is in the service at the time of
his death and has at least three (3) years of service; or
(2) in the absence of secondary beneficiaries, the benefits under this paragraph shall be
paid to his legal heirs.
(d) For purposes of the survivorship benefits, legitimate children shall include legally
adopted and legitimated children.
"SEC. 22. Death of a Pensioner. - Upon the death of an old-age pensioner or a member
receiving the monthly income benefit for permanent disability, the qualified beneficiaries
shall be entitled to the survivorship pension defined in Section 20 of this Act, subject to
the provisions of paragraph (b) of Section 21 hereof. When the pensioner dies within the
period covered by the lump sum, the survivorship pension shall be paid only after the
expiration of the said period.
"FUNERAL BENEFITS
"SEC. 23. Funeral Benefits. - The amount of the funeral benefits shall be determined and
specified by the GSIS in the rules and regulations but shall not be less than Twelve
thousand pesos (P12,000.00): Provided, That it shall be increased to at least Eighteen
thousand pesos (P18,000.00) after five (5) years and shall be paid upon the death of:
(a) an active member as defined under Section 2 (e) of this Act; or
(b) a member who has been separated from the service, but who may be entitled to
future benefit pursuant to Section 4 of this Act; or
(c) a pensioner, as defined in Section 2 (o) of this Act; or
(d) a retiree who at the time of his retirement was of pensionable age under this Act but
who opted to retire under Republic Act No. 1616.
"LIFE INSURANCE BENEFITS
"SEC. 24. Compulsory Life Insurance. - All employees except for Members of the Armed
Forces of the Philippines (AFP) and the Philippine National Police (PNP) shall, under
such terms and conditions as may be promulgated by the GSIS, be compulsorily covered
with life insurance, which shall automatically take effect as follows:
(1) for those employed after the effectivity of this Act, their insurance shall take effect on
the date of their employment;
(2) for those whose insurance will mature after the effectivity of this Act, their insurance
shall be deemed renewed on the day following the maturity or expiry date of their
insurance;
(3) for those without any life insurance as of the effectivity of this Act, their insurance shall
take effect following said effectivity.
"SEC. 25. Dividends. - An annual dividend may be granted to all members of the GSIS
whose life insurance is in force for at least one (1) year in accordance with a dividends
allocation formula to be determined by the GSIS.
"SEC. 26. Optional Insurance. - Subject to the rules and regulations prescribed by the
GSIS, a member may apply for insurance and/or pre-need coverage embracing life,
health, hospitalization, education, memorial plans, and such other plans as may be
designed by the GSIS, for himself and/or his dependents. Any employer may likewise
apply for group insurance coverage for its employees. The payment of the
premiums/installments for optional insurance and pre-need products may be made by the
insured or his employer and/or any person acceptable to the GSIS.
"SEC. 27. Reinsurance. - The GSIS may reinsure any of its interests or part thereof with
any private company or reinsurer whether domestic of foreign: Provided, That the GSIS
shall submit an annual report on its reinsurance operations to the Insurance Commission.
"E. ADJUDICATION OF CLAIMS AND DISPUTES
22
"SEC. 28. Prescription. - Claims for benefits under this Act except for life and retirement
shall prescribe after four (4) years from the date of contingency.
"SEC. 29. Facility of Payment. - The GSIS shall prescribe rules and regulations to
facilitate payment of benefits, proceeds, and claims under this Act and any other laws
administered by the GSIS. Payments made by the GSIS prior to its receipt of an adverse
claim, to a beneficiary or claimant subsequently found not entitled thereto, shall not bar
the legal and eligible recipient to his right to demand the payment of benefits, proceeds,
and claims from the GSIS, who shall, however, have a right to institute the appropriate
action in a court of law against the ineligible recipient.
"SEC. 30. Settlement of Disputes. - The GSIS shall have original and exclusive
jurisdiction to settle any disputes arising under this Act and any other laws administered
by the GSIS.
The Board may designate any member of the Board, or official of the GSIS who is a
lawyer, to act as hearing officer to receive evidence, make findings of fact and submit
recommendations, together with all documentary and testimonial evidence to the Board
within thirty (30) working days from the time the parties have closed their respective
evidence and filed their last pleading. The Board shall decide the case within thirty (30)
days from the receipt of the hearing officers findings and recommendations. The cases
heard directly by the Board shall be decided within thirty (30) working days from the time
they are submitted by the parties for decision.
"SEC. 31. Appeals. - Appeals from any decision or award of the Board shall be governed
by Rules 43 and 45 of the 1997 Rules of Civil Procedure adopted by the Supreme Court
on April 8, 1997 which will take effect on July 1, 1997: Provided, That pending cases and
those filed prior to July 1, 1997 shall be governed by the applicable rules of procedure:
Provided, further, That the appeal shall take precedence over all other cases except
criminal cases when the penalty of life imprisonment or death or reclusion perpetua is
imposable.
The appeal shall not stay the execution of the order or award unless ordered by the
Board, by the Court of Appeals or by the Supreme Court and the appeal shall be without
prejudice to the special civil action of certiorari when proper.
"SEC. 32. Execution of Decision. - When no appeal is perfected and there is no order to
stay by the Board, by the Court of Appeals or by the Supreme Court, any decision or
award of the Board shall be enforced and executed in the same manner as decisions of
the Regional Trial Court. For this purpose, the Board shall have the power to issue to the
city or provincial sheriff or its appointed sheriff such writs of execution as may be
necessary for the enforcement of such decision or award, and any person who shall fail
or refuse to comply with such decision, award, writ or process after being required to do
so shall, upon application by the GSIS, be punished for contempt.
"SEC. 33. Oaths, Witnesses, and Production of Records. - When authorized by the
Board, an official or employee of the GSIS shall have the power to administer oath and
affirmation, take deposition, certify to official acts, and issue subpoena ad testificandum
and subpoena duces tecum to compel the attendance of witnesses and the production of
books, papers, correspondences, and other records deemed necessary as evidence in
connection with any question arising under this Act. Any case of contumacy shall be dealt
with in accordance with the provisions of Section 580 of the Revised Administrative
Code.
"F. FUNDS OF THE GSIS
"SEC. 34. Funds. - All contributions payable under Section 5 of this Act together with the
earnings and accruals thereon shall constitute the GSIS Social Insurance Fund. The said
fund shall be used to finance the benefits administered by the GSIS under this Act. In
addition, the GSIS shall administer the optional insurance fund for the insurance
coverage described in Section 26 hereof, the Employees Compensation Insurance Fund
created under P.D. 626, as amended, General Insurance Fund created under Act No.
656, as amended, and such other special funds existing or that may be created for
special groups or persons rendering services to the government. The GSIS shall maintain
the required reserves to guarantee the fulfillment of its obligations under this Act.
The funds of the GSIS shall not be used for purposes other than what are provided for
under this Act. Moreover, no portion of the funds of the GSIS or income thereof shall
accrue to the General Fund of the national government and its political subdivisions,
instrumentalities and other agencies including government-owned and controlled
corporations except as may be allowed under this Act.
"SEC. 35. Deposits and Disbursements. - All revenues collected and all accruals thereto
shall be deposited, administered and disbursed in accordance with the law. A maximum
expense loading of twelve percent (12%) of the yearly revenues from all sources may be
disbursed for administrative and operational expenses except as may be otherwise
approved by the President of the Philippines on the basis of actuarial and management
studies.
"SEC. 36. Investment of Funds. - The funds of the GSIS which are not needed to meet
the current obligations may be invested under such terms and conditions and rules and
regulations as may be prescribed by the Board: Provided, That investments shall satisfy
the requirements of liquidity, safety/security and yield in order to ensure the actuarial
solvency of the funds of the GSIS: Provided, further, That the GSIS shall submit an
annual report on all investments made to both Houses of Congress of the Philippines, to
wit:
(a) in interest-bearing bonds or securities or other evidence of indebtedness of the
Government of the Philippines;
23
(b) in interest-bearing deposits or securities in any domestic bank doing business in the
Philippines: Provided, That in the case of such deposits, there shall not exceed at any
time the unimpaired capital and surplus or total private deposits of the depository bank,
whichever is smaller: Provided, further, That the said bank has prior designation as a
depository for the purpose by the Monetary Board of the Central Monetary Authority;
(c) in direct housing loans to members and group housing projects secured by first
mortgage, giving priority to the low income groups and in short and medium term loans to
members such as salary, policy, educational, emergency stock purchase plan and other
similar loans: Provided, That no less than forty percent (40%) of the investible fund of the
GSIS Social Insurance Fund shall be invested for these purposes;
(d) in bonds, securities, promissory notes or other evidence of indebtedness of
educational or medical institutions to finance the construction, improvement and
maintenance of schools and hospitals;
(e) in real estate property including shares of stocks involving real state property and
investments secured by first mortgages on real estate or other collaterals acceptable to
the GSIS: Provided, That such investment shall, in the determination of the Board,
redound to the benefit of the GSIS, its members as well as the general public;
(f) in debt instruments and other securities traded in the secondary markets;
(g) in loans to, or in bonds, debentures, promissory notes or other evidence of
indebtedness of any solvent corporation created or existing under the laws of the
Philippines;
(h) in common and preferred stocks of any solvent corporation or financial institution
created or existing under the laws of the Philippines listed in the stock exchange with
proven track record of profitability over the last three (3) years and payment of dividends
at least once over the same period;
(i) in domestic mutual funds including investments related to the operations of mutual
funds; and
(j) in foreign mutual funds and in foreign currency deposits or foreign currency-
denominated debts, non-speculative equities and other financial instruments or other
assets issued in accordance with existing laws of the countries where such financial
instruments are issued: Provided, That these instruments or assets are listed in bourses
of the respective countries where these instruments or assets are issued: Provided,
further, That the issuing company has proven track record of profitability over the last
three (3) years and payment of dividends at least once over the same period.
"SEC. 37. Records and Reports. - The GSIS shall keep and cause to keep such records
as may be necessary for the purpose of making actuarial studies, calculations and
valuations of the funds of the GSIS including such data needed in the computation of
rates of disability, mortality, morbidity, separation and retirement among the members
and any other information useful for the adjustment of the benefits of the members. The
GSIS shall maintain appropriate books of accounts to record its assets, liabilities, income,
expenses, receipts and disbursement of funds and other financial transactions and
operations.
"SEC. 38. Examination and Valuation of the Funds. - The GSIS shall make a periodic
actuarial examination and valuation of its funds in accordance with accepted actuarial
principles.
"SEC. 39. Exemption from Tax, Legal Process and Lien. - It is hereby declared to be the
policy of the State that the actuarial solvency of the funds of the GSIS shall be preserved
and maintained at all times and that contribution rates necessary to sustain the benefits
under this Act shall be kept as low as possible in order not to burden the members of the
GSIS and their employers. Taxes imposed on the GSIS tend to impair the actuarial
solvency of its funds and increase the contribution rate necessary to sustain the benefits
of this Act. Accordingly, notwithstanding any laws to the contrary, the GSIS, its assets,
revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes,
assessments, fees, charges, or duties of all kinds. These exemptions shall continue
unless expressly and specifically revoked and any assessment against the GSIS as of
the approval of this Act are hereby considered paid. Consequently, all laws, ordinances,
regulations, issuances, opinions or jurisprudence contrary to or in derogation of this
provision are hereby deemed repealed, superseded and rendered ineffective and without
legal force and effect.
"Moreover, these exemptions shall not be affected by subsequent laws to the contrary
unless this section is expressly, specifically and categorically revoked or repealed by law
and a provision is enacted to substitute or replace the exemption referred to herein as an
essential factor to maintain or protect the solvency of the fund, notwithstanding and
independently of the guaranty of the national government to secure such solvency or
liability.
"The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from attachment,
garnishment, execution, levy or other processes issued by the courts, quasi-judicial
agencies or administrative bodies including Commission on Audit (COA) disallowances
and from all financial obligations of the members, including his pecuniary accountability
arising from or caused or occasioned by his exercise or performance of his official
functions or duties, or incurred relative to or in connection with his position or work except
when his monetary liability, contractual or otherwise, is in favor of the GSIS.
"G. ADMINISTRATION
24
"SEC. 40. Implementing Body. - The Government Service Insurance System as created
under Commonwealth Act No. 186 shall implement the provisions of this Act.
"SEC. 41. Powers and Functions of the GSIS. - The GSIS shall exercise the following
powers and functions:
(a) to formulate, adopt, amend and/or rescind such rules and regulations as may be
necessary to carry out the provisions and purposes of this Act, as well as the effective
exercise of the powers and functions, and the discharge of duties and responsibilities of
the GSIS, its officers and employees;
(b) to adopt or approve the annual and supplemental budget of receipts and expenditures
including salaries and allowances of the GSIS personnel; to authorize such capital and
operating expenditures and disbursements of the GSIS as may be necessary and proper
for the effective management and operation of the GSIS;
(c) to invest the funds of the GSIS, directly or indirectly, in accordance with the provisions
of this Act;
(d) to acquire, utilize or dispose of, in any manner recognized by law, real or personal
property in the Philippines or elsewhere necessary to carry out the purposes of this Act;
(e) to conduct continuing actuarial and statistical studies and valuations to determine the
financial condition of the GSIS and taking into consideration such studies and valuations
and the limitations herein provided, re-adjust the benefits, contributions, premium rates,
interest rates or the allocation or re-allocation of the funds to the contingencies covered;
(f) to have the power of succession;
(g) to sue and be sued;
(h) to enter into, make, perform and carry out contracts of every kind and description with
any person, firm or association or corporation, domestic or foreign;
(i) to carry on any other lawful business whatsoever in pursuance of, or in connection with
the provisions of this Act;
(j) to have one or more offices in and outside of the Philippines, and to conduct its
business and exercise its powers throughout and in any part of the Republic of the
Philippines and/or in any or all foreign countries, states and territories: Provided, That the
GSIS shall maintain a branch office in every province where there exists a minimum of
fifteen thousand (15,000) membership;
(k) to borrow funds from any source, private or government, foreign or domestic, only as
an incident in the securitization of housing mortgages of the GSIS and on account of its
receivables from any government or private entity;
(l) to invest, own or otherwise participate in equity in any establishment, firm or entity;
(m) to approve appointments in the GSIS except appointments to positions which are
policy determining, primarily confidential or highly technical in nature according to the
Civil Service rules and regulations: Provided, That all positions in the GSIS shall be
governed by the compensation and position classification system and qualifications
standards approved by the GSIS Board of Trustees based on a comprehensive job
analysis and audit of actual duties and responsibilities: Provided, further, That the
compensation plan shall be comparable with the prevailing compensation plans in the
private sector and shall be subject to the periodic review by the Board no more than once
every four (4) years without prejudice to yearly merit reviews or increases based on
productivity and profitability;
(n) to design and adopt an Early Retirement Incentives Plan (ERIP) and/or financial
assistance for the purpose of retirement for its own personnel;
(o) to fix and periodically review and adjust the rates of interest and other terms and
conditions for loans and credits extended to members or other persons, whether natural
or juridical;
(p) to enter into agreement with the Social Security System or any other entity,
enterprise, corporation or partnership for the benefit of members transferring from one
system to another subject to the provisions of Republic Act No. 7699, otherwise known
as the Portability Law;
(q) to be able to float proper instrument to liquefy long-term maturity by pooling funds for
short-term secondary market;
(r) to submit annually, not later than June 30, a public report to the President of the
Philippines and the Congress of the Philippines regarding its activities in the
administration and enforcement of this Act during the preceding year including
information and recommendations on board policies for the development and perfection
of the programs of the GSIS;
(s) to maintain a provident fund, which consists of contributions made by both the GSIS
and its officials and employees and their earnings, for the payments of benefits to such
officials and employees or their heirs under such terms and conditions as it may
prescribe;
(t) to approve and adopt guidelines affecting investments, insurance coverage of
government properties, settlement of claims, disposition of acquired assets, privatization
or expansion of subsidiaries, development of housing projects, increased benefit and
loan packages to members, and the enforcement of the provision of this Act;
25
(u) any provision of law to the contrary notwithstanding, to authorize the payment of extra
remuneration to the officials and employees directly involved in the collection and/or
remittances of contributions, loan repayments, and other monies due to the GSIS at such
rates and under such conditions as it may adopt: Provided, That the best interest of the
GSIS shall be observed thereby;
(v) to determine, fix and impose interest upon unpaid premiums due from employers and
employees;
(w) to ensure the collection or recovery of all indebtedness, liabilities and/or
accountabilities, including unpaid premiums or contributions in favor of the GSIS arising
from any cause or source whatsoever, due from obligors, whether public or private. The
Board shall demand payment or settlement of the obligations referred to herein within
thirty (30) days from the date the obligation becomes due, and in the event of failure or
refusal of the obligor or debtor to comply with the demand, to initiate or institute the
necessary or proper actions or suits, criminal, civil or administrative or otherwise, before
the courts, tribunals, commissions, boards, or bodies of proper jurisdiction within thirty
(30) days reckoned from the expiry date of the period fixed in the demand within which to
pay or settle the account;
(x) to design and implement programs that will promote and mobilize savings and provide
additional resources for social security expansion and at the same time afford individual
members appropriate returns on their savings/investments. The programs shall be so
designed as to spur socio-economic take-off and maintain continued growth; and
(y) to exercise such powers and perform such other acts as may be necessary, useful,
incidental or auxiliary to carry out the provisions of this Act, or to attain the purposes and
objectives of this Act.
"SEC. 42. The Board of Trustees; its Composition; Tenure and Compensation. - The
corporate powers and functions of the GSIS shall be vested in and exercised by the
Board of Trustees composed of the President and General Manager of the GSIS and
eight (8) other members to be appointed by the President of the Philippines, one (1) of
whom shall be either the President of the Philippine Public School Teachers Association
(PPSTA) or the President of the Philippine Association of School Superintendents
(PASS), another two (2) shall represent the leading organizations or associations of
government employees/retirees, another four (4) from the banking, finance, investment,
and insurance sectors, and one (1) recognized member of the legal profession who at the
time of appointment is also a member of the GSIS. The Trustees shall elect from among
themselves a Chairman while the President and General Manager of the GSIS shall
automatically be the vice-chairman.
The Trustees, except the President and General Manager who shall cease as trustee
upon his separation, shall hold office for six (6) years without reappointment, or until their
successors are duly appointed and qualified. Vacancy, other than through the expiration
of the term, shall be filled for the unexpired term only. The members of the Board shall be
entitled to a per diem of Two thousand five hundred pesos (P2,500.00) for each board
meeting actually attended by them, but not to exceed Ten thousand pesos (P10,000.00)
a month and reasonable transportation and representation allowances as may be fixed
by the Board.
"SEC. 43. Powers and Functions of the Board of Trustees. - The Board of Trustees shall
have the following powers and functions:
"(a) to formulate the policies, guidelines and programs to effectively carry out the
purposes of this Act;
"(b) to promulgate such rules and regulations as may be necessary or proper for the
effective exercise of the powers and functions as well as the discharge of the duties and
responsibilities of the GSIS, its officers and employees;
"(c) upon the recommendation of the President and General Manager, to approve the
annual and supplemental budget of receipts and expenditures of the GSIS, and to
authorize such operating and capital expenditures and disbursements of the GSIS as
may be necessary or proper for the effective management, operation and administration
of the GSIS;
"(d) upon the recommendation of the President and General Manager, to approve the
GSIS organizational and administrative structure and staffing pattern, and to establish,
fix, review, revise and adjust the appropriate compensation packages for the officers and
employees of the GSIS and reasonable allowances, incentives, bonuses, privileges and
other benefits as may be necessary or proper for the effective management, operation
and administration of the GSIS, which shall be exempt from Republic Act No. 6758,
otherwise known as the Attrition Law;
"(e) to fix and periodically review and adjust the rates of interest and other terms and
conditions for loans and credits extended to its members or other persons, whether
natural or juridical;
"(f) the provision of any law to the contrary notwithstanding, to compromise or release, in
whole or in part, any claim or settle liability to the GSIS, regardless of the amount
involved, under such terms and conditions as it may impose for the best interest of the
GSIS;
"(g) to approve and adopt guidelines affecting investments, insurance coverage of
government properties, settlement of claims, disposition of acquired assets, development
of housing projects, increased benefit and loan packages to members, and the
enforcement of the provisions of this Act;
26
"(h) to determine, fix, and impose interest upon unpaid or unremitted premiums and/or
contributions; and
"(i) to do and perform any and all acts necessary, proper or incidental to the attainment of
the purposes and objectives of this Act.
"SEC. 44. Appointment, Qualifications, and Compensation of the President and General
Manager and of other Personnel. - The President and General Manager of the GSIS shall
be its Chief Executive Officer and shall be appointed by the President of the Philippines.
He shall be a person with management and investments expertise necessary for the
effective performance of his duties and functions under this Act.
"The GSIS President and General Manager shall be assisted by one or more executive
vice-presidents, senior vice-presidents and managers in addition to the usual supervisory
and rank-and-file positions who shall be appointed and removed by the President and
General Manager with the approval of the Board, in accordance with the existing Civil
Service rules and regulations.
"SEC. 45. Powers and Duties of the President and General Manager. - The President
and General Manager of the GSIS shall, among others, execute and administer the
policies and resolutions approved by the Board and direct and supervise the
administration and operations of the GSIS. The President and General Manager, subject
to the approval of the Board, shall appoint the personnel of the GSIS, remove, suspend
or otherwise discipline them for cause, in accordance with the existing Civil Service rules
and regulations, and prescribe their duties and qualifications to the end that only
competent persons may be employed.
"SEC. 46. Auditor. - (a) The Chairman of the Commission on Audit shall be the ex officio
auditor of the GSIS, and the necessary personnel to assist said representative in the
performance of his duties.
"(b) The Chairman of the Commission on Audit or his authorized representatives, shall
submit to the Board soon after the close of each calendar year, an audited statement
showing the financial condition and progress of the GSIS for the calendar year just
ended.
"SEC. 47. Legal Counsel. - The Government Corporate Counsel shall be the legal
adviser and consultant of the GSIS, but the GSIS may assign to the Office of the
Government Corporate Counsel (OGCC) cases for legal action or trial, issues for legal
opinions, preparation and review of contracts/agreements and others, as the GSIS may
decide or determine from time to time: Provided, however, That the present legal services
group in the GSIS shall serve as its in-house legal counsel.
"The GSIS may, subject to approval by the proper court, deputize any personnel of the
legal service group to act as special sheriff in the enforcement of writs and processes
issued by the court, quasi-judicial agencies or administrative bodies in cases involving
the GSIS.
"SEC. 48. Powers of the Insurance Commission. - The Insurance Commissioner or his
authorized representatives shall make an examination of financial condition and methods
of transacting business of the GSIS at least once every three (3) years and the report of
said examination shall be submitted to the Board of Trustees and copies thereof be
furnished the Office of the President of the Philippines and the two houses of the
Congress of the Philippines within five (5) days after the close of examination: Provided,
however, That for each examination, the GSIS shall pay the office of the Insurance
Commissioner an amount equal to the actual expenses incurred by the said office in the
conduct of examination, including the salaries of the examiners and of the actuary of
such examination for the actual time spent.
"H. GENERAL PROVISION
"SEC. 49. Dispensation of Social Insurance Benefits. - (a) The GSIS shall pay the
retirement benefits to the employee on his last day of service in the government:
Provided, That all requirements are submitted to the GSIS within a reasonable period
prior to the effective date of the retirement;
"(b) The GSIS shall discontinue the processing and adjudication of retirement claims
under R.A. No. 1616 except refund of retirement premium under R. A. No. 910. Instead,
all agencies concerned shall process and pay the gratuities of their employees. The
Board shall adopt the proper rules and procedures for the implementation of this
provision.
"SEC. 50. Development and Disposition of Acquired Assets. - The GSIS shall have the
right to develop and dispose of its acquired assets obtained in the ordinary course of its
business. To add value to, improve profitability on, and/or enhance the marketability of an
acquired asset, the GSIS may further develop/renovate the same either with its own
capital or through a joint venture arrangement with private companies or individuals.
"The GSIS may sell its acquired assets in accordance with existing Commission on Audit
(COA) rules and regulations for an amount not lower than the current market value of the
property. For this purpose, the GSIS shall conduct an annual appraisal of its property or
acquired assets to determine its current market value. All notices of sale shall be
published in newspapers of general circulation.
"No injunction or restraining order issued by any court, commission, tribunal or office shall
bar, impede or delay the sale and disposition by the GSIS of its acquired assets except
on questions of ownership and national or public interest.
"SEC. 51. Government Assistance to the GSIS. - The GSIS may call upon any employer
for such assistance as may be necessary in the discharge of its duties and functions.
27
"I. PENAL PROVISIONS
"SEC. 52. Penalty. - (a) Any person found to have participated directly or indirectly in the
commission of fraud, collusion, falsification, or misrepresentation in any transaction with
the GSIS, whether for him or for some other persons, shall suffer the penalties provided
for in Article 172 of the Revised Penal Code.
"(b) Whoever shall obtain or receive any money or check invoking any provision of this
Act or any agreement thereunder, without being entitled thereto with the intent to defraud
any member, any employer, the GSIS, or any third party, shall be punished by a fine of
not less than Five thousand pesos (P5,000.00) nor more than Twenty thousand pesos
(P20,000.00) or by imprisonment of not less than six (6) years and one (1) day to twelve
(12) years, or both, at the discretion of the court.
"(c) Whoever fails or refuses to comply with the provisions of this Act or with the rules and
regulations adopted by the GSIS, shall be punished by a fine of not less than Five
thousand pesos (P5,000.00) nor more than Twenty thousand pesos (P20,000.00) or
imprisonment of not less than six (6) years and one (1) day to twelve (12) years, or both,
at the discretion of the court.
"(d) The treasurer, finance officer, cashier, disbursing officer, budget officer or other
official or employee who fails to include in the annual budget the amount corresponding
to the employer and employee contributions, or who fails or refuses or delays by more
than thirty (30) days from the time such amount becomes due and demandable, or to
deduct the monthly contributions of the employee shall, upon conviction by final
judgment, suffer the penalties of imprisonment from six (6) months and one (1) day to six
(6) years, and a fine of not less than Three thousand pesos (P3,000.00) but not more
than Six thousand pesos (P6,000.00), and in addition, shall suffer absolute perpetual
disqualification from holding public office and from practicing any profession or calling
licensed by the government.
"(e) Any employee or member who receives or keeps fund or property belonging, payable
or deliverable to the GSIS and appropriates the same, or takes or misappropriates or
uses the same for any purpose other than authorized by this Act, or permits another
person to take, misappropriate or use said fund or property by expressly consenting
thereto, or through abandonment or negligence, or is otherwise guilty of the
misappropriation of said fund or property, in whole or in part, shall suffer the penalties
provided in Article 217 of the Revised Penal Code, and in addition, shall suffer absolute
perpetual disqualification from holding public office and from practicing any profession or
calling licensed by the government.
"(f) Any employee who, after deducting the monthly contribution or loan amortization from
a members compensation, fails to remit the same to the GSIS within thirty (30) days from
the date they should have been remitted under Section 6(a), shall be presumed to have
misappropriated such contribution or loan amortization and shall suffer the penalties
provided in Article 315 of the Revised Penal Code, and in addition, shall suffer absolute
perpetual disqualification from holding public office and from practicing any profession or
calling licensed by the government.
"(g) The heads of the offices of the national government, its political subdivisions,
branches, agencies and instrumentalities, including government-owned or controlled
corporations and government financial institutions, and the personnel of such offices who
are involved in the collection of premium contributions, loan amortization and other
accounts due the GSIS who shall fail, refuse or delay the payment, turnover, remittance
or delivery of such accounts to the GSIS within thirty (30) days from the time that the
same shall have been due and demandable shall, upon conviction by final judgment,
suffer the penalties of imprisonment of not less than one (1) year nor more than five (5)
years and a fine of not less than Ten thousand pesos (P10,000.00) nor more than Twenty
thousand pesos (P20,000.00), and in addition, shall suffer absolute perpetual
disqualification from holding public office and from practicing any profession or calling
licensed by the government.
"(h) The officers and/or personnel referred to in paragraph (g) of this section shall be
liable not only criminally but also civilly to the GSIS or to the employee or member
concerned in the form of damages, including surcharges and interests.
"(i) For the charges or complaints referred to in paragraph (g) of this section, the liabilities
therein set forth shall be construed as waiver of the State of its immunity from suit, hence,
the above-mentioned officials and/or personnel may not invoke the defense of non-
suability of the State.
"(j) Failure of the Members of the GSIS Board, including the chairman and the vice-
chairman, to comply with the provisions of paragraph (w) of Section 41 hereof, shall
subject them to imprisonment of not less than six (6) months nor more than one (1) year
or a fine of not less than Five thousand pesos (P5,000.00) nor more than Ten thousand
pesos (P10,000.00) without prejudice to any civil or administrative liability which may also
arise therefrom.
"(k) Criminal actions arising from violations of the provisions of this Act may be
commenced by the GSIS or by the aggrieved member, either under this Act or, in
appropriate cases, under the Revised Penal Code.
"SEC. 53. Implementing Rules and Regulations. - The implementing rules and
regulations to carry out the provisions of this Act shall be adopted and promulgated by
the GSIS not later than ninety (90) days after the approval of this Act.
"SEC. 54. Non-impairment of Benefits, Powers, Jurisdiction, Rights, Privileges, Functions
and Activities. - Nothing in this Act shall be construed to repeal, amend or limit any
provision of existing laws, Presidential Decrees and Letters of Instructions, not otherwise
specifically inconsistent with the provisions of this Act.
28
"SEC. 55. Exclusiveness of Benefits. - Whenever other laws provide similar benefits for
the same contingencies covered by this Act, the member who qualifies to the benefits
shall have the option to choose which benefits will be paid to him. However, if the
benefits provided by the law chosen are less than the benefits provided under this Act,
the GSIS shall pay only the difference.

"SEC. 56. Appropriations. - The amount necessary to carry out the provisions of this Act
shall be included in the respective budgets of the agencies in the national government
obligation program of the year following its enactment into law and thereafter."

Section 2. Separability Clause. - Should any provision of this Act or any part thereof be
declared invalid, the other provisions, so far as they are separable from the invalid ones,
shall remain in force and effect.

Section 3. Repealing Clause. - All laws and any other law or parts of law specifically
inconsistent herewith are hereby repealed or modified accordingly: Provided, That the
rights under the existing laws, rules and regulations vested upon or acquired by an
employee who is already in the service as of the effectivity of this Act shall remain in
force and effect: Provided, further, That subsequent to the effectivity of this Act, a new
employee or an employee who has previously retired or separated and is reemployed in
the service shall be covered by the provisions of this Act.

Section 4. Effectivity. - This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in at least two (2) newspapers of general circulation.

This Act, which is a consolidation of Senate Bill No. 2013 and House Bill No. 8561, was
finally passed by the Senate and the House of Representatives on May 29, 1997 and
May 28, 1997, respectively.

Approved: May 30, 1997.

29
PRESIDENTIAL DECREE No. 626
FURTHER AMENDING CERTAIN ARTICLES OF PRESIDENTIAL DECREE NO. 442
ENTITLED "LABOR CODE OF THE PHILIPPINES"
WHEREAS, Presidential Decree No. 570-A amends certain provisions of Presidential
Decree No. 442, otherwise known as the Labor Code of the Philippines, and Presidential
Decree No. 608 extends the effectivity of Title II of Book IV on Employees' Compensation
and State Insurance Fund and Title III of Book IV on Medicare of the same Code to
January 1, 1975;
(b) "Commission" means the Employees' Compensation Commission created under this
Title.
(c) "SSS" means the Social Security System created under Republic Act numbered
eleven hundred sixty-one, as amended.
(d) "GSIS" means the Government Service Insurance System created under
Commonwealth Act numbered one hundred eighty-six, as amended.
(e) "System" means the SSS or GSIS, as the case may be.

WHEREAS, pending the effectivity of said Titles, the Social Security System,
Government Service Insurance System, Philippine Medical Care Commission, and the
Department of Labor have utilized the transition period for intensive study and
consultations with labor organizations, employers' organizations, and civic, professional,
and technical associations, representing the various sectors of the economy;
WHEREAS, as a result of such discussions and consultations, it has found necessary to
make adjustments in the text of the Labor Code to initiate, rationalize and coordinate the
grant of benefits with the broad objectives of the Code consistent with the overriding
priority of development;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue
of the powers vested in me by the Constitution as Commander-in-Chief of all the Armed
Forces of the Philippines, and pursuant to Proclamation No. 1081 dated September 22,
1972, as amended, do hereby order and decree:
Section 1. Title II of Book IV on Employees' Compensation and State Insurance Fund of
the Labor Code of the Philippines is hereby amended to read as follows:
(f) "Employer" means any person, natural or juridical, employing the services of the
employee.
(g) "Employee" means any person compulsorily covered by the GSIS under
Commonwealth Act Numbered one hundred eighty-six, as amended, including members
of the Armed Forces of the Philippines, and any person employed as casual, emergency,
temporary, substitute or contractual; or any person compulsorily covered by the SSS
under Republic Act numbered eleven hundred sixty-one, as amended.
(h) "Person" means any individual, partnership, firm, association, trust, corporation or
legal representative thereof.
(i) "Dependents" means the legitimate, legitimated or legally adopted child who is
unmarried, not gainfully employed, and not over eighteen years of age, or over eighteen
but not over twenty-one years of age provided that he is enrolled in school, or over
twenty-one years of age provided that he is congenitally incapacitated and incapable of
self-support physically or mentally; the legitimate spouse living with the employee; and
the legitimate parents of said employee wholly dependent upon him for regular support.

TITLE
EMPLOYEES COMPENSATION AND STATE INSURANCE FUND
CHAPTER
Policy and Definitions
Article 164. Policy. The State shall promote and develop a tax-exempt employees'
compensation program whereby employees and their dependents, in the event of work-
connected disability or death, may promptly secure adequate income benefit, and
medical or related benefits.
Article 165. Definition of Terms. As used in this Title, unless the context indicates
otherwise:
(a) "Code" means the Labor Code of the Philippines instituted under Presidential Decree
numbered four hundred forty-two, as amended.
II (j) "Beneficiaries" means the dependent spouse until he remarries and dependent
children who are the primary beneficiaries. In their absence, the dependent parents
subject to the restrictions imposed on dependent children, the illegitimate children and
I legitimate descendants, who are the secondary beneficiaries.
(k) "Injury" means any harmful change in the human organism sustained at work carried
out during working hours at the workplace or elsewhere while executing an order for the
employer.
(l) "Sickness" means any illness definitely accepted as an occupational disease listed by
the Commission, or any illness caused by employment subject to proof by the employee
that the risk of contracting the same is increased by working conditions.
(m) "Death" means loss of life resulting from injury or sickness.
30
(n) "Disability" means loss or impairment of a physical or mental function resulting from
injury or sickness.
(o) "Compensation" means all payments made under this Title for income benefits, and
medical or related benefits.
(p) "Income benefit" means all payments made under this Title to the employee or his
dependents.
(q) "Medical benefit" means all payments made under this Title to the providers of
medical care, rehabilitation services and hospital care.
(r) "Related benefit" means all payments made under this Title for appliances and
supplies.
(s) "Appliances" means crutches, artificial aids and other similar devices.
(t) "Supplies" means medicine and other medical, dental or surgical items.
(u) "Hospital" means any medical facility, government or private, authorized by law, an
active member of good standing of the Philippine Hospital Association and accredited by
the Commission.
(v) "Physician" means any doctor of medicine duly licensed to practice in the Philippines,
an active member of good standing of the Philippine Medical Association and accredited
by the Commission.
(w) "Wages" or "salary" means all actual remuneration for employment received during
the month, except that part in excess of one thousand pesos.
(x) "Monthly salary credit" means the wage or salary base for contributions as provided in
Republic Act numbered eleven hundred sixty-one, as amended, or the wages or salary.
(y) "Average monthly salary credit" means the result obtained by dividing the sum of the
monthly salary credits in the sixty-month period ending on the last day of the second
quarter preceding the quarter of death or permanent disability by sixty, except where the
month of death or permanent disability falls within eighteen calendar months from the
month of coverage, in which case, the average month salary credit is the result obtained
by dividing the sum of all monthly salary credits by the number of calendar months of
coverage.
(z) "Average daily salary credit" means the result obtained by dividing the sum of the six
highest monthly salary credits in the twelve-month period ending on the last day of the
second quarter preceding the quarter of sickness or injury by one hundred eighty, except
where the month of injury falls within twelve calendar months from the first month of
coverage in the System, in which case the average daily salary credit is the result
obtained by dividing the sum of all monthly salary credits by thirty times the number of
calendar months of coverage.
(aa) "Quarter" means a period of three consecutive months ending on the last day of
March, June, September and December.
CHAPTER II
Coverage and Liability
Article 166. Compulsory coverage. Coverage in the State Insurance Fund shall be
compulsory upon all employers and their employees not over sixty years of age:
Provided, That an employee who is over sixty years of age and paying contributions to
qualify for the retirement or life insurance benefit administered by the System shall be
subject to compulsory coverage: Provided, further, That in case of an employee who is
both covered by the SSS and GSIS, only his employment under the GSIS shall be
considered for purposes of his coverage.
Article 167. Foreign employment. The Commission shall ensure adequate coverage of
Filipino employees employed abroad, subject to regulations as it may prescribe.
Article 168. Effective date of coverage. Compulsory coverage of the employer during
the effectivity of this Title shall take effect on the first day of his operation, and that of the
employee on the date of his employment.
Article 169. Registration. Each employer and his employees shall register with the
System in accordance with its regulations.
Article 170. Limitation of liability. The State Insurance Fund shall be liable for
compensation to the employee or his dependents, except when the disability or death
was occasioned by the employee's intoxication, willful intention to injure or kill himself or
another, notorious negligence, or otherwise provided under this Title.
Article 171. Exclusiveness of liability. Unless otherwise provided, the liability of the
State Insurance Fund under this Title shall be exclusive and in place of all other liabilities
of the employer to the employee, his dependents or anyone otherwise entitled to receive
damages on behalf of the employee or his dependents. The payment of compensation
under this Title shall bar the recovery of benefits as provided for in Section 699 of the
Revised Administrative Code, Republic Act Numbered eleven hundred sixty-one, as
amended, Commonwealth Act numbered one hundred eighty-six, as amended, Republic
Act numbered sixty-one hundred eleven, as amended, Republic Act numbered six
hundred ten, as amended, Republic Act numbered forty-eight hundred sixty-four, as
amended, and other laws whose benefits are administered by the System, during the
period of such payment for the same disability or death, and conversely.
31
Article 172. Liability of third parties. (a) When the disability or death is caused by
circumstances creating a legal liability against a third party, the disabled employee or the
dependents in case of his death shall have the option either to claim for benefit from the
System under this Title or to sue such third party for damages in accordance with law. In
case benefit is claimed and allowed under this Title, the System shall be subrogated to
the rights of the disabled employee or the dependents in case of his death in accordance
with the general law.
(b) Where the System recovers from such third party damages in excess of those paid or
allowed under this Title, such excess shall be delivered to the disabled employee or other
persons entitled thereto, after deducting the cost of proceedings and expenses of the
System. The Proof of payment of compensation under this Title shall be admissible as
evidence in any damage suit or action.
Article 173. Deprivation of benefits. Except as otherwise provided under this Title, no
contract, regulation or device whatsoever shall operate to deprive the employee or his
dependents of any part of the income benefits, and medical or related services granted
under this Title. Existing medical services being provided by the employer shall be
maintained and continued to be enjoyed by their employees.
CHAPTER III
Administration
Article 174. Employees Compensation Commission. (a) To initiate, rationalize and
coordinate the policies of the employees' compensation program, the Employees'
Compensation Commission is hereby created to be composed of four ex-officio
members: The Secretary of Labor as Chairman, the GSIS General Manager, the SSS
Administrator, the Chairman of the Philippine Medical Care Commission; and two
appointive members, one of whom shall represent the employees and the other, the
employers, to be appointed by the President of the Philippines for a term of six years.
The appointive member shall have at least five years experience in workmen's
compensation or social security programs. All vacancies shall be filled for the unexpired
term only.
(b) The Vice-Chairman of the Commission shall be alternated each year between the
GSIS General Manager and the SSS Administrator. The presence of four members shall
constitute a quorum. Meetings shall be held as often as necessary. Each member shall
receive a per diem of one hundred pesos for every meeting actually attended by him
exclusive of actual, ordinary and necessary travel and representation expenses. In his
absence, any member may designate an official of the institution he serves on full time
basis as his representative to act on his behalf.
(c) The general conduct of the operations and management functions of the GSIS or SSS
under this Title shall be vested in its respective chief executive officer, who shall be
immediately responsible for carrying out the policies of the Commission.
Article 175. Powers and duties. The Commission shall have the following powers and
duties:
(a) To assess and fix a rate of contribution from all employers.
(b) To determine the rate of contribution payable by an employer whose records show a
high frequency of work accidents or occupational diseases due to failure by the said
employer to observe adequate safety measures.
(c) To approve rules and regulations governing the processing of claims and the
settlement of disputes arising therefrom as prescribed by the System.
(d) To initiate policies and programs towards adequate occupational health and safety
and accident prevention in the working environment.
(e) To make the necessary actuarial studies and calculations concerning the grant of
constant help and income benefits for permanent disability or death, and the
rationalization of the benefits for permanent disability and death under this Title with
benefits payable by the System for similar contingencies.
(f) To appoint the personnel of its staff, subject to civil service law and rules.
(g) To adopt annually a budget of expenditures of the Commission and its staff
chargeable against the State Insurance Fund.
(h) To have the power to administer oath and affirmation, and to issue subpoena and
subpoena duces tecum in connection with any question or issue arising from appealed
cases under this Title.
(i) To sue and be sued in court.
(j) To perform such other acts as it may deem appropriate for the attainment of the
purposes of the Commission and proper enforcement of the provisions of this Title.
Article 176. Management of funds. All revenues collected by the System under this
Title shall be deposited, invested, administered and disbursed in the same manner and
under the same conditions, requirements and safeguards as provided by Republic Act
numbered eleven hundred and sixty-one, as amended, and Commonwealth Act
numbered one hundred eighty-six, as amended, with regards to such other funds as are
thereunder being paid to or collected by the SSS and GSIS, respectively: Provided, That
the Commission, SSS and GSIS may disburse each year not more than twelve per cent
of the contributions and investment earnings collected for operational expenses, including
occupational health and safety programs, incidental to the carrying out of this Title.
Article 177. Investment of funds. All revenues as are not needed to meet current
operational expenses under this Title shall be accumulated in a fund to be known as the
32
State Insurance Fund, which shall be used exclusively for the payment of the benefits
under this Title, and no amount thereof shall be used for any other purpose. All amounts
accruing to the State Insurance Fund, which is hereby established in the SSS and GSIS,
respectively, shall be deposited with any authorized depository banks approved by the
Commission, or invested with due and prudent regard for the liquidity needs of the
System.
Article 178. Settlement of claims. The System shall have original and exclusive
jurisdiction to settle any dispute arising from this Title with respect to coverage,
entitlement to benefits, collection and payment of contributions and penalties thereon, or
any other matter related thereto, subject to appeal to the Commission, which shall decide
appealed case within twenty working days from the submission of the evidence.
Article 179. Review. Decisions, orders or resolutions by the Commission may be
reviewed on certiorari by the Supreme Court only on questions of law upon petition of an
aggrieved party within ten days from notice thereof.
Article 180. Enforcement of decisions. (a) Any decision, order or resolution of the
Commission shall become final and executory if no appeal is taken therefrom within ten
days from notice thereof. All awards granted by the Commission in cases appealed from
decisions of the System shall be effected within fifteen days from receipt of notice.
(b) In all other cases, decisions, orders and resolutions of the Commission which have
become final and executory shall be enforced and executed in the same manner as
decisions of the Court of First Instance, and the Commission shall have the power to
issue to the city or provincial sheriff or to the sheriff whom it may appoint such writs of
execution as may be necessary for the enforcement of such decisions, orders or
resolutions, and any person who shall fail or refuse to comply therewith shall, upon
application by the Commission, be punished by the proper court for contempt.
CHAPTER IV
Contributions
Article 181. Employer's contributions. (a) Under such regulations as the System may
prescribe, beginning as of the last day of the month when an employee's compulsory
coverage takes effect and every month thereafter during his employment, his employer
shall prepare to remit to the System a contribution equivalent to one per cent of his
monthly salary credit.
(b) The rate of contributions shall be reviewed periodically and, subject to the limitations
herein provided, may be revised as the experience in risk, cost of administration, and
actual or anticipated as well as unexpected losses, may require.
(c) Contributions under this Title shall be paid in their entirety by the employer and any
contract or device for the deduction of any portion thereof from the wages or salaries of
the employees shall be null and void.
(d) When a covered employee dies, becomes disabled or is separated from employment,
his employer's obligation to pay the monthly contribution arising from that employment
shall cease at the end of the month of contingency and during such months that he is not
receiving wages or salary.
Article 182. Government guarantee. The Republic of the Philippines guarantees the
benefits prescribed under this Title, and accepts general responsibility for the solvency of
the State Insurance Fund. In case of any deficiency, the same shall be covered by
supplemental appropriations from the national government.
CHAPTER V
Medica Benefits
Article 183. Medical Services. Immediately after an employee contracts sickness or
sustains an injury, he shall be provided by the System during the subsequent period of
his disability with such medical services and appliances as the nature of his sickness or
injury and progress of his recovery may require, subject to the expense limitation
prescribed by the Commission.
Article 184. Liability. The System shall have the authority to choose or order a change
of physician, hospital or rehabilitation facility for the employee, and shall not be liable for
compensation for any aggravation of the employee's injury or sickness resulting from
unauthorized changes by the employee of medical services, appliances, hospitals,
rehabilitation facilities or physicians.
Article 185. Attending physician. Any physician attending an injured or sick employee
shall comply with all the regulations of the System and submit reports in prescribed form
at such time as may be required concerning his condition or treatment. All medical
information relevant to the particular injury or sickness shall on demand be made
available to the employee or the System. No information developed in connection with
treatment or examination for which compensation is sought shall be considered as
privileged communication.
Article 186. Refusal of examination or treatment. If the employee unreasonably
refuses to submit to medical examination or treatment the System shall stop the payment
of further compensation during such time as such refusal continues. What constitutes an
unreasonable refusal shall be determined by the System which may on its own initiative
determine the necessity character, and sufficiency of any medical services furnished or to
be furnished.
33
Article 187. Fees and other charges. All fees and other charges for hospital services,
medical care and appliances, excluding professional fees, shall not be higher than those
prevailing in wards of hospitals for similar services to injured or sick persons in general,
and shall be subject to the regulations of the Commission. Professional fees shall only be
appreciably higher than those prescribed under Republic Act numbered sixty-one
hundred eleven, as amended, otherwise known as the Philippines Medical Care Act of
1969.
Article 188. Rehabilitation services. (a) The System shall, as soon as practicable,
establish a continuing program of the rehabilitation of injured and handicapped
employees, who shall be entitled to rehabilitation services, which shall consist of medical,
surgical or hospital treatment, including appliances if he has been handicapped by the
injury, to help him become physically independent.
(b) As soon as practicable, the System shall established centers equipped and staffed to
provide a balanced program of remedial treatment, vocational assessment and
preparation designed to meet the individual needs of each handicapped employee to
restore him to suitable employment, including assistance as may be within its resources
to help each rehabilitee to develop his mental, vocational or social potential.
CHAPTER
Disability Benefits
Article 189. Temporary total disability. (a) Under such regulations as the Commission
may approve, any employee under this Title who sustains an injury or contracts sickness
resulting in temporary total disability shall for each day of injury or fraction thereof, or for
each day or fraction thereof after the third day of sickness, be paid by the System an
income benefit equivalent to ninety per cent of his average daily salary credit, subject to
the following conditions: (1) The daily income benefit shall not be less than two pesos
and fifty centavos nor more than sixteen pesos nor paid for a continuous period longer
than one hundred twenty days, and (2) The System shall be notified of the injury or
sickness.
(b) The payment of such income benefit shall be in accordance with the regulations of the
Commission: Provided, That the employee shall not be entitled to avail himself of the
income benefit under this Title and his sick leave credits at the same time: Provided,
further, That all sick leaves earned by him shall be preserved to his credit if he has not
been paid his salary during such leave of absence.
Article 190. Permanent Total disability. (a) Under such regulations as the Commission
may approve, any employee under this Title who contracts sickness or sustains an injury
resulting in permanent total disability shall for each month until his death but not
exceeding five years be paid by the system during such disability an income benefit to be
computed as follows:
Forty-five percent of the first three hundred pesos of average monthly salary credit or
fraction thereof; plus
Twenty-five per cent of the next three hundred pesos of average monthly salary credit or
fraction thereof; plus
Nine per cent of each succeeding one hundred pesos of average monthly salary credit or
fraction thereof; plus
One tenth of one per cent of the average monthly salary credit for each month of paid
coverage in the System in excess of one hundred twenty months of paid coverage as of
the last day of the second quarter preceding the quarter of disability: Provided, That the
monthly income benefit shall not be less than forty-five pesos.
(b) The monthly income benefit shall be guaranteed for five years, but the total payments
of which shall in no case exceed twelve thousand pesos, and shall be suspended if the
employee is gainfully employed or recovers from his permanent total disability or fails to
present himself for examination at least once a year upon notice by the System.
(c) The following disabilities shall be deemed total and permanent:
VI
(1) Temporary total disability lasting continuously for more than one hundred twenty days;
(2) Complete loss of sight of both eyes;
(3) Lost of two limbs at or above the ankle or wrist;
(4) Permanent complete paralysis of two limbs;
(5) Brain injury resulting in incurable imbecility or insanity; and
(6) Such cases as determined by the Medical Director of the System and approved by the
Commission.
(d) The number of months of paid coverage shall be defined and approximated by a
formula to be approved by the Commission.
Article 191. Permanent partial disability. (a) Under such regulations as the
Commission may approve, any employee under this Title who contracts sickness or
sustains an injury resulting in permanent partial disability shall for each month not
exceeding the period designated herein be paid by the System during such disability an
income benefit equivalent to the income benefit for permanent total disability.
(b) The benefit shall be paid for not more than the period designated in the following
schedule:
34
Complete and permanent loss of the use of: No. of months

(c) A loss of a wrist shall be considered as a loss of the hand, and a loss of an
One thumb 8 elbow considered as a loss of the arm. A loss of an ankle shall be considered as
loss of the foot, and a loss of a knee considered as a loss of the leg. A loss of
more than one joint shall be considered as a loss of the whole finger or toe, and
One index finger 6
a loss of only the first joint considered as a loss of one-half the whole finger or
toe: Provided, That such loss shall be either the functional loss of the use or
One middle finger 5 physical loss of the member.

(d) In cases of permanent partial disability less than the total loss of the member
One ring finger 4 specified in the preceding paragraph, the same monthly income benefit shall be
paid for a portion of the period established for the total loss of the member in
accordance with the proportion that the partial loss bears to the total loss. If the
One little finger 2
result is a decimal fraction, the same shall be rounded off to the next higher
integer.
One big toe 5
(e) In cases of simultaneous loss of more than one member or a part thereof as
specified in this Art., the same monthly income benefit shall be paid for a period
Any toe 2 equivalent to the sum of the periods established for the loss of the member or a
part thereof. If the result is a decimal fraction, the same shall be rounded off to
the next higher integer.
One hand 31
CHAPTER VII
One arm 40 Death Benefits

Article 192. Death. (a) Under such regulations as the Commission may
One foot 25 approve, the System shall pay to the primary beneficiaries upon the death of the
covered employee under this Title a monthly income benefit equivalent to the
monthly income benefit for permanent total disability increased by ten per cent
One leg 37
for each dependent child but not exceeding five, beginning with the youngest
and without substitution: Provided, That the portion equivalent to the monthly
One ear 8 income benefit for permanent total disability shall be guaranteed for five years;
Provided, further, That if he has no primary beneficiary the System shall pay to
his beneficiaries or legal heirs a lump sum benefit equivalent to the lesser of
Both ears 16 thirty times the monthly income benefit for permanent total disability and six
thousand pesos.
Hearing of one ear 8
(b) Under such regulations as the Commission may approve, the System shall
pay to the primary beneficiaries upon the death of a covered employee who is
Hearing of both ears 40 under permanent total disability under this Title the balance of his income
benefit plus ten per cent of the monthly income benefit for each dependent child
but not exceeding five, beginning with the youngest and without substitution:
Sight of one eye 20 Provided, That if he has no primary beneficiary the System shall pay to his

35
beneficiaries or legal heirs a lump sum benefit equivalent to the lesser of the
balance of his income benefit or thirty times his monthly income benefit and six
thousand pesos.
CHAPTER VIII
Provisions Common to Income Benefits
Article 193. Relationship and dependency. All questions of relationship and
dependency shall be determined as of the time of death.
Article 194. Delinquent contributions. (a) An employer who is delinquent in his
contributions shall be liable to the System for the benefits which may have been
paid by the System to his employees or their dependents, and any benefit and
expenses to which such employer is liable shall constitute a lien on all his
property, real or personal, which is hereby declared to be preferred to any credit
except taxes. The payment by the employer of the lump sum equivalent of such
liability shall absolve him from the payment of the delinquent contributions and
penalty thereon with respect to the employee concerned.
(b) Failure or refusal of the employer to pay or remit the contributions herein
prescribed shall not prejudice the right of the employee or his dependents to the
benefits under this Title. If the sickness, injury, disability or death occurs before
the System receives any report of the name of his employee, the employer shall
be liable to the System for the lump sum equivalent of the benefits to which such
employee or his dependents may be entitled.
Article 195. Second injuries. If any employee under permanent partial
disability suffers another injury which results in a compensable disability greater
than the previous injury, the State Insurance Fund shall be liable for the income
benefit of the new disability; Provided, That if the new disability is related to the
previous disability, the System shall be liable only for the difference in income
benefits.
Article 196. Assignment of benefits. No claim for compensation under this
Title is transferrable, or liable to tax, attachment, garnishment, levy or seizure by
or under any legal process whatsoever, either before or after receipt by the
person or persons entitled thereto, except to pay any debt of the employee to
the System.
Article 197. Earned benefits. Income benefits shall, with respect to any period
of disability, be payable in accordance with this Title to an employee who is
entitled to receive wages, salaries or allowance for holidays, vacation or sick
leaves, and any award or benefit under a collective bargaining or other
agreement.
Article 198. Safety devices. In case the employee's injury or death was due to
the failure of the employer to comply with any law, or to install and maintain
safety devices, or take other precautions for the prevention of injury, said
employer shall pay to the State Insurance Fund a penalty of twenty-five percent
of lump sum equivalent of the income benefit payable by the System to the
employee. All employers, especially those who should have been paying a rate
of contribution higher than that required of them under this Title, are enjoined to
undertake and strengthen measures for the occupational health and safety of
their employees.
Article 199. Prescriptive period. No claim for compensation shall be given due
course unless notice thereof has been given to the employer in accordance with
the provisions herein, except when said notice is not required. The right to
compensation shall be barred unless said claim is filed with the System within
one year from notice to the employer.
Article 200. Erroneous payment. (a) If the System in good faith pays income
benefit to a dependent who is inferior in right to another dependent or with
whom another dependent is entitled to share, such payments shall discharge
the System from liability, unless and until such other dependent notifies the
System of his claim prior to the payments.
(b) In case of doubt as to the respective rights of rival claimants, the System is
hereby empowered to determine as to whom payment should be made in
accordance with such regulations as the Commission may approve. If the
money is payable to a minor or incompetent, payment shall be made by the
System to such person or persons as it may consider to be best qualified to take
care and dispose of the minor's or incompetent's property for his benefit.
Article 201. Prohibition. No agent, attorney or other person pursuing or in
charge of the preparation or filing of any claim for benefit under this Title shall
demand or charge for his services a fee, and any stipulation to the contrary shall
be null and void. The retention or deduction of any amount from any benefit
granted under this Title for the payment of fees of such services is prohibited.
Violation of any provision of this Article shall be punished by a fine of not less
than five hundred pesos nor more than five thousand pesos, or imprisonment for
not less than six months nor more than one year, or both, at the discretion of the
court.
Article 202. Exemption from levy, tax, etc. All laws to the contrary
notwithstanding, the State Insurance Fund and all its assets shall be exempt
from any tax, fee, charge, levy, or customs or import duty, and no law hereafter
enacted shall apply to the State Insurance Fund unless it is provided therein that
36
the same is applicable by expressly stating its name.
CHAPTER IX
Records, Reports, and Penal Provisions
Article 203. Record of death or disability. (a) All employers shall keep a
logbook to record chronologically the sickness, injury or death of their
employees, setting forth therein his name, date and place of the contingency,
nature of the contingency and absences. Entries in the logbook shall be made
within five days from notice or knowledge of the occurrence of the contingency.
Within five days after entry in the logbook, the employer shall report to the
System only those contingencies it deems to be work-connected.
(b) All entries in the employer's logbook shall be made by the employer or any of
his authorized official after verification of the contingencies or the employee's
absences for a period of a day or more. Upon request by the System, the
employer shall furnish the necessary certificate regarding information about any
contingency appearing in the logbook, citing the entry number, page number
and date. Such logbook shall be made available for inspection to the duly
authorized representative of the System.
(c) Should any employer fail to record in the logbook an actual sickness, injury
or death of any of his employees within the period prescribed herein, give false
information or withhold material information already in his possession, he shall
be held liable for fifty per cent of the lump sum equivalent of the income benefit
to which the employee may be found to be entitled, the payment of which shall
accrue to the State Insurance Fund.
(d) In case of payment of benefits for a claim which is later determined to be
fraudulent and the employer is found to be a party to the fraud, such employer
shall reimburse the System the full amount of the compensation paid.
Article 204. Notice of sickness, injury or death. Notice of sickness, injury or
death shall be given to the employer by the employee or by his dependents or
anybody on his behalf within five days from the occurrence of the contingency.
No notice to the employer shall be required if the contingency is known to the
employer or his agents or representatives.
Article 205. Penal provisions. (a) The penal provisions of Republic Act
numbered eleven hundred sixty-one, as amended, and Commonwealth Act
numbered one hundred eighty-six, as amended, with regard to the funds as are
thereunder being paid to, collected or disbursed by the System, shall be
applicable to the collection, administration and disbursement of the funds under
this Title. The penal provisions on coverage shall also be applicable.
(b) Any person, who for the purpose of securing entitlement to any benefit or
payment under this Title or the issuance of any certificate or document for any
purpose connected with this Title, whether for him or for some other person,
commits fraud, collusion, falsification, misrepresentation of facts or any other
kind of anomaly shall be punished with a fine of not less than five hundred
pesos nor more than five thousand pesos and an imprisonment for not less than
six months nor more than one year, at the discretion of the court.
(c) If the act penalized by this Article is committed by any person who has been
or is employed by the Commission or System, or a recidivist, the imprisonment
shall not be less than one year; if committed by a lawyer, physician or other
professional, he shall in addition to the penalty prescribed herein be disqualified
from the practice of his profession; and if committed by any official, employee or
personnel of the Commission, System or any government agency, he shall in
addition to the penalty prescribed herein be dismissed with prejudice to
reemployment in the government service.
Article 206. Applicability. This Title shall apply only to injury, sickness,
disability or death occurring on or after January 1, 1975.
Section 2. Title III of Book IV on Medicare of the same Code is hereby amended
to read as follows:
Article 207. Medical Care. The Philippine Medical Care Plan shall be
implemented as provided under Republic Act numbered sixty-one hundred
eleven, as amended.
Section 3. Article 331 of Chapter II of Book VII on prescription of Offense and
Claims of the same Code is hereby amended to read as follows:
Article 331. Money Claims. All money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise they shall be forever
barred.
"All money claims accruing prior to the effectivity of this Code shall be filed with
the appropriate entities established under this Code within one year from the
date of such effectivity, and shall be processed or determined in accordance
with implementing rules and regulations of the Code; otherwise they shall be
forever barred.
"Workmen's compensation claims accruing prior to the effectivity of this Code
and during the period from November 1, 1974, up to December 31, 1974, shall
be filed with the appropriate regional offices of the Department of Labor not later
than March 31, 1975; otherwise they shall be forever barred. These claims shall
37
be processed and adjudicated in accordance with the law and rules at the time renumbering them consecutively beginning with Art. 1.
their causes of action accrued."
Section 7. This Decree shall take effect on January 1, 1975.
Section 4. Article 336 of Chapter III of Book VII on Transitory and Final
Provisions of the same Code is hereby amended to read as follows: Done in the City of Manila, this 27th day of December, in the year of Our Lord,
nineteen hundred and seventy-four.
Article 336. Bureau of Workmen's Compensation and Workmen's Compensation
Commission. The present Bureau of Workmen's Compensation, Workmen's
Compensation Commission, and Workmen's Compensation Units in the
Department of Labor shall continue to exist up to December 31, 1975.
Thereafter, said offices shall be considered abolished and all officials and
personnel thereof shall be transferred to and mandatorily absorbed by the
Department of Labor, subject to Presidential Decree No. 6, Letters of
Instructions No. 14 and 14-A and the Civil Service law and rules.

"The salaries of the present officials and personnel of the Bureau of Workmen's
Compensation, Workmen's Compensation Commission, and Workmen's
Compensation Units in the original offices of the Department of Labor shall be
paid from the appropriations under Presidential Decree No. 503 for the fiscal
year ending June 30, 1975. Beginning July 1, 1975, their salaries shall be paid
from general appropriations."

Section 5. Article 339 of Chapter III of Book VII on Transitory and Final
Provisions of the same Code is hereby amended to read as follows:

Article 339. Disposition of pending cases. All cases pending before the Court
of Industrial Relations and the National Labor Relations Commission established
under Presidential Decree No. 21 on the date of effectivity of this Code shall be
transferred to and processed by the corresponding labor relations division or the
National Labor Relations Commission created under this Code having
cognizance of the same in accordance with the procedure laid down herein and
its implementing rules and regulations. Cases on labor relations on appeal with
the Secretary of Labor or the Office of the President of the Philippines as of the
date of effectivity of this Code shall remain under their respective jurisdiction
and shall be decided in accordance with the law, rules and regulations in force
at the time of appeal.

"All workmen's compensation cases pending before the Workmen's

Compensation Units in the regional offices of the Department of Labor and
those pending before the Workmen's Compensation Commission as of March
31, 1975, shall be processed and adjudicated in accordance with the law, rules
and procedure existing prior to the effectivity of the Employees' Compensation
and State Insurance Fund."

Section 6. The numbers of the Articles of the same Code shall be amended by
38
REPUBLIC ACT NO. 7699
AN ACT INSTITUTING LIMITED PORTABILITY SCHEME IN THE SOCIAL SECURITY
INSURANCE SYSTEMS BY TOTALIZING THE WORKERS' CREDITABLE SERVICES
OR CONTRIBUTIONS IN EACH OF THE SYSTEMS.
SECTION 1. It is hereby declared the policy of the State to promote the welfare of our
workers by recognizing their efforts in productive endeavors and to further improve their
conditions by providing benefits for their long years of contribution to the national
economy. Towards this end, the State shall institute a scheme for totalization and
portability of social security benefits with the view of establishing within a reasonable
period a unitary social security system.
Sec. 2. Definition of Terms. As used in this Act, unless the context indicates otherwise,
the following terms shall mean:
(a) "Contributions" shall refer to the contributions paid by the employee or worker to
either the Government Service Insurance System (GSIS) or the Social Security System
(SSS) on account of the worker's membership;
Sec. 5. Nothing in this Act shall be construed to diminish or reduce the benefits being
enjoyed by a covered worker arising from existing laws, issuances, and company policies
or practices or agreements between the employer and the employees.
Sec. 6. The Department of Labor and Employment for the private sector and the Civil
Service Commission for the government sector, together with the SSS and the GSIS
shall, within ninety (90) days from the effectivity of this Act, promulgate the rules and
regulations necessary to implement the provisions hereof: Provided, That any conflict in
the interpretation of the law and the implementing rules and regulations shall be resolved
in favor of the workers.
Sec. 7. All laws, decrees, orders, rules and regulations, or parts thereof, which are
inconsistent with the provisions of this Act are hereby repealed or modified accordingly.
Sec. 8. This Act shall take effect fifteen (15) days after its complete publication in the
Official Gazette or in at least two (2) national newspapers of general circulation,
whichever comes earlier.

(b) "Portability" shall refer to the transfer of funds for the account and benefit of a worker
who transfers from one system to the other;

(c) "Sector" shall refer to employment either in the public or private sector;

(d) "System" shall refer to either the SSS as created under Republic Act No. 1161, as
amended or the GSIS as created under Presidential Decree No. 1146, as amended; and

(e) "Totalization" shall refer to the process of adding up the periods of creditable services
or contributions under each of the Systems, for purposes of eligibility and computation of
benefits.

Sec. 3. Provisions of any general or special law or rules and regulations to the contrary
notwithstanding, a covered worker who transfers employment from one sector to another
or is employed in both sectors shall have his credible services or contributions in both
Systems credited to his service or contribution record in each of the Systems and shall be
totalized for purposes of old-age, disability, survivorship and other benefits in case the
covered member does not qualify for such benefits in either or both Systems without
totalization: Provided, however, That overlapping periods of membership shall be
credited only once for purposes of totalization.

Sec. 4. All contributions paid by such member personally, and those that were paid by his
employers to both Systems shall be considered in the processing of benefits which he
can claim from either or both Systems: Provided, however, That the amount of benefits to
be paid by one System shall be in proportion to the number of contributions actually
remitted to that System.
39
REPUBLIC ACT NO. 7875
REPUBLIC ACT NO. 7875 - AN ACT INSTITUTING A NATIONAL HEALTH INSURANCE
PROGRAM FOR ALL FILIPINOS AND ESTABLISHING THE PHILIPPINE HEALTH
INSURANCE CORPORATION FOR THE PURPOSE
SECTION 1. Short Title. This Act shall be known as the "National Health Insurance
Act of 1995."
ARTICLE I
GUIDING PRINCIPLES
SECTION 2. Declaration of Principles and Policies. Section 11, Article XIII of the
1987 Constitution of the Republic of the Philippines declares that the State shall adopt an
integrated and comprehensive approach to health development which shall endeavor to
make essential goods, health and other social services available to all the people at
affordable cost. Priority for the needs of the underprivileged, sick, elderly, disabled,
women, and children shall be recognized. Likewise, it shall be the policy of the State to
provide free medical care to paupers.
In the pursuit of a National Health Insurance Program, this Act shall adopt the following
guiding principles:
a) Allocation of National Resources for Health The Program shall underscore the
importance for government to give priority to health as a strategy for bringing about faster
economic development and improving quality of life.
b) Universality The Program shall provide all citizens with the mechanism to gain
financial access to health services, in combination with other government health
programs. The National Health Insurance Program shall give the highest priority to
achieving coverage of the entire population with at least a basic minimum package of
health insurance benefits;
c) Equity The Program shall provide for uniform basic benefits. Access to care must
be a function of a person's health needs rather than his ability to pay;
d) Responsiveness The Program shall adequately meet the needs for personal
health services at various stages of a member's life;
e) Social Solidarity The Program shall be guided by community spirit. It must
enhance risk sharing among income groups, age groups, and persons of differing health
status, and residing in different geographic areas;
f) Effectiveness The Program shall balance economical use of resources with quality
of care;
g) Innovation The Program shall adapt to changes in medical technology, health
service organizations, health care provider payment systems, scopes of professional
practice, and other trends in the health sector. It must be cognizant of the appropriate
roles and respective strengths of the public and private sectors in health care, including
people's organizations and community-based health care organizations;
h) Devolution The Program shall be implemented in consultation with local
government units (LGUs), subject to the overall policy directions set by the National
Government;
i) Fiduciary Responsibility The Program shall provide effective stewardship, funds
management, and maintenance of reserves;
j) Informed Choice The Program shall encourage members to choose from among
accredited health care providers. The Corporation's local offices shall objectively apprise
its members of the full range of providers involved in the Program and of the services and
privileges to which they are entitled as members. This explanation, which the members
may use as a guide in selecting the appropriate and most suitable provider, shall be
given in clear and simple Filipino and in the local languages that is comprehensible to the
member;
k) Maximum Community Participation The Program shall build on existing
community initiatives for its organization and human resource requirements;
l) Compulsory Coverage All citizens of the Philippines shall be required to enroll in
the National Health Insurance Program in order to avoid adverse selection and social
inequity;
m) Cost Sharing The Program shall continuously evaluate its cost sharing schedule
to ensure that costs borne by the members are fair and equitable and that the charges by
health care providers are reasonable;
n) Professional Responsibility of Health Care Providers The Program shall assure
that all participating health care providers are responsible and accountable in all their
dealings with the Corporation and its members;
o) Public Health Services The Government shall be responsible for providing public
health services for all groups such as women, children, indigenous people, displaced
communities and communities in environmentally endangered areas, while the Program
shall focus on the provision of personal health services. Preventive and promotive public
health services are essential for reducing the need and spending for personal health
services;
p) Quality of Services The Program shall promote the improvement in the quality of
health services provided through the institutionalization of programs of quality assurance
40
at all levels of the health service delivery system. The satisfaction of the community, as
well as individual beneficiaries, shall be a determinant of the quality of service delivery;
q) Cost Containment The program shall incorporate features of cost containment in
its design and operations and provide a viable means of helping the people pay for health
care services; and
r) Care for the Indigent The Government shall be responsible for providing a basic
package of needed personal health services to indigents through premium subsidy, or
through direct service provision until such time that the program is fully implemented.
SECTION 3. General Objectives. This Act seeks to:
a) provide all citizens of the Philippines with the mechanism to gain financial access to
health services;
b) create the National Health Insurance Program, hereinafter referred to as the
Program, to serve as the means to help the people pay for health care services;
c) prioritize and accelerate the provision of health services to all Filipinos, especially
that segment of the population who cannot afford such services; and
d) establish the Philippine Health Insurance Corporation, hereinafter referred to as the
Corporation, that will administer the Program at central and local levels.
ARTICLE II
DEFINITIONS OF TERMS
SECTION 4. Definitions of Terms. For the purpose of this Act, the following terms
shall be defined as follows:
a) Beneficiary Any person entitled to health care benefits under this Act.
b) Benefit Package Services that the Program offers to its members.
c) Capitation A payment mechanism where a fixed rate, whether per person, family,
household, or group, is negotiated with a health care provider who shall be responsible
for delivering or arranging for the delivery of health services required by the covered
person under the conditions of a health care provider contract.
d) Contribution The amount paid by or in behalf of a member to the Program for
coverage, based on salaries or wages in the case of formal sector employees, and on
household earnings and assets, in the case of the self-employed, or on other criteria as
may be defined by the Corporation in accordance with the guiding principles set forth in
Article I of this Act.
e) Coverage The entitlement of an individual, as a member or as a dependent, to the
benefits of the Program.
f) Dependent The legal dependents of a member are: 1) the legitimate spouse who
is not a member; 2) the unmarried and unemployed legitimate, legitimated, illegitimate,
acknowledged children as appearing in the birth certificate; legally adopted or
stepchildren below twenty-one (21) years of age; 3) children who are twenty-one (21)
years old or above but suffering from congenital disability, either physical or mental, or
any disability acquired that renders them totally dependent on the member for support; 4)
the parents who are sixty (60) years old or above whose monthly income is below an
amount to be determined by the Corporation in accordance with the guiding principles set
forth in Article I of this Act.
g) Diagnostic Procedure Any procedure to identify a disease or condition through
analysis and examination.
h) Emergency An unforeseen combination of circumstances which calls for
immediate action to preserve the life of a person or to preserve the sight of one or both
eyes; the hearing of one or both ears; or one or two limbs at or above the ankle or wrist.
i) Employee Any person who performs services for an employer in which either or
both mental and physical efforts are used and who receives compensation for such
services, where there is an employer-employee relationship.
j) Employer A natural or juridical person who employs the services of an employee.
k) Enrollment The process to be determined by the Corporation in order to enlist
individuals as members or dependents covered by the Program.
l) Fee for Service A reasonable and equitable health care payment system under
which physicians and other health care providers receive a payment that does not
exceed their billed charge for each unit of service provided.
m) Global Budget An approach to the purchase of medical services by which health
care provider negotiations concerning the costs of providing a specific package of
medical benefits is based solely on a predetermined and fixed budget.
n) Government Service Insurance System The Government Service Insurance
System created under Commonwealth Act No. 186, as amended.
41
o) Health Care Provider Refers to:
1) a health care institution, which is duly licensed and accredited devoted primarily to
the maintenance and operation of facilities for health promotion, prevention, diagnosis,
treatment, and care of individuals suffering from illness, disease, injury, disability or
deformity, or in need of obstetrical or other medical and nursing care. It shall also be
construed as any institution, building, or place where there are installed beds, cribs, or
bassinets for twenty-four hour use or longer by patients in the treatment of diseases,
injuries, deformities, or abnormal physical and mental states, maternity cases or sanitarial
care; or infirmaries, nurseries, dispensaries, and such other similar names by which they
may be designated; or
2) a health care professional, who is any doctor of medicine, nurse, midwife, dentist, or
other health care professional or practitioner duly licensed to practice in the Philippines
and accredited by the Corporation; or
3) a health maintenance organization, which is an entity that provides, offers, or
arranges for coverage of designated health services needed by plan members for a fixed
prepaid premium; or
4) a community-based health care organization, which is an association of indigenous
members of the community organized for the purpose of improving the health status of
that community through preventive, promotive and curative health services.
p) Health Insurance Identification (ID) Card The document issued by the Corporation
to members and dependents upon their enrollment to serve as the instrument for proper
identification, eligibility verification, and utilization recording.
q) Indigent A person who has no visible means of income, or whose income is
insufficient for the subsistence of his family, as identified by the Local Health Insurance
Office and based on specific criteria set by the Corporation in accordance with the
guiding principles set forth in Article 1 of this Act;
r) Inpatient Education Package A set of informational services made available to an
individual who is confined in a hospital to afford him with knowledge about his illness and
its treatment, and of the means available, particularly lifestyle changes, to prevent the
recurrence or aggravation of such illness and to promote his health in general.
s) Member Any person whose premiums have been regularly paid to the National
Health Program. He may be a paying member, an indigent member, or a
pensioner/retiree member.
t) Means Test A protocol administered at the barangay level to determine the ability
of individuals or households to pay varying levels of contributions to the Program, ranging
from the indigent in the community whose contributions should be totally subsidized by
government, to those who can afford to subsidize part but not all the required
contributions for the Program.
u) Medicare The health insurance program currently being implemented by the
Philippine Medical Care Commission. It consists of:
1) Program I, which covers members of the SSS and GSIS including their legal
dependents; and
2) Program II, which is intended for those not covered under Program I.
v) National Health Insurance Program The compulsory health insurance program of
the government as established in this Act, which shall provide universal health insurance
coverage and ensure affordable, acceptable, available and accessible health care
services for all citizens of the Philippines.
w) Pensioner An SSS or GSIS member who receives pensions therefrom.
x) Personal Health Services Health services in which benefits accrue to the
individual person. These are categorized into inpatient and outpatient services.
y) Philippine Medical Care Commission The Philippine Medical Care Commission
created under Republic Act No. 6111, as amended.
z) Philippine National Drug Formulary The essential drugs list for the Philippines
which is prepared by the National Drug Committee of the Department of Health in
consultation with experts and specialists from organized professional medical societies,
medical academe and the pharmaceutical industry, and which is updated every year.
aa) Portability The enablement of a member to avail of Program benefits in an area
outside the jurisdiction of his Local Health Insurance Office.
bb) Prescription Drug A drug which has been approved by the Bureau of Food and
Drug and which can be dispensed only pursuant to a prescription order from a physician
who is duly licensed to do so.
cc) Public Health Services Services that strengthen preventive and promotive health
care through improving conditions in partnership with the community at large. These
include control of communicable and non-communicable diseases, health promotion,
public information and education, water and sanitation, environmental protection, and
health-related data collection, surveillance, and outcome monitoring.
dd) Quality Assurance A formal set of activities to review and ensure the quality of
services provided. Quality assurance includes quality assessment and corrective actions
to remedy any deficiencies identified in the quality of direct patient, administrative, and
support services.
42
ee) Residence The place where the member actually lives.
ff) Retiree A member of the Program who has reached the age of retirement or who
was retired on account of disability.
gg) Self-employed A person who works for himself and is thereforee both employee
and employer at the same time.
hh) Social Security System The Social Security System created under Republic Act
No. 1161, as amended.
ii) Treatment Procedure Any method used to remove the symptoms and cause of a
disease.
jj) Utilization Review A formal review of patient utilization or of the appropriateness of
health care services, on a prospective, concurrent or retrospective basis.
ARTICLE III
THE NATIONAL HEALTH INSURANCE PROGRAM
SECTION 5. Establishment and Purposes. There is hereby created the National
Health Insurance Program which shall provide health insurance coverage and ensure
affordable, acceptable, available and accessible health care services for all citizens of the
Philippines, in accordance with the policies and specific provisions of this Act. This social
insurance program shall serve as the means for the healthy to help pay for the care of the
sick and for those who can afford medical care to subsidize those who cannot. It shall
initially consist of programs I and II of Medicare and be expanded progressively to
constitute one universal health insurance program for the entire population. The Program
shall include a sustainable system of funds constitution, collection, management and
disbursement for financing the availment of a basic minimum package and other
supplementary packages of health insurance benefits by a progressively expanding
proportion of the population. The Program shall be limited to paying for the utilization of
health services by covered beneficiaries or to purchasing health services in behalf of
such beneficiaries. It shall be prohibited from providing health care directly, from buying
and dispensing drugs and pharmaceuticals, from employing physicians and other
professionals for the purpose of directly rendering care, and from owning or investing in
health care facilities.
SECTION 6. Coverage. All citizens of the Philippines shall be covered by the
National Health Insurance Program. In accordance with the principles of universality and
compulsory coverage enunciated in Section 2 (b) and 2 (l) hereof, implementation of the
Program shall, furthermore, be gradual and phased in over a period of not more than
fifteen (15) years: provided, that the Program shall not be made compulsory in certain
provinces and cities until the Corporation shall be able to ensure that members in such
localities shall have reasonable access to adequate and acceptable health care services.
SECTION 7. Enrollment. The Program shall enroll beneficiaries in order for them to
be placed under coverage that entitles them to avail of benefits with the assistance of the
financial arrangements provided by the Program. The process of enrollment shall include
the identification of beneficiaries, issuance of appropriate documentation specifying
eligibility to benefits, and indicating how membership was obtained or is being
maintained. The enrollment shall proceed in accordance with these specific policies:
a) all persons currently eligible for benefits under Medicare Program I, including SSS
and GSIS members, retirees, pensioners and their dependents, shall immediately and
automatically be made members of the National Health Insurance Program;
b) all persons eligible through health insurance plans established by local governments
as part of Program II of Medicare or in accordance with the provisions of this Act,
including indigent members, shall also be enrolled in the Program;
c) all persons eligible for benefits as member of local health insurance plans
established by the Corporation in accordance with the implementing rules and regulations
of this Act shall also be deemed to have enrolled in the Program. Enrollment of persons
who have no current health insurance coverage shall be given priority by the corporation;
and
d) all persons eligible for benefits as members of other government initiated health
insurance programs, community-based health care organizations, cooperatives, or
private non-profit health insurance plans shall be enrolled in the Program upon
accreditation by the Corporation which shall devise and provide incentives to ensure that
such accredited organizations will benefit from their participation in the program.
All indigents not enrolled in the Program shall have priority in the use and availment of
the services and facilities of government hospitals, health care personnel, and other
health organizations: provided, however, that such government health care providers
shall ensure that said indigents shall subsequently be enrolled in the Program.
SECTION 8. Health Insurance ID Card. In conjunction with the enrollment provided
above, the Corporation through its local office shall issue a health insurance ID which
shall be used for purposes of identification, eligibility verification, and utilization recording.
The issuance of this ID card shall be accompanied by a clear explanation to the enrollee
of his rights, privileges and obligations as a member. A list of health care providers
accredited by the Local Health Insurance Office shall likewise be attached thereto.
SECTION 9. Change of Residence. A citizen can be under only one Local Health
Insurance Office which shall be located in the province or city of his place of residence.
A person who changes residence, becomes temporarily employed, or for other justifiable
43
reasons, is transferred to another locality should inform said Office of such transfer and 2) the initial set of services shall not be less than half of those provided under the
subsequently transfer his Program membership. current Medicare Program I in terms of overall average cost of claims paid per beneficiary
household per year.
SECTION 10. Benefit Package. Subject to the limitations specified in this Act and as
may be determined by the Corporation, the following categories of personal health 3) the services included are prioritized, first, according to its effectiveness and, second,
services granted to the member or his dependents as medically necessary or appropriate according to its potential of providing maximum relief from the financial burden on the
shall include: beneficiary: provided, that in addition to the basic minimum package, the Program shall
provide supplemental health benefit coverage to beneficiaries of contributory funds,
a) Inpatient hospital care: taking into consideration the availability of funds for the purpose from said contributory
funds: provided, further, that the Program shall progressively expand the basic minimum
1) room and board; benefit package as the proportion of the population covered reaches targeted milestones
so that the same benefits are extended to all members of the Program within five (5)
2) services of health care professionals;
years after implementation of this Act. Such expansion will provide for the gradual
3) diagnostic, laboratory, and other medical examination services; incorporation of supplementary health benefits previously extended only to some
beneficiaries into the basic minimum package extended to all beneficiaries: and provided
4) use of surgical or medical equipment and facilities; finally, that in the phased implementation of this Act, there should be no reduction or
interruption in the benefits currently enjoyed by present members of Medicare.
5) prescription drugs and biologicals; subject to the limitations stated in Section 37 of
this Act; SECTION 11. Excluded Personal Health Services. The benefits granted under this
Act shall not cover expenses for the services enumerated hereunder except when the
6) inpatient education packages; Corporation, after actuarial studies, recommend their inclusion subject to the approval of
the Board:
b) Outpatient care:
a) non-prescription drugs and devices;
1) services of health care professionals;
b) outpatient psychotherapy and counselling for mental disorders;
2) diagnostic, laboratory, and other medical examination services;
c) drug and alcohol abuse or dependency treatment;
3) personal preventive services; and
d) cosmetic surgery;
4) prescription drugs and biologicals, subject to the limitations described in Section 37
of this Act; e) home and rehabilitation services;

c) Emergency and transfer services; and f) optometric services;

d) Such other health care services that the Corporation shall determine to be
appropriate and cost-effective: provided, that the Program, during its initial phase of
implementation, which shall not be more than five (5) years, shall provide a basic
minimum package of benefits which shall be defined according to the following
guidelines:
1) the cost of providing said package is such that the available national and local
government subsidies for premium payments of indigents are sufficient to extend
coverage to the widest possible population.
g) normal obstetrical delivery; and
h) cost-ineffective procedures which shall be defined by the Corporation.
SECTION 12. Entitlement to Benefits. A member whose premium contributions for at
least three (3) months have been paid within the six (6) months prior to the first day of his
or his dependents' availment, shall be entitled to the benefits of the Program: provided,
that such member can show that he contributes thereto with sufficient regularity, as
evidenced in their health insurance ID card: and provided further, that he is not currently
subject to legal penalties as provided for in Section 44 of this Act.

44
The following need not pay the monthly contributions to be entitled to the Program's
benefits:
a) Retirees and pensioners of the SSS and GSIS prior to the effectivity of this Act;
b) Members who reach the age of retirement as provided for by law and have paid at
least one hundred twenty (120) monthly contributions; and
c) Enrolled indigents.
SECTION 13. Portability of Benefits. The corporation shall develop and enforce
mechanisms and procedures to assure that benefits are portable across Offices.
ARTICLE IV
THE PHILIPPINE HEALTH INSURANCE CORPORATION
SECTION 14. Creation and Nature of the Corporation. There is hereby created a
Philippine Health Insurance Corporation, which shall have the status of a tax-exempt
government corporation attached to the Department of Health for Policy coordination and
guidance.
SECTION 15. Exemption from Taxes and Duties. The Corporation shall be exempt
from the payment of taxes on all contributions thereto and all accruals on its income or
investment earnings.
Any donation, contribution, bequest, subsidy or financial aid which may be made to the
Corporation shall constitute as allowable deduction from the income of the donor for
income tax purposes and shall be exempt from donor's tax, subject to such conditions as
provided in the National Internal Revenue Code, as amended.
SECTION 16. Powers and Functions. The Corporation shall have the following
powers and functions:
a) to administer the National Health Insurance Program;
b) to formulate and promulgate policies for the sound administration of the Program;
c) to set standards, rules, and regulations necessary to ensure quality of care,
appropriate utilization of services, fund viability, member satisfaction, and overall
accomplishment of Program objectives;
d) to formulate and implement guidelines on contributions and benefits, cost
containment and quality assurance; and health care provider arrangements, payment
methods; and referral systems;
e) to establish branch offices as mandated in Article V of this Act;
f) to receive and manage grants, donations, and other forms of assistance;
g) to sue and be sued in court;
h) to acquire property, real and personal, which may be necessary or expedient for the
attainment of the purposes of this Act;
i) to collect, deposit, invest, administer, and disburse the National Health Insurance
Fund in accordance with the provisions of this Act;
j) to negotiate and enter into contracts with health care institutions, professionals, and
other persons, juridical or natural, regarding the pricing, payment mechanisms, design
and implementation of administrative and operating systems and procedures, financing,
and delivery of health services;
k) to authorize Local Health Insurance Offices to negotiate and enter into contracts in
the name and on behalf of the Corporation with any accredited government or private
sector health provider organization, including but not limited to health maintenance
organizations, cooperatives and medical foundations, for the provision of at least the
minimum package of personal health services prescribed by the Corporation;
l) to determine requirements and issue guidelines for the accreditation of health care
providers for the Program in accordance with this Act;
m) to supervise the provision of health benefits with the power to inspect medical and
financial records of health care providers and patients who are participants in or
members of the Program, and the power to enter and inspect accredited health care
institutions, subject to the rules and regulations to be promulgated by the Corporation;
n) 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;
o) to submit to the President of the Philippines and to both Houses of Congress its
Annual Report which shall contain the status of the National Health Insurance Fund, its
total disbursements, reserves, average costings to beneficiaries, any request for
additional appropriation, and other data pertinent to the implementation of the Program
and publish a synopsis of such report in two (2) newspapers of general circulation;
p) to keep records of the operations of the Corporation and investments of the National
Health Insurance Fund; and
45
q) to perform such other acts as it may deem appropriate for the attainment of the
objectives of the Corporation and for the proper enforcement of the provisions of this Act.
SECTION 17. Quasi-Judicial Powers. The Corporation, to carry out its tasks more
effectively, shall be vested with the following powers:
a) to conduct investigations for the determination of a question, controversy, complaint,
or unresolved grievance brought to its attention, and render decisions, orders, or
resolutions thereon. It shall proceed to hear and determine the case even in the absence
of any party who has been properly served with notice to appear. It shall conduct its
proceedings or any part thereof in public or in executive session; adjourn its hearings to
any time and place; refer technical matters or accounts to an expert and to accept his
reports as evidence; direct parties to be joined in or excluded from the proceedings; and
give all such directions as it may deem necessary or expedient in the determination of the
dispute before it;
b) to summon the parties to a controversy, issue subpoenas requiring the attendance
and testimony of witnesses or the production of documents and other materials
necessary to a just determination of the case under investigation;
c) to suspend temporarily, revoke permanently, or restore the accreditation of a health
care provider or the right to benefits of a member and/or impose fines after due notice
and hearing. The decision shall immediately be executory, even pending appeal, when
the public interest so requires and as may be provided for in the implementing rules and
regulations. Suspension of accreditation shall not exceed twenty-four (24) months.
Suspension of the rights of members shall not exceed six (6) months.
The revocation of a health care provider's accreditation shall operate to disqualify him
from obtaining another accreditation in his own name, under a different name, or through
another person, whether natural or juridical.
The Corporation shall not be bound by the technical rules of evidence.
SECTION 18. The Board of Directors.
a) Composition The Corporation shall be governed by a Board of Directors
hereinafter referred to as the Board, composed of eleven members as follows:
The Secretary of Health;
The Secretary of Labor and Employment or his representative;
The Secretary of the Interior and Local Government or his representative;
The Secretary of Social Welfare and Development or his representative;
The President of the Corporation;
A representative of the labor sector;
A representative of employers;
The SSS Administrator or his representative;
The GSIS General Manager or his representative;
A representative of the self-employed sector; and
A representative of health care providers.
The Secretary of Health shall be the ex officio Chairperson while the President of the
Corporation shall be the Vice Chairperson of the Board.
b) Appointment and Tenure The President of the Philippines shall appoint the
Members of the Board upon the recommendation of the Chairman of the Board and in
consultation with the sectors concerned. Members of the Board shall have a term of four
(4) years each, renewable for a maximum of two (2) years, except for members whose
terms shall be co-terminus with their respective positions in government. Any vacancy in
the Board shall be filled in the manner in which the original appointment was made and
the appointee shall serve only the unexpired term of his predecessor.
c) Meetings and Quorum The Board shall hold regular meetings at least once a
month. Special meetings may be convened at the call of the chairperson or by a majority
of the members of the Board. The presence of six (6) voting members shall constitute a
quorum. In the absence of the Chairperson and Vice Chairperson, a temporary presiding
officer shall be designated by the majority of the quorum.
d) Allowances and Per Diems The members of the Board shall receive a per diem
for every meeting actually attended subject to the pertinent budgetary laws, rules and
regulations on compensation, honoraria and allowances.
SECTION 19. The President of the Corporation.
a) Appointment and Tenure The President of the Philippines shall appoint for a non-
renewable term of six (6) years the President of the Corporation, hereinafter referred to
as the President, upon the recommendation of the Board. The President shall not be
removed from office except in accordance with existing laws.
b) Duties and Functions The President shall have the duty of advising the Board and
carrying into effect its policies and decisions. His functions are as follows:
1) to act as the chief executive officer of the Corporation; and
46
2) to be responsible for the general conduct of the operations and management
functions of the Corporation and for other duties assigned to him by the Board.
c) Qualifications The President must a Filipino citizen and must possess adequate
and appropriate training and at least five (5) years experience in the field of health care
financing and corporate management.
d) Salary The President shall receive a salary to be fixed by the Board, with the
approval of the President of the Philippines, payable from the funds of the Corporation.
e) Prohibition To avoid conflict of interest, the President must not be involved in any
health care institution as owner or member of its board.
SECTION 20. Health Finance Policy Research. Among the staff departments that
will be established by the Corporation shall be the Health Finance Policy Research
Department, which shall have the following duties and functions:
a) development of broad conceptual framework for implementation of the Program
through a national health finance master plan to ensure sustained investments in health
care, and to provide guidance for additional appropriations from the National
Government;
b) conduct of researches and studies toward the development of policies necessary to
ensure the viability, adequacy and responsiveness of the Program;
c) review, evaluation, and assessment of the Program's impact on the access to, as
well as the quality and cost of, health care in the country;
d) periodic review of fees, charges, compensation rates, capitation rates, medical
standards, health outcomes and satisfaction of members, benefits, and other matters
pertinent to the operations of the Program;
e) comparison in the delivery, quality, use, and cost of health care services of the
different Offices;
f) submission for consideration of program of quality assurance, utilization review, and
technology assessment; and
g) submission of recommendations on policy and operational issues that will help the
Corporation meet the objectives of this Act.
SECTION 21. Actuary of the Corporation. An Office of Actuary shall be created
within the Corporation to conduct the necessary actuarial studies and present
recommendations on insurance premium, investments and other related matters.
ARTICLE V
LOCAL HEALTH INSURANCE OFFICE
SECTION 22. Establishment. The Corporation shall establish a Local Health
Insurance Office, hereinafter referred to as the Office, in every province or chartered city,
or wherever it is deemed practicable, to bring its services closer to members of the
Program. However, one office may serve the needs of more than one province or city
when the merged operations will result in lower administrative cost and greater cross-
subsidy between rich and poor localities.
Provinces and cities where prospective members are organized shall receive priority in
the establishment of local health insurance offices.
SECTION 23. Functions. Each Office shall have the following powers and functions:
a) to consult and coordinate, as needed, with the local government units within its
jurisdiction in the implementation of the Program;
b) to recruit and register members of the Program from all areas within its jurisdiction;
c) to collect and receive premiums and other payment contributions to the Program;
d) to maintain and update the membership eligibility list at community levels;
e) to supervise the conduct of means testing which shall be based on the criteria set by
the Corporation and undertaken by the Barangay Captain in coordination with the social
welfare officer and community-based health care organizations to determine the
economic status of all households and individuals, including those who are indigent;
f) to issue health insurance ID cards to persons whose premiums have been paid
according to the requirements of the Office and the guidelines issued by the Board;
g) to recommend to the Board premium schedules that provide for lower rates to be
paid by members whose dependents include those with reduced probability of utilization,
as in fully immunized children;
h) to recommend to the Board a contribution schedule which specifies contribution
levels by individuals and households, and a corresponding uniform package of personal
health service benefits which is at least equal to the minimum package of such benefits
prescribed by the Board as applying to the nation;
i) to grant or deny accreditation to health care providers, within a period not exceeding
sixty (60) days whenever applicable in accordance with the rules and guidelines of the
Corporation;
47
j) to process, review and pay the claims of providers, within a period not exceeding
sixty (60) days whenever applicable in accordance with the rules and guidelines of the
Corporation;
k) to pay fees, as necessary, for claims review and processing when such are
conducted by the central office of the Corporation or by any of its contractors;
l) to establish referral systems and network arrangements with other Offices, as may
be necessary and following the guidelines set by the Corporation;
m) to establish mechanisms by which private and public sector health facilities and
human resources may be shared in the interest of optimizing the use of health resources;
n) to support the management information system requirements of the Corporation;
o) to serve as the first level for appeals and grievance cases;
p) to tap community-based volunteer health workers and barangay officials, if
necessary, for member recruitment, premium collection and similar activities, and to grant
such workers incentives according to the guidelines set by the Corporation and in
accordance with applicable laws. However, the incentives for the barangay officials shall
accrue to the barangay and not to the said officials.
q) to participate in information and education activities that are consistent with the
government's priority programs on disease prevention and health promotion; and
r) to prepare an annual report according to guidelines set by the Board and to submit
the same to the central office of the Corporation.
ARTICLE VI
THE NATIONAL HEALTH INSURANCE FUND
SECTION 24. Creation of the National Health Insurance Fund. There is hereby
created a National Health Insurance Fund, hereinafter referred to as the Fund, that shall
consist of:
a) Contributions from Program members;
b) Current balances of the Health Insurance Funds of the SSS and the GSIS collected
under the Philippine Medical Care Act of 1969, as amended, including arrearages of the
Government of the Philippines with the GSIS for the said Fund;
c) Other appropriations earmarked by the national and local governments purposely for
the implementation of the Program;
d) Subsequent appropriations provided for under Sections 46 and 47 of this Act;
e) Donations and grants-in-aid; and
f) All accruals thereof.
SECTION 25. Components of the National Health Insurance Fund. The National
Health Insurance Fund shall have the following components:
a) The Basic Benefit Fund. This Fund shall finance the availment of the basic
minimum benefit package by eligible beneficiaries. All liabilities associated with the
extension of entitlement to the basic minimum benefit package to the enrolled population
shall be borne by the basic benefit fund. It shall be constituted and maintained through
the following process:
1) upon the determination of the amount of government subsidies and donations
available for paying fully or partially the premium of indigent beneficiaries, a basic
minimum benefit package affordable for enrolling as many of the indigent beneficiaries
as possible shall be defined. The government subsidies will then be constituted as
premium payments for enrolled indigents and contributed into the basic benefit fund.
2) for extending coverage of this same minimum benefit package to non-indigents who
are not members of Medicare, premium prices for specific population shall be actuarially
determined based on variations in risk, capacity to pay, and projected costs of services
utilized. The amounts corresponding to the premium required, including costs of direct
benefit payments, all costs of administration, and provision of adequate reserves, for
extending the coverage of the basic minimum benefit package for such population groups
shall be contributed into the basic benefit fund.
3) for the population enrolled through Medicare Program I under SSS, the
corresponding premium for the basic minimum benefit package, including costs of direct
benefit payments, all costs of administration, and provision of adequate reserves, for
extending the coverage of the basic minimum benefit package for such population groups
shall be contributed into the basic benefit fund.
4) for the population enrolled through Medicare Program I under GSIS, the
corresponding premium for the basic minimum benefit package, including costs of direct
benefit payments, all costs of administration, and provision of adequate reserves, shall be
charged to the health insurance fund of the GSIS and paid into the basic benefit fund.
5) for groups enrolled through any of the existing or future health insurance schemes
and plans, including those created under Medicare Programs II and those organized by
local government units, national agencies, cooperatives, and other similar organizations,
the corresponding premium, including costs of direct benefit payments, all costs of
administration, and provision of adequate reserves, for extending the basic minimum
48
benefit package to their respective enrollees will be charged to their respective funds and
paid into the basic benefit fund.
b) Supplementary Benefit Funds. These are separate and distinct supplementary
benefit funds created by the Corporation as eligible for use to provide supplementary
coverage to various groups of the population enjoying the basic benefit coverage as are
affordable by their respective funding sources. Each supplementary benefit fund shall
finance the extension and availment of additional benefits not included in the basic
minimum benefit package but approved by the Board. Such supplementary benefits shall
be financed by whatever amounts are available after deducting the costs of providing the
basic minimum benefit package, including costs of direct benefit payments, all costs of
administration, and provision of adequate reserves. All liabilities associated with the
extension of supplementary benefits to the defined group of enrollees shall be borne
exclusively by the respective supplementary benefit fund. Upon the implementation of
this Act, the following supplementary benefit funds shall be established:
1) supplementary benefit fund for SSS-Medicare members and beneficiaries. After
deducting the amount corresponding to the premium of the basic minimum benefit
package, the balance of the SSS-Health Insurance Fund (HIF) shall be constituted into a
supplementary benefit fund to finance the extension of benefits in addition to the
minimum basic package to SSS members and beneficiaries; and
2) supplementary benefit fund for GSIS-Medicare members and beneficiaries. After
deducting the amount corresponding to the premium for the basic minimum benefit
package, the balance of the GSIS-HIF plus the arrearages of the Government of the
Philippines with the GSIS for the said HIF shall be constituted into a supplementary
benefit fund to finance the extension of benefits in addition to the minimum basic package
to GSIS members and beneficiaries.
In accordance with the principles of equity and social solidarity, as enunciated in Section
2 of this Act, the above supplementary benefit funds shall be maintained for not more
than five (5) years, after which, such funds shall be merged into the basic benefit fund.
SECTION 26. Financial Management. The use, disposition, investment,
disbursement, administration and management of the National Health Insurance Fund,
including any subsidy, grant or donation received for program operations shall be
governed by resolution of the Board of Directors of the Corporation, subject to the
following limitations:
a) All funds under the management and control of the Corporation shall be subject to all
rules and regulations applicable to public funds.
b) The corporation is authorized to charge the various funds under its control for the
costs of administering the Program. Such costs may include administration, monitoring,
marketing and promotion, research and development, audit and evaluation, information
services, and other necessary activities for the effective management of the Program.
The total annual costs for these shall not exceed twelve percent (12%) of the total
contributions, including government contributions to the Program and not more than three
percent (3%) of the investment earnings collected during the immediately preceding year.
SECTION 27. Reserve Fund. The Corporation shall set aside a portion of its
accumulated revenues not needed to meet the cost of the current year's expenditures as
reserve funds: provided, that the total amount of reserves shall not exceed a ceiling
equivalent to the amount actuarially estimated for two years' projected Program
expenditures: provided, further, that whenever actual reserves exceed the required
ceiling at the end of the Corporation's fiscal year, the Program's benefits shall be
increased or member contributions decreased prospectively in order to adjust
expenditures or revenues to meet the required ceiling for reserve funds. Such portions of
the reserve fund as are not needed to meet the current expenditure obligations shall be
invested in short-term investments to earn an average annual income at prevailing rates
of interest and shall be known as the "Investment Reserve Fund" which shall be invested
in any or all of the following:
a) In interest-bearing bonds, securities or other evidences of indebtedness of the
Government of the Philippines, or in bonds, securities, promissory notes and other
evidences of indebtedness to which full faith and credit and unconditional guarantee of
the Republic of the Philippines is pledged;
b) In interest-bearing deposits and loans to or securities in any domestic bank doing
business in the Philippines: provided, that in the case of such deposits, this shall not
exceed at any time the unimpaired capital and surplus or total private deposits of the
depository bank, whichever is smaller: provided, further, that said bank shall first have
been designated as a depository for this purpose by the Monetary Board of the Bangko
Sentral ng Pilipinas; and
c) In preferred stocks of any solvent corporation or institution created or existing under
the laws of the Philippines: provided, that the issuing, assuming, or guaranteeing entity or
its predecessor has paid regular dividends upon its preferred or guaranteed stocks for a
period of at least three (3) years immediately preceding the date of investment in such
preferred or guaranteed stocks: provided, further, that if the stocks are guaranteed the
amount of stocks so guaranteed is not in excess of fifty percent (50%) of the amount of
the preferred common stocks as the case may be of the issuing corporations: provided,
furthermore, that if the corporation or institution has not paid dividends upon its preferred
stocks, the corporation or institution has sufficient retained earnings to declare dividends
for at least two (2) years on such preferred stocks and in common stocks option or
warrants to common stocks of any solvent corporation or institution created or existing
under the laws of the Philippines in the stock exchange with proven track record of
profitability and payment of dividends over the last three (3) years or in common stocks of
a newly organized corporation about to be listed in the stock exchange: provided, finally,
that such duly organized corporations shall have been rated 'A', double 'A's or triple 'A's
49
by authorized accredited domestic rating agencies or by Corporation or in mutual funds
including allied investments.
ARTICLE VII
FINANCING
SECTION 28. Contributions. All members of the Program shall contribute to the
Fund, in accordance with a reasonable, equitable and progressive contribution schedule
to be determined by the Corporation on the basis of applicable actuarial studies and in
accordance with the following guidelines:
a) Formal sector employees and current medicare members and their employers shall
continue paying the same monthly contributions as provided for by law until such time
that the Corporation shall have determined the contribution schedule mentioned herein:
provided, that their monthly contribution shall not exceed three percent (3%) of their
respective monthly salaries.
b) Contributions from self-employed members shall be based primarily on household
earnings and assets; their total contributions for one year shall not, however, exceed
three percent (3%) of their estimated actual net income for the preceding year.
c) Contributions made in behalf of indigent members shall not exceed the minimum
contributions set for employed members.
SECTION 29. Payment for Indigent Contributions. Contributions for indigent
members shall be subsidized partially by the local government unit where the member
resides. The Corporation shall provide counterpart financing equal to the LGU's subsidy
for indigents: provided, that in the case of fourth, fifth and sixth class LGUs, the National
Government shall provide up to ninety percent (90%) of the subsidy for indigents for a
period not exceeding five (5) years. The share of the LGUs shall be progressively
increased until such time that its share becomes equal to that of the National
Government.
ARTICLE VIII
HEALTH CARE PROVIDERS
SECTION 30. Free Choice of Health Facility, Medical or Dental Practitioner.
Beneficiaries requiring treatment or confinement shall be free to choose from accredited
health care providers. Such choice shall, however, be subject to limitations based on the
area of jurisdiction of the concerned Office and on the appropriateness of treatment in the
facility chosen or by the desired provider.
SECTION 31. Authority to Grant Accreditation. The Corporation shall have the
authority to grant to health care providers accreditation which confers the privilege of
participating in the Program.
SECTION 32. Accreditation Eligibility. All health care providers, as enumerated in
Sec. 4(o) hereof and operating for at least three (3) years may apply for accreditation.
SECTION 33. Minimum Requirements for Accreditation. The minimum accreditation
requirements for health care providers are as follows:
a) human resource, equipment and physical structure in conformity with the standards
of the relevant facility, as determined by the Department of Health;
b) acceptance of formal program of quality assurance and utilization review;
c) acceptance of the payment mechanisms specified in the following section;
d) adoption of referral protocols and health resources sharing arrangements;
e) recognition of the rights of patients; and
f) acceptance of information system requirements and regular transfer of information.
SECTION 34. Provider Payment Mechanisms. The following mechanisms for public
and private providers shall be allowed in the Program:
a) Fee-for-service based on mechanisms established by the Corporation;
b) Capitation of health care professionals and facilities, or networks of the same
including HMOs, medical cooperatives, and other legally formed health service groups;
c) A combination of both; and
d) Any or all of the above, subject to a global budget.
Each Office shall recommend the appropriate payment mechanism within its jurisdiction
for approval by the Corporation. Special consideration shall be given to payment for
services rendered by public and private health care providers serving remote or medically
underserved areas.
SECTION 35. Fee-for-service Payments and Payments in General. Fee-for-service
payments may be made separately for professional fees and hospital charges, or both,
based on arrangements with health care providers. This fee shall be reviewed every
three (3) years. Fees paid for professional services rendered by salaried public providers
shall be allowed to be retained by the health facility in which services are rendered and
be pooled and distributed among health personnel. Charges paid to public facilities shall
50
be allowed to be retained by the individual facility in which services were rendered and
for which payment was made. Such revenues shall be used to defray operating costs
other than salaries, to maintain or upgrade equipment, plant or facility, and to maintain or
improve the quality of service in the public sector.
SECTION 36. Capitation Payments. Capitation payments may be paid to public or
private providers according to rates of capitation payments based on annual capitation
rate guidelines to be issued by the Corporation.
SECTION 37. Quality Assurance. Under the guidelines approved by the Corporation
and in collaboration with their respective Offices, health care providers shall take part in
programs of quality assurance, utilization review, and technology assessment that have
the following objectives:
a) to ensure that the quality of personal health services delivered, measured in terms of
inputs, process, and outcomes, are of reasonable quality in the context of the Philippines
over time;
b) to ensure that the health care standards are uniform within the Office's jurisdiction
and eventually throughout the nation; and
c) to see to it that the acquisition and use of scarce and expensive medical
technologies and equipment are consistent with actual needs and standards of medical
practice, and that:
1) the performance of medical procedures and the administration of drugs are
appropriate, necessary and unquestionably consistent with accepted standards of
medical practice and ethics. Drugs for which payments will be made shall be those
included in the Philippine National Drug Formulary, unless explicit exception is granted by
the Corporation.
2) the performance of medical procedures and the administration of drugs are
appropriate, consistent with accepted standards of medical practice and ethics, and
respectful of the local culture.
SECTION 38. Safeguards Against Over and Under Utilization. It is incumbent upon
the Corporation to set up a monitoring mechanism to be operationalized through a
contract with health care providers to ensure that there are safeguards against:
a) over-utilization of services;
b) unnecessary diagnostic and therapeutic procedures and intervention;
c) irrational medication and prescriptions;
d) under-utilization of services; and
e) inappropriate referral practices.
The Corporation may deny or reduce the payment for claims when such claims are
attended by false or incorrect information and when the claimant fails without justifiable
cause to comply with the pertinent rules and regulations of this Act.
ARTICLE IX
GRIEVANCE AND APPEAL
SECTION 39. Grievance System. A system of grievance is hereby established,
wherein members, dependents, or health care providers of the Program who believe they
have been aggrieved by any decision of the implementors of the Program, may seek
redress of the grievance in accordance with the provisions of this Article.
SECTION 40. Grounds for Grievances. The following acts shall constitute valid
grounds for grievance action:
a) any violation of the rights of patients;
b) a willful neglect of duties of Program implementors that results in the loss or non-
enjoyment of benefits by members or their dependents;
c) unjustifiable delay in actions on claims;
d) delay in the processing of claims that extends beyond the period agreed upon; and
e) any other act or neglect that tends to undermine or defeat the purposes of this Act.
SECTION 41. Grievance and Appeal Procedures. A member, his dependent, or a
health care provider may file a complaint for grievance based on any of the above
grounds, in accordance with the following procedures:
a) A complaint for grievance must be filed with the Office which shall rule on the
complaint ninety (90) calendar days from receipt thereof.
b) Appeals from Office decisions must be filed with the Board within thirty (30) days
from receipt of notice of dismissal or disallowance by the Office.
c) The Offices shall have no jurisdiction over any issue involving the suspension or
revocation of accreditation, the imposition of fines, or the imposition of charges on
members or their dependents in case of revocation of their entitlement.
d) All decisions by the Board as to entitlement to benefits of members or to payments of
health care providers shall be considered final and executory.
51
SECTION 42. Grievance and Appeal Review Committee. The Board shall create a
Grievance and Appeal Review Committee, composed of three (3) to five (5) members,
hereinafter referred to as the Committee, which, subject to the procedures enumerated
above, shall receive and recommend appropriate action on complaints from members
and health care providers relative to this Act and its implementing rules and regulations.
SECTION 43. Hearing Procedures of the Committee. Upon the filing of the
complaint, the Grievance and Appeal Review Committee, from a consideration of the
allegations thereof, may dismiss the case outright due to lack of verification, failure to
state the cause of action, or any other valid ground for the dismissal of the complaint after
consultation with the Board; or require the respondent to file a verified answer within five
(5) days from service of summons.
Should the defendant fail to answer the complaint within the reglementary five-day period
herein provided, the Committee, motu proprio or upon motion of the complainant, shall
render judgments as may be warranted by the facts alleged in the complainant and
limited to what is prayed for therein.
After an answer is filed and the issues are joined, the Committee shall require the parties
to submit, within ten (10) days from receipt of the order, the affidavits of witnesses and
other evidence on the factual issues defined therein, together with a brief statement of
their positions setting forth the law and the facts relied upon by them. In the event the
Committee finds, upon consideration of the pleadings, the affidavits and other evidence,
and position statements submitted by the parties, that a judgment may be rendered
thereon without need of a formal hearing, it may proceed to render judgment not later
than ten (10) days from the submission of the position statements of the parties.
In cases where the Committee deems it necessary to hold a hearing to clarify specific
factual matters before rendering judgment, it shall set the case for hearing for the
purpose. At such hearing, witnesses whose affidavits were previously submitted may be
asked clarificatory questions by the proponent and by the Committee and may be cross-
examined by the adverse party. The order setting the case of hearing shall specify the
witnesses who will be called to testify, and the matters on which their examination will
deal. The hearing shall be terminated within fifteen (15) days, and the case decided by
the Committee within fifteen (15) days from such termination.
The decision of the Committee shall become final and executory fifteen (15) days after
notice thereof: provided, however, that it is appealable to the Board by filing the
appellant's memorandum of appeal within fifteen (15) days from receipt of the copy of the
judgment appealed from. The appellees shall be given fifteen (15) days from notice to
file the appellee's memorandum after which the Board shall decide the appeal within
thirty (30) days from the submittal of the said pleadings.
The decision of the Board shall also become final and executory fifteen (15) days after
notice thereof: provided, however, that it is reviewable by the Supreme Court on purely
questions of law in accordance with the Rules of Court.
The Committee and the Board, in the exercise of their quasi-judicial function, as specified
in Section 17 hereof, can administer oaths, certify to official acts and issue subpoena to
compel the attendance and testimony of witnesses, and subpoena duces tecum or ad
testificadum to enjoin the production of books, papers and other records and to testify
therein on any question arising out of this Act. Any case of contumacy shall be dealt with
in accordance with the provisions of the Revised Administrative Code and the Rules of
Court. The Board or the Committee, as the case may be, shall prescribe the necessary
administrative sanctions such as fines, warnings, suspension or revocation of the right to
participate in the Program.
In all its proceedings, the Committee and the Board shall not be bound by the technical
rules of evidence: provided, however, that the Rules of Court shall apply with suppletory
effect.
ARTICLE X
PENALTIES
SECTION 44. Penal Provisions. Any violation of the provisions of this Act, after due
notice and hearing, shall suffer the following penalties:
A fine of not less than Ten thousand pesos (P10,000) nor more than Fifty thousand
pesos (P50,000) in case the violation is committed by the hospital management or
provider. In addition, its accreditation shall be suspended or revoked from three (3)
months to the whole term of accreditation: provided, however, that recidivists may not
anymore be accredited as a participant of the Program;
A fine of not less than Five hundred pesos (P500) nor more than Five thousand pesos
(P5,000) and imprisonment of not less than six (6) months nor more than one (1) year in
case the violation is committed by the member.
Where the violations consist of failure or refusal to deduct contributions from the
employee's compensation or to remit the same to the Corporation, the penalty shall be a
fine of not less than Five hundred pesos (P500) but not more than One Thousand pesos
(P1,000) multiplied by the total number of employees employed by the firm and
imprisonment of not less than six (6) months but not more than one (1) year: provided,
further, that in the case of self-employed members, failure to remit one's own contribution
shall be penalized with a fine of not less than Five hundred pesos (P500) but not more
than One Thousand pesos (P1,000).
52
Any employer or any officer authorized to collect contributions under this Act who, after
collecting or deducting the monthly contributions from his employees' compensation, fails
to remit the said contributions to the Corporation within thirty (30) days from the date they
become due shall be presumed to have misappropriated such contributions and shall
suffer the penalties provided for in Article 315 of the Revised Penal Code.
Any employer who shall deduct directly or indirectly from the compensation of the
covered employees or otherwise recover from them his own contribution on behalf of
such employees shall be punished by a fine not exceeding One thousand pesos (P1,000)
multiplied by the total number of employees employed by the firm, or imprisonment not
exceeding one (1) year, or both fine and imprisonment, at the discretion of the Court.
If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing directors or partners or president or
general manager, or other persons responsible for the commission of the said act shall
be liable for the penalties provided for in this Act and other laws for the offense.
Any employee of the Corporation who receives or keeps funds or property belonging,
payable or deliverable to the Corporation, and who shall appropriate the same, or shall
take or misappropriate or shall consent, or through abandonment or negligence shall
permit any other person to take such property or funds wholly or partially, shall likewise
be liable for misappropriation of funds or property and shall suffer imprisonment of not
less than six (6) years and not more than twelve (12) years and a fine of not less than
Ten thousand pesos (P10,000.00) nor more than Twenty thousand pesos (P20,000).
Any shortage of the funds or loss of the property upon audit shall be deemed prima facie
evidence of the offense.
All other violations involving funds of the Corporation shall be governed by the applicable
provisions of the Revised Penal Code or other laws, taking into consideration the rules on
collection, remittances, and investment of funds as may be promulgated by the
Corporation.
ARTICLE XI
APPROPRIATIONS
SECTION 45. Initial Appropriation. The unexpended portion of the budget of the
Philippine Medical Care Commission (PMCC) for the year during which this Act was
approved shall be utilized for establishing the Corporation and initiating its operations,
including the formulation of the rules and regulations necessary for the implementation of
this Act. In addition, initial funding shall come from any unappropriated but available fund
of the Government.
SECTION 46. Subsequent Appropriations. Starting 1995 and thereafter, twenty-five
percent (25%) of the increment in total revenue collected under Republic Act No. 7654
shall be appropriated in the General Appropriations Act solely for the National Health
Insurance Fund.
In addition, starting 1996 and thereafter, twenty-five percent (25%) of the incremental
revenue from the increase in the documentary stamp taxes under Republic Act No. 7660
shall likewise be appropriated solely for the said fund.
SECTION 47. Additional Appropriations. The Corporation may request Congress to
appropriate supplemental funding to meet targeted milestones of the Program in
accordance with Section 10(d) of this Act.
ARTICLE XII
TRANSITORY PROVISIONS
SECTION 48. Appointment of Board Members. Within thirty (30) days from the date
of effectivity of this Act, the President of the Philippines shall appoint the members of the
Board and the President of the Corporation.
SECTION 49. Implementing Rules and Regulations. Within thirty (30) days from the
completion of such appointments, the Board shall convene to formulate the rules and
regulations necessary for the implementation of this Act.
SECTION 50. Promulgation. Within one (1) year from its initial meeting, the Board
shall promulgate the aforementioned rules and regulations in at least two (2) national
newspapers of general circulation. But until such time that the Corporation shall have
promulgated said rules and regulations, the existing rules and regulations of the PMCC
shall be followed. The present Medicare Program shall continue to be so administered,
until the Corporation's Board deems the new system as ready for implementation in
accordance with the provisions of this Act.
SECTION 51. Merger. Within sixty (60) days from the promulgation of the
implementing rules and regulations, all functions and assets of the Philippine Medical
Care Commission shall be merged with those of the Corporation without need of
conveyance, transfer or assignment. The PMCC shall thereafter cease to exist.
The liabilities of the PMCC shall be treated in accordance with existing laws and pertinent
rules and regulations.
To the greatest extent possible and in accordance with existing laws, all employees of the
PMCC shall be absorbed by the Corporation.
SECTION 52. Transfer of Health Insurance Funds of the SSS and GSIS . The
Health Insurance Funds being administered by the SSS and GSIS shall be transferred to
the Corporation within sixty (60) days from the promulgation of the implementing rules
and regulations. The SSS and GSIS shall, however, continue to perform Medicare
53
functions under contract with the Corporation until such time that such functions are Approved: February 14, 1995
assumed by the Corporation, in accordance with the following Section.

SECTION 53. Transfer of the Medicare Functions of the SSS and GSIS . Within five
(5) years from the promulgation of the implementing rules and regulations, the functions,
assets, equipment, records, operating systems, and liabilities, if any, of the Medicare
operations of the SSS and GSIS shall be transferred to the Corporation; Provided,
however, that the SSS and GSIS shall continue performing its Medicare functions beyond
the stipulated five-year period if such extension will benefit Program members, as
determined by the Corporation.

Personnel of the Medicare departments of the SSS and GSIS shall be given priority in the
hiring of the Corporation's employees.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

SECTION 54. Oversight Provision. Congress shall conduct a regular review of the
National Health Insurance Program which shall entail a systematic evaluation of the
Program's performance, impact or accomplishments with respect to its objectives or
goals. Such review shall be undertaken by the Committees of the Senate and the House
of Representatives which have legislative jurisdiction over the Program.

SECTION 55. Information Campaign. There shall be provided a substantial period of

time to undertake an intensive public information campaign prior to the implementation of
the rules and regulations of this Act.

SECTION 56. Separability Clause. In the event any provision of this Act or the
application of such provision to any person or circumstances is declared invalid, the
remainder of this Act or the application of said provisions to other persons or
circumstances shall not be affected by such declaration.

SECTION 57. Repealing Clause. Executive Order 119, Presidential Decree 1519
and other laws currently applying to the administration of Medicare are hereby repealed.
All other laws, executive orders, administrative rules and regulations or parts thereof
which are inconsistent with the provisions of this Act also hereby amended, modified, or
repealed accordingly.

SECTION 58. Government Guarantee. The Government of the Philippines

guarantees the financial viability of the Program.

SECTION 59. Effectivity. This Act shall take effect fifteen (15) days after its
publication in at least three (3) national newspapers of general circulation.

54
REPUBLIC ACT NO. 9241
February 10 2004
AN ACT AMENDING REPUBLIC ACT NO. 7875, OTHERWISE KNOWN AS "AN ACT
INSTITUTING A NATIONAL HEALTH INSURANCE PROGRAM FOR ALL FILIPINOS
AND ESTABLISHING THE PHILIPPINE HEALTH INSURANCE CORPORATION FOR
THE PURPOSE"
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
Section 1. Sec. 4 of Republic Act No. 7875 is hereby amended to read as follows:
"Sec. 4. Definition of Terms.-For the purpose of this Act, the following terms shall be
defined as follows:
a) Beneficiary - Any person entitled to health care benefits under this Act.
b) Benefit Package - Services that the Program offers to its members.
c) Capitation - A payment mechanism where a fixed rate, whether per person, family,
household or group, is negotiated with a health care provider who shall be responsible in
delivering or arranging for the delivery of health services required by the covered person
under the conditions of a health care provider contract.
d) Contribution - The amount paid by or in behalf of a member to the Program for
coverage, based on salaries or wages in the case of formal sector employees, and on
household earnings and assets, in the case of self-employed, or on other criteria as may
be defined by the Corporation in accordance with the guiding principles set forth in Article
1 of this Act.
e) Coverage - The entitlement of an individual, as a member or as a dependent, to the
benefits of the program.
f) Dependent - The legal dependents of a member are: 1) the legitimate spouse who is
not a member; 2) the unmarried and unemployed legitimate, legitimated, illegitimate,
acknowledged children as appearing in the birth certificate; legally adopted or step-
children below twenty-one (21) years of age; 3)children who are twenty-one (21) years
old and above but suffering from congenital disability, either physical or mental, or any
disability acquired that renders them totally dependent on the member of our support; 4)
the parents who are sixty (60) years old or above whose monthly income is below an
amount to be determined by the Corporation in accordance with the guiding principles set
forth in Article I of this Act.
g) Diagnostic Procedure - Any procedure to identify a disease or condition through
analysis and examination.
h) Emergency - An unforeseen combination of circumstances which calls for immediate
action to preserve the life of a person or to preserve the sight of one or both eyes; the
hearing of one or both ears; or one or two limbs at or above the ankle or wrist.
i) Employee - Any person who performs services for an employer in which either or both
mental and physical efforts are used and who receives compensation for such services,
where there is an employer-employee relationship.
j) Employer - A natural or juridical person who employs the services of an employee.
k) Enrollment - The process to be determined by the Corporation in order to enlist
individuals as members or dependents covered by the Program.
l) Fee for Service - A reasonable and equitable health care payment system under which
physicians and other health care providers receive a payment that does not exceed their
billed charge for each unit of service provided.
m) Global Budget - An approach to the purchase of medical services by which health
care provider negotiations concerning the costs of providing a specific package of
medical benefits is based solely on a predetermined and fixed budget.34urchase of
medical services by which health care provider negotiations concerning the costs of
providing a specific package of medical benefits is based solely on a predetermined and
fixed budget.
n) Government Service Insurance System - The Government Service Insurance System
created under Commonwealth Act No. 186, as amended.
o) Health Care Provider - Refers to:
(1) a health care institution , which is duly licensed and accredited devoted primarily to
the maintenance and operation of facilities for health promotion, prevention, diagnosis,
injury, disability, or deformity, drug addiction or in need of obstetrical or other medical and
nursing care. It shall also be construed as any institution, building, or place where there
are installed beds, cribs, or bassinets for twenty-four hour use or longer by patients in the
treatment of diseases, injuries, deformities, or abnormal physical and mental states,
maternity cases or sanitarial care; or infirmaries, nurseries, dispensaries, rehabilitation
centers and such other similar names by which they may be designated; or
(2) a health care professional, who is any doctor of medicine, nurse, midwife, dentist, or
other health care professional or practitioner duly licensed to practice in the Philippines
and accredited by the Corporation; or
55
(3) a health maintenance organization, which is entity that provides, offers, or arranges
for coverage of designated health services needed by plan members for a fixed prepaid
premium; or
(4) a community-based health organization, which is an association of indigenous
members of the community organized for the purpose of improving the health status of
that community through preventive, promotive and curative health services.
p) Health Insurance Identification (ID) Card - The document issued by the Corporation to
members and dependents upon their enrollment to serve as the instrument for proper
identification, eligibility verification, and utilization recording.
q) Indigent - A person who has no visible means of income, or whose income is
insufficient for the subsistence of his family, as identified by the Local Health Insurance
Office and based on specific criteria set by the Corporation in accordance with the
guiding principles set forth in Article I of this Act.
r) Inpatient Education Package - A set of informational services made available to an
individual who is confined in a hospital to afford him with knowledge about his illness and
its treatment, and of the means available, particularly lifestyle changes, to prevent the
recurrence or aggravation of such illness and to promote his health in general.
s) Member - Any person whose premiums have been regularly paid to the National
Health Insurance Program. He may be a paying member, or a pensioner/retiree member.
t) Means Test - A protocol administered at the barangay level to determine the ability of
individuals or households to pay varying levels of contributions to the Program, ranging
from the indigent in the community whose contributions should be totally subsidized by
the government, to those who can afford to subsidize part but not all the required
contributions for the Program.
u) Medicare - The health insurance program currently being implemented by the
Philippine Medical Care Commission. It consists of:
(1) Program I, which covers members of the SSS and GSIS including their legal
dependents; and
(2) Program II, which is intended for those not covered under Program I.
v) National Health Insurance Program - The compulsory health insurance program of the
government as established in this Act, which shall provide universal health insurance
coverage and ensure affordable, acceptable, available and accessible health care
services for all citizens of the Philippines.
w) Pensioner - An SSS or GSIS member who receives pensions therefrom.
x) Personal Health Services - Health Services in which benefits accrue to the individual
person. These are categorized into inpatient and outpatient services.
y) Philippine Medical Care Commission - The Philippine Medical Care Commission
created under Republic Act No. 6111, as amended.
z) Philippine National Drug Formulary - The essential drugs list for the Philippines which
is prepared by the National Drug Committee of the Department of Health in Consultation
with experts and specialists from organized profession medical societies, medical
academe and the pharmaceutical industry, and which is updated every year.
aa) Portability - The enablement of a member to avail of Program benefits in an area
outside the jurisdiction of his Local Health Insurance Office.
bb) Prescription Drug - A drug which has been approved by the Bureau of Food and Drug
and which can be dispensed only pursuant to a prescription order from a physician who is
duly licensed to do so.
cc) Public Health Services - Services that strengthen preventive and promotive health
care through improving conditions in partnership with the community at large. These
include control of communicable and non-communicable diseases, health promotion,
public information and education, water and sanitation, environmental protection, and
health-related data collection, surveillance, and outcome monitoring.
dd) Quality Assurance - A formal set of activities to review and ensure the quality of
services provided. Quality assurance includes quality assessment and corrective actions
to remedy any deficiencies identified in the quality of direct patient, administrative, and
support services.
ee) Residence - The place where the member actually lives.
ff) Retiree - A member of the Program who has reached the age of retirement or who was
retired on account of disability.
gg) Self-employed - A person who works for himself and is therefore both employee and
employer at the same time.
hh) Social Security System - The Social Security System created under Republic Act No.
1161, as amended.
ii) Treatment Procedure - Any method used to remove the symptoms and cause of a
disease.
jj) Utilization Review - A formal review of a patient utilization or of the appropriateness of
health care services, on a prospective, concurrent or retrospective basis.
56
kk) Rehabilitation Center - Refers to a facility, which undertakes rehabilitation of drug
dependents. It includes institutions, agencies and the like which have for their purpose,
the development of skills, or which provides counseling, or which seeks to inculcate,
social and moral values to clientele who have a drug problem with the pain of weaning
them from drugs and making them drug-free, adapted to their families and peers, and
readjusted into the community as law-abiding, useful and productive citizens.
ll) Home Care and Medical Rehabilitation Services - Refer to skilled nursing care, which
members get in their homes/clinics for the treatment of an illness or injury that severely
affects their activities or daily living. Home care and medical rehabilitation services
include hospice or palliative care for people who are terminally ill but does not include
custodial and non-skilled personal care."
Sec. 2. Sec. 11 of the same Act shall now read as follows:
"Sec. 11. Excluded Personal Health Services.- The benefits granted under this Act shall
not cover expenses for the services enumerated hereunder except when the Corporation,
after actuarial studies, recommends their inclusion subject to the approval of the Board:
(a) non-prescription drugs and devices;
(b) alcohol abuse or dependency treatment;
(c) cosmetic surgery;
(d) optometric services;
(e) fifth and subsequent normal obstetrical deliveries; and
(f) cost-ineffective procedures, which shall be defined by the Corporation.
Provided, That, such actuarial studies must be done within a period of three (3) years,
and then periodically reviewed, to determine the financial sustainability of including the
foregoing personal health services in the benefit package provided for under Sec. 10 of
this Act."
Section 3. Sec. 18 of the Law shall be amended to read as follows:
"Sec. 18. The Board of Directors.
a) Composition - The Corporation shall be governed by a Board of Directors hereinafter
referred to as the Board, composed of the following members:
The Secretary of Health;
The Secretary of Labor and Employment or his representative;
The Secretary of the Interior and Local Government or his Representative;
The Secretary of Social Welfare and Development or his Representative;
The President of the Corporation;
A representative of the labor sector;
A representative of employers;
The SSS Administrator or his representative;
The GSIS General Manager or his representative;
The Vice chairperson for the basic sector of the National Anti-Poverty Commission or his
representative;
A representative of Filipino overseas workers;
A representative of the self-employed sector; and
A representative of health care providers to be endorsed by the national associations of
health care institutions and medical health professionals.
The Secretary of Health shall be the ex officio Chairperson while the President of the
President of the Corporation shall be the Vice Chairperson of the Board.
b) Appointment and Tenure - The President of the Philippines shall appoint the Members
of the Board upon the recommendation of the Chairman of the Board and in consultation
with the sectors concerned. Members of the Boards shall have a term of four (4) years
each, renewable for a maximum of two (2) years, except for members whose terms shall
be co-terminous with their respective positions in government. Any vacancy in the Board
shall be filled in the manner in which the original appointment was made and the
appointee shall serve only the unexpired term of his predecessor.
c) Meetings and Quorum. - The Board shall hold regular meetings at least once a month.
Special meetings may be convened at the call of the Chairperson or by a majority of the
members of the Board. The presence of a majority of all the members shall constitute a
quorum. In the absence of the Chairperson and Vice Chairperson, a temporary presiding
officer shall be designated by the majority of the quorum.
d) Allowances and Per Diems - The members of the Board shall receive a per diem for
every meeting actually attended subject to the pertinent budgetary laws, rules and
regulations on compensation, honoraria and allowances."
Sec. 4. Sec. 29 of the Law shall now read as follows:
57
"Sec. 29. Payment of Indigent Contributions.- Contributions for indigent members shall be
subsidized partially by the local government unit where the member resides. The
Corporation shall provide counterpart financing equal to the LGU's subsidy for indigents:
Provided, That in the case of the fourth, fifth and sixth class municipalities, the National
Government shall provide up to ninety percent (90%) of the subsidy for indigents until
such time that they shall have been upgraded to first, second or third class municipalities.
The share of the LGUs shall be progressively increased until such time that its share
becomes equal to that of the National Government."
Sec. 5. Sec. 32 of the same Act shall now read as follows:
shall undertake studies to validate the accomplishments of the Program. The Budget
required to undertake such study shall come from the income of the PhilHealth."
Sec. 8. Separability Clause. - If any part or provision of this Act shall be held
unconstitutional or invalid, other provisions, which are not affected thereby, shall continue
to be in full force and effect.
Section 9. Repealing Clause. - All laws, presidential decrees, executive orders, rules and
regulations or parts thereof which are inconsistent with the provisions of this Act are
hereby repealed, amended or modified accordingly.

"Sec. 32. Accreditation Eligibility - All health care providers, as enumerated in Sec. 4(o)
hereof and operating for at least three (3) years may apply for accreditation: Provided,
That a health care provider which has not operated for at least three (3) years may
likewise apply and qualify for accreditation if it complies with all the other accreditation of
and further meets any of the following conditions:
a) Its managing health care professional has had a working experience in another
accredited health care institution for at least three (3) years;
Sec. 10. Effectivity. - This Act shall take effect fifteen (15) days after its publication in at
least (3) national newspapers of general circulation.
This Act which is a consolidation of House Bill No. 5547 and Senate Bill No. 2630 was
finally passed by the House of Representatives and the Senate on October 15, 2003 and
October 14, 2003, respectively.

b) It operates as a tertiary facility or its equivalent;

c) It operates in a local government unit where the accredited health care provider cannot
adequately or fully service its population; and

d) Other conditions as may be determined by the Corporation."

Sec. 6. The third paragraph of Sec. 44 (penal Provisions) of the same Act shall amend to
read as follows:

"Where the violations consist of failure or refusal to deduct contributions from the
employee's compensation or to remit the same to the Corporation, the penalty shall be a
fine of not less than Five hundred pesos (P500) but not more than One thousand pesos
(P1,000) multiplied by the total number of employees employed by the firm and
imprisonment of not less than six (6) months but not more than one (1) year."

Sec. 7. Sec. 54 of the Law shall be amended to read as follows:

"Sec. 54. Oversight Provision.- Congress shall conduct regular review of the National
Health Insurance Program, which shall entail a systematic evaluation of the Program's
performance, impact or accomplishments with respect to its objectives or goals. Such
review shall be undertaken by the Committees of the Senate and the House of
Representatives, which have legislative jurisdiction over the Program.

The National Economic and Development Authority, in coordination with the National
Statistics Office and the National Institutes of Health of the University of the Philippines
58
Official Gazette PH Republic Act No. 10606 Published: June 19, 2013. Latest update:
June 21, 2013. S. No. 2849 H. No. 6048
[REPUBLIC ACT NO. 10606]
AN ACT AMENDING REPUBLIC ACT NO. 7875, OTHERWISE KNOWN AS THE
NATIONAL HEALTH INSURANCE ACT OF 1995, AS AMENDED, AND FOR OTHER
PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:
SECTION 1. Section 1 of Republic Act No. 7875, as amended, is hereby amended to
read as follows:
SECTION 1. Short Title. This Act shall be known as the National Health Insurance Act
of 2013.
SEC. 2. Section 2 of the same Act is hereby amended to read as follows:
SEC. 2. Declaration of Principles and Policies. It is hereby declared the policy of the
State to adopt an integrated and comprehensive approach to health development which
shall endeavor to make essential goods, health and other social services available to all
the people at affordable cost and to provide free medical care to paupers. Towards this
end, the State shall provide comprehensive health care services to all Filipinos through a
socialized health insurance program that will prioritize the health care needs of the
underprivileged, sick, elderly, persons with disabilities (PWDs), women and children and
provide free health care services to indigents.
Pursuant to this policy, the State shall adopt the following principles:
x x x.
SEC. 3. Section 4 of the same Act is hereby further amended to read as follows:
SEC. 4. Definition of Terms. For the purpose of this Act, the following terms shall be
defined as follows:
x x x
(f) Dependent The legal dependents of a member are:
x x x
(4) the parents who are sixty (60) years old or above whose monthly income is below an
amount to be determined by the Corporation in accordance with the guiding principles set
forth in Article I of this Act; and
(5) parents with permanent disability that render them totally dependent on the member
for subsistence.
x x x
(l) Fee-for-service A fee pre-determined by the Corporation for each service delivered
by a health care provider based on the bill. The payment system shall be based on a pre-
negotiated schedule promulgated by the Corporation.
x x x
(q) Indigent A person who has no visible means of income, or whose income is
insufficient for the subsistence of his family, as identified by the Department of Social
Welfare and Development (DSWD) based on specific criteria set for this purpose in
accordance with the guiding principles set forth in Article I of this Act.
x x x
(s) Member Any person whose premiums have been regularly paid to the National
Health Insurance Program who may be a paying member, a sponsored member, or a
lifetime member.
x x x
(ff) Retiree A member of the Program who has reached the age of retirement as
provided for by law or who was retired on account of permanent disability as certified by
the employer and the Corporation.
x x x
(mm) Abandoned Children Children who have no known family willing and capable to
take care of them and are under the care of the DSWD, orphanages, churches and other
institutions.
(nn) Case-based Payment Hospital payment method that reimburses to hospitals a
predetermined fixed rate for each treated case or disease; also called per case payment.
(oo) Health Technology Assessment A field of science that investigates the value of a
health technology such as procedure, process, products, or devices, specifically on their
quality, relative cost-effectiveness and safety. It usually involves the science of
epidemiology and economics. It has implications on policy, decision to adopt and invest
in these technologies, or in health benefit coverage.
59
(pp) Informal Sector Units engaged in the production of goods and services with the
primary objective of generating employment and income for the persons concerned. It
consists of households, unincorporated enterprises that are market and nonmarket
producers of goods, as well as market producers of services.
These enterprises are operated by own-account workers, which may employ unpaid
family workers as well as occasional, seasonally hired workers.
To this sector belong, among others, street hawkers, market vendors, pedicab and
tricycle drivers, small construction workers and home-based industries and services.
(qq) Other Self-earning Individuals Individuals who render services or sell goods as a
means of livelihood outside of an employer-employee relationship, or as a career, but do
not belong to the informal sector. These include businessmen, entrepreneurs, actors,
actresses and other performers, news correspondents, professional athletes, coaches,
trainers, and other individuals as recognized by the Department of Labor and
Employment (DOLE) and/or the Bureau of Internal Revenue (BIR).
(rr) Out-patient Services Health services such as diagnostic consultation, examination,
treatment, surgery and rehabilitation on an out-patient basis.
(ss) Professional Practitioners Include doctors, lawyers, certified public accountants,
and other practitioners required to pass government licensure examinations in order to
practice their professions.
(tt) Traditional and Alternative Health Care The application of traditional knowledge,
skills and practice of alternative health care or healing methods which include reflexology,
acupuncture, massage, accupressure, chiropractics, nutritional therapy and other similar
methods in accordance with the accreditation guidelines set forth by the Corporation and
the Food and Drug Administration (FDA).
(uu) Lifetime Member A former member who has reached the age of retirement under
the law and has paid at least one hundred twenty (120) monthly premium contributions.
(vv) Members in the Formal Economy Workers with formal contracts and fixed terms of
employment including workers in the government and private sector, whose premium
contribution payments are equally shared by the employee and the employer.
(ww) Members in the Informal Economy Workers who are not covered by formal
contracts or agreements and whose premium contributions are self-paid or subsidized by
another individual through a defined criteria set by the Corporation.
(xx) Migrant Workers Documented or undocumented Filipinos who are engaged in a
remunerated activity in another country of which they are not citizens.
(yy) Sponsored Member A member whose contribution is being paid by another
individual, government agency, or private entity according to the rules as may be
prescribed by the Corporation.
SEC. 4. Section 6 of the same Act is hereby amended to read as follows:
SEC. 6. Mandatory Coverage. All citizens of the Philippines shall be covered by the
National Health Insurance Program. In accordance with the principles of universality and
compulsory coverage enunciated in Section 2(b) and 2(l) hereof, implementation of the
Program shall ensure sustainability of coverage and continuous enhancement of the
quality of service: Provided, That the Program shall be compulsory in all provinces, cities
and municipalities nationwide, notwithstanding the existence of LGU-based health
insurance programs: Provided, further, That the Corporation, Department of Health
(DOH), local government units (LGUs), and other agencies including nongovernmental
organizations (NGOs) and other national government agencies (NGAs) shall ensure that
members in such localities shall have access to quality and cost-effective health care
services.
SEC. 5. Section 7 of the same Act is hereby amended to read as follows:
SEC. 7. Enrollment. The Corporation shall enroll beneficiaries in order for them to avail
of benefits under this Act with the assistance of the financial arrangements provided by
the Corporation under the following categories:
(a) Members in the formal economy;
(b) Members in the informal economy;
(c) Indigents;
(d) Sponsored members; and
(e) Lifetime members.
The process of enrollment shall include the identification of beneficiaries, issuance of
appropriate documentation specifying eligibility to benefits, and indicating how
membership was obtained or is being maintained.
SEC. 6. Section 8 of the same Act is hereby amended to read as follows:
SEC. 8. Health Insurance Identification (ID) Card and ID Number. In conjunction with
the enrollment provided above, the Corporation through its local office shall issue a
health insurance ID with a corresponding ID number which shall be used for purposes of
identification, eligibility verification, and utilization recording. The issuance of this ID card
shall be accompanied by a clear explanation to the enrollee of his rights, privileges and
60
obligations as a member. A list of health care providers accredited by the Local Health
Insurance Office shall likewise be provided to the member together with the ID card.
The absence of the ID card shall not prejudice the right of any member to avail of
benefits or medical services under the National Health Insurance Program (NHIP).
This health insurance ID card with a corresponding ID number shall be recognized as a
valid government identification and shall be presented and honored in transactions
requiring the verification of a persons identity.
SEC. 7. Section 10 of the same Act is hereby amended to read as follows:
SEC. 10. Benefit Package.
Members and their dependents are entitled to the following minimum services, subject to
the limitations specified in this Act and as may be determined by the Corporation:
(a) Inpatient hospital care:
(1) room and board;
(2) services of health care professionals;
(3) diagnostic, laboratory, and other medical examination services;
(4) use of surgical or medical equipment and facilities;
(5) prescription drugs and biologicals, subject to the limitations stated in Section 37 of
this Act; and
(6) inpatient education packages;
(b) Outpatient care:
(1) services of health care professionals;
(2) diagnostic, laboratory, and other medical examination services;
(3) personal preventive services; and
(4) prescription drugs and biologicals, subject to the limitations described in Section 37
of this Act;
(c) Emergency and transfer services; and
(d) Such other health care services that the Corporation and the DOH shall determine to
be appropriate and cost-effective.
These services and packages shall be reviewed annually to determine their financial
sustainability and relevance to health innovations, with the end in view of quality
assurance, increased benefits and reduced out-of-pocket expenditure.
SEC. 8. Section 11 of the same Act is hereby further amended to read as follows:
SEC. 11. Excluded Personal Health Services. The Corporation shall not cover
expenses for health services which the Corporation and the DOH consider cost-
ineffective through health technology assessment.
The Corporation may institute additional exclusions and limitations as it may deem
reasonable in keeping with its protection objectives and financial sustainability.
SEC. 9. Section 12 of the same Act is hereby amended to read as follows:
SEC. 12. Entitlement to Benefits. A member whose premium contributions for at least
three (3) months have been paid within six (6) months prior to the first day of availment,
including those of the dependents, shall be entitled to the benefits of the Program:
Provided, That such member can show that contributions have been made with sufficient
regularity: Provided, further, That the member is not currently subject to legal penalties as
provided for in Section 44 of this Act.
The following need not pay the monthly contributions to be entitled to the Programs
benefits:
(a) Retirees and pensioners of the SSS and GSIS prior to the effectivity of this Act; and
(b) Lifetime members.
SEC. 10. Section 16 of the same Act is hereby amended to read as follows:
SEC. 16. Powers and Functions. The Corporation shall have the following powers and
functions:
x x x
(c) To supervise the provision of health benefits and to set standards, rules, and
regulations necessary to ensure quality of care, appropriate utilization of services, fund
viability, member satisfaction, and overall accomplishment of Program objectives;
x x x
(j) To negotiate and enter into contracts with health care institutions, professionals, and
other persons, juridical or natural, regarding the pricing, payment mechanisms, design
and implementation of administrative and operating systems and procedures, financing,
and delivery of health services in behalf of its members;
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x x x
(m) To visit, enter and inspect facilities of health care providers and employers during
office hours, unless there is reason to believe that inspection has to be done beyond
office hours, and where applicable, secure copies of their medical, financial, and other
records and data pertinent to the claims, accreditation, premium contribution, and that of
their patients or employees, who are members of the Program;
x x x
(p) To keep records of the operations of the Corporation and investments of the National
Health Insurance Fund;
(q) To establish and maintain an electronic database of all its members and ensure its
security to facilitate efficient and effective services;
(r) To invest in the acceleration of the Corporations information technology systems;
(s) To conduct an information campaign on the principles of the NHIP to the public and
to accredited health care providers. This campaign must include the current benefit
packages provided by the Corporation, the mechanisms to avail of the current benefit
packages, the list of accredited and disaccredited health care providers, arid the list of
offices/branches where members can pay or check the status of paid health premiums;
(t) To conduct post-audit on the quality of services rendered by health care providers;
(u) To establish an office, or where it is not feasible, designate a focal person in every
Philippine Consular Office in all countries where there are Filipino citizens. The office or
the focal person shall, among others, process, review and pay the claims of the overseas
Filipino workers (OFWs);
(v) Notwithstanding the provisions of any law to the contrary, to impose interest and/or
surcharges of not exceeding three percent (3%) per month, as may be fixed by the
Corporation, in case of any delay in the remittance of contributions which are due within
the prescribed period by an employer, whether public or private. Notwithstanding the
provisions of any law to the contrary, the Corporation may also compromise, waive or
release, in whole or in part, such interest or surcharges imposed upon employers
regardless of the amount involved under such valid terms and conditions it may
prescribe;
(w) To endeavor to support the use of technology in the delivery of health care services
especially in farflung areas such as, but not limited to, telemedicine, electronic health
record, and the establishment of a comprehensive health database;
(x) To monitor compliance by the regulatory agencies with the requirements of this Act
and to carry out necessary actions to enforce compliance;
(y) To mandate the national agencies and LGUs to require proof of PhilHealth
membership before doing business with a private individual or group;
(z) To accredit independent pharmacies and retail drug outlets; and
(aa) To perform such other acts as it may deem appropriate for the attainment of the
objectives of the Corporation and for the proper enforcement of the provisions of this
Act.
SEC. 11. Section 17 of the same Act, is hereby amended to read as follows:
SEC. 17. Quasi-Judicial Powers. The Corporation, to carry out its tasks more
effectively, shall be vested with the following powers:
(a) Subject to the respondents right to due process, to conduct investigations for the
determination of a question, controversy, complaint, or unresolved grievance brought to
its attention, and render decisions, orders, or resolutions thereon. It shall proceed to hear
and determine the case even in the absence of any party who has been properly served
with notice to appear. It shall conduct its proceedings or any part thereof in public or in
executive session; adjourn its hearings to any time and place; refer technical matters or
accounts to an expert and to accept his reports as evidence; direct parties to be joined in
or excluded from the proceedings; and give all such directions as it may deem necessary
or expedient in the determination of the dispute before it;
x x x
(c) Subject to the respondents right to due process, to suspend temporarily, revoke
permanently, or restore the accreditation of a health care provider or the right to benefits
of a member and/or impose fines. The decision shall immediately be executory, even
pending appeal, when the public interest so requires and as may be provided for in the
implementing rules and regulations. Suspension of accreditation shall not exceed six (6)
months. Suspension of the rights of members shall not exceed six (6) months.
The revocation of a health care providers accreditation shall operate to disqualify him
from obtaining another accreditation in his own name, under a different name, or through
another person, whether natural or juridical.
The Corporation shall not be bound by the technical rules of evidence.
SEC. 12. Section 18 of the same Act is hereby further amended to read as follows:
SEC. 18. The Board of Directors.
(a) Composition. The Corporation shall be governed by a Board of Directors
hereinafter referred to as the Board, composed of the following members:
62
The Secretary of Health;
The Secretary of Labor and Employment or a permanent representative;
The Secretary of the Interior and Local Government or a permanent representative;
The Secretary of Social Welfare and Development or a permanent representative;
The Secretary of the Department of Finance (DOF) or a permanent representative;
The President and Chief Executive Officer (CEO) of the Corporation;
The SSS Administrator or a permanent representative;
The GSIS General Manager or a permanent representative;
The Vice Chairperson for the basic sector of the National Anti-Poverty Commission or a
permanent representative;
The Chairperson of the Civil Service Commission (CSC) or a permanent representative;
A permanent representative of Filipino migrant workers;
A permanent representative of the members in the informal economy;
A permanent representative of the members in the formal economy;
A representative of employers;
A representative of health care providers to be endorsed by their national associations of
health care institutions and medical health professionals;
A permanent representative of the elected local chief executives to be endorsed by the
League of Provinces, League of Cities and League of Municipalities; and
An independent director to be appointed by the Monetary Board.
The Secretary of Health shall be the ex officio Chairperson while the President and CEO
of the Corporation shall be the Vice Chairperson of the Board.
(b) Appointment and Tenure. Except for ex officio members, the other members of the
Board shall be appointed by the President of the Philippines in accordance with the
provisions of Republic Act No. 10149, otherwise known as the GOCC Governance Act of
2011: Provided, That sectoral board members shall be appointed by the President of the
Philippines upon the recommendation of the Chairperson and after due consultations with
the sectors concerned.
The term of office of the appointive members of the Board shall be in accordance with
Republic Act No. 10149.
x x x.
SEC. 13. Section 19 of the same Act is hereby amended to read as follows:
SEC. 19. The President of the Corporation.
(a) Appointment and Tenure. The President of the Philippines shall appoint the
President and CEO of the Corporation, hereinafter referred to as the President, upon the
recommendation of the Board. The President shall have a tenure of one (1) year in
accordance with the provisions of Republic Act No. 10149.
x x x.
SEC. 14. Section 20 of the same Act is hereby amended to read as follows:
SEC. 20. Health Finance Policy Research. Among the staff departments that will be
established by the Corporation shall be the Health Finance Policy Research Department,
which shall have the following duties and functions:
x x x
(f) submission for consideration of program of quality assurance, utilization review, and
technology assessment;
(g) submission of recommendations on policy and operational issues that will help the
Corporation meet the objectives of this Act; and
(h) conduct of client-satisfaction surveys and research in order to assess outcomes of
service rendered by health care providers.
SEC. 15. Section 24 of the same Act is hereby amended to read as follows:
SEC. 24. Creation of the National Health Insurance Fund. There is hereby created a
National Health Insurance Fund, hereinafter referred to as the Fund, that shall consist of:
(a) Contribution from Program members;
(b) Other appropriations earmarked by the national and local governments purposely for
the implementation of the Program;
(c) Subsequent appropriations provided for under Sections 46 and 47 of this Act;
(d) Donations and grants-in-aid; and
63
(e) All accruals thereof.
SEC. 16. Section 26 of the same Act is hereby amended to read as follows:
SEC. 26. Financial Management. The use, disposition, investment, disbursement,
administration and management of the National Health Insurance Fund, including any
subsidy, grant or donation received for program operations shall be governed by
applicable laws and in the absence thereof, existing resolutions of the Board of Directors
of the Corporation, subject to the following limitations:
(a) All funds under the management and control of the Corporation shall be subject to all
rules and regulations applicable to public funds.
(b) The Corporation is authorized to charge to the various funds under its control the
costs of administering the Program. Such costs may include administration, monitoring,
marketing and promotion, research and development, audit and evaluation, information
services, and other necessary activities for the effective management of the Program.
The total annual costs for these shall not exceed the sum total of the following:
(1) Four percent (4%) of the total premium contributions collected during the immediately
preceding year;
(2) Four percent (4%) of the total reimbursements or total cost of health services paid by
the Corporation in the immediately preceding year; and
(3) Five percent (5%) of the investment earnings generated during the immediately
preceding year.
The period for implementation of the cost ceiling provided under this section shall not be
later than five (5) years from the effectivity of this Act during which period, the total
annual cost shall not exceed the sum total of the following:
(i) Five percent (5%) of the total contributions;
(ii) Five percent (5%) of the total reimbursements; and
(iii) Five percent (5%) of the investment earnings generated during the immediately
preceding year.
SEC. 17. Section 27 of the same Act is hereby amended to read as follows:
SEC. 27. Reserve Fund. The Corporation shall set aside a portion of its accumulated
revenues not needed to meet the cost of the current years expenditures as reserve
funds: Provided, That the total amount of reserves shall not exceed a ceiling equivalent to
the amount actuarially estimated for two (2) years projected Program expenditures:
Provided, further, That whenever actual reserves exceed the required ceiling at the end
of the Corporations fiscal year, the excess of the Corporations reserve fund shall be
used to increase the Programs benefits, decrease the members contributions, and
augment the health facilities enhancement program of the DOH.
The remaining portion of the reserve fund that are not needed to meet the current
expenditure obligations or used for the abovementioned programs shall be placed in
investments to earn an average annual income at prevailing rates of interest and shall be
known as the Investment Reserve Fund which shall be invested in any or all of the
following:
(a) In interest-bearing bonds, securities or other evidences of indebtedness of the
Government of the Philippines, or in bonds, securities, promissory notes and other
evidences of indebtedness to which full faith and credit and unconditional guarantee of
the Republic of the Philippines is pledged;
(b) In debt securities and corporate bonds issuances: Provided, That such securities and
bonds are rated triple A by authorized accredited domestic rating agencies: Provided,
further, That the issuing or assuming entity or its predecessor shall not have defaulted in
the payment of interest on any of its securities and that during each of any three (3)
including last two (2) of the five (5) fiscal years next preceding the date of acquisition by
the Corporation of such bonds, securities or other evidences of indebtedness, the net
earnings of the issuing or assuming institution available for its recurring expenses, such
as amortization of debt discount and rentals for leased properties, including interest on
funded and unfunded debt, shall have been not less than one and one quarter (1 )
times the total of the recurring expenses for such year: Provided, further, That such
investment shall not exceed fifteen percent (15%) of the investment reserve fund;
(c) In interest-bearing deposits and loans to or securities in any domestic bank doing
business in the Philippines: Provided, That in the case of such deposits, this shall not
exceed at any time the unimpaired capital and surplus or total private deposits of the
depository bank, whichever is smaller: Provided, further, That said bank shall first have
been designated as a depository for this purpose by the Monetary Board of the Bangko
Sentral ng Pilipinas;
(d) In preferred stocks of any solvent corporation or institution created or existing under
the laws of the Philippines: Provided, That the issuing, assuming, or guaranteeing entity
or its predecessor has paid regular dividends upon its preferred or guaranteed stocks for
a period of at least three (3) years immediately preceding the date of investment in such
preferred or guaranteed stocks: Provided, further, That if the stocks are guaranteed the
amount of stocks so guaranteed is not in excess of fifty percent (50%) of the amount of
the preferred common stocks as the case may be of the issuing corporation: Provided,
furthermore, That if the corporation or institution has not paid dividends upon its preferred
stocks, the corporation or institution has sufficient retained earnings to declare dividends
64
for at least two (2) years on such preferred stocks and in common stocks of any solvent
corporation or institution created or existing under the laws of the Philippines in the stock
exchange with proven track record of profitability and payment of dividends over the last
three (3) years; and
(e) In bonds, securities, promissory notes or other evidences of indebtedness of
accredited and financially sound medical institutions exclusively to finance the
construction, improvement and maintenance of hospitals and other medical facilities:
Provided, That such securities and instruments are backed up by the guarantee of the
Republic of the Philippines or the issuing medical institution and the issued securities and
bonds are both rated triple A by authorized accredited domestic rating agencies:
Provided, further, That said investments shall not exceed ten percent (10%) of the total
investment reserve fund.
As part of its investments operations, the Corporation may hire institutions with valid
trust licenses as its external local fund managers to manage the investment reserve fund,
as it may deem appropriate, through public bidding. The fund managers shall submit
annual reports on investment performance to the Corporation.
The Corporation shall set up the following funds:
(1) A fund to secure benefit payouts to members prior to their becoming lifetime
members;
(2) A fund to secure payouts to lifetime members; and
(3) A fund for any optional supplemental benefits that are subject to additional
contributions.
A portion of each of the above funds shall be identified as current and kept in liquid
instruments. In no case shall said portion be considered part of invested assets.
Another portion of the said funds shall be allocated for lifetime members within six (6)
months after the effectivity of this Act. Said amount shall be determined by an actuary or
pre-calculated based on the most recent valuation of liabilities.
The Corporation shall allocate a portion of all contributions to the fund for lifetime
members based on an allocation to be determined by the PHIC actuary based on a pre-
determined percentage using the current average age of members and the current life
expectancy and morbidity curve of Filipinos.
The Corporation shall manage the supplemental benefits and the lifetime members fund
in an actuarially sound manner.
The Corporation shall manage the supplemental benefits fund to the minimum required
to ensure that the supplemental benefit payments are secure.
SEC. 18. Section 28 of the same Act is hereby amended to read as follows:
SEC. 28. Contributions. All members who can afford to pay shall contribute to the
Fund, in accordance with a reasonable, equitable and progressive contribution schedule
to be determined by the Corporation on the basis of applicable actuarial studies and in
accordance with the following guidelines:
(a) Members in the formal economy and their employers shall continue paying the same
monthly contributions as provided for by law until such time that the Corporation shall
have determined a new contribution schedule: Provided, That their monthly contributions
shall not exceed five percent (5%) of their respective monthly salaries.
It shall be mandatory for all government agencies to include the payment of premium
contribution in their respective annual appropriations: Provided, further, That any
increase in the premium contribution of the national government as employer shall only
become effective upon inclusion of said amount in the annual General Appropriations
Act.
(b) Contributions from members in the informal economy shall be based primarily on
household earnings and assets. Those from the lowest income segment who do not
qualify for full subsidy under the means test rule of the DSWD shall be entirely subsidized
by the LGUs or through cost sharing mechanisms between/among LGUs and/or
legislative sponsors and/or other sponsors and/or the member, including the national
government: Provided, That the identification of beneficiaries who shall receive subsidy
from LGUs shall be based on a list to be provided by the DSWD through the same means
test rule or any other appropriate statistical method that may be adopted for said
purpose.
(c) Contributions made in behalf of indigent members shall not exceed the minimum
contributions for employed members.
(d) The required number of monthly premium contributions to qualify as a lifetime
member may be increased by the Corporation to sustain the financial viability of the
Program: Provided, That the increase shall be based on actuarial estimate and study.
SEC. 19. Section 29 of the same Act is hereby further amended to read as follows:
SEC. 29. Payment for Indigent Contributions. Premium contributions for indigent
members as identified by the DSWD through a means test or any other appropriate
statistical method shall be fully subsidized by the national government. The amount
necessary shall be included in the appropriations for the DOH under the annual General
Appropriations Act.
SEC. 20. A new Section 29-A shall be added to read as follows:
SEC. 29-A. Payment for Sponsored Members Contributions.
65
(a) The premium contributions of orphans, abandoned and abused minors, out-of-school
youths, street children, PWDs, senior citizens and battered women under the care of the
DSWD, or any of its accredited institutions run by NGOs or any nonprofit private
organizations, shall be paid by the DSWD and the funds necessary for their inclusion in
the Program shall be included in the annual budget of the DSWD.
(b) The needed premium contributions of all barangay health workers, nutrition scholars
and other barangay workers and volunteers shall be fully borne by the LGUs concerned.
(c) The annual premium contributions of househelpers shall be fully paid by their
employers, in accordance with the provisions of Republic Act No. 10361 or the
Kasambahay Law.
SEC. 21. A new Section 29-B shall be added to read as follows:
SEC. 29-B. Coverage of Women About to Give Birth. The annual required premium for
the coverage of unenrolled women who are about to give birth shall be fully borne by the
national government and/or LGUs and/or legislative sponsor which shall be determined
through the means testing protocol recognized by the DSWD.
SEC. 22. Section 32 of the same Act is hereby further amended to read as follows:
SEC. 32. Accreditation Eligibility. All health care providers, as enumerated in Section
4(o) hereof and operating for at least three (3) years may apply for accreditation:
Provided, That a health care provider which has not operated for at least three (3) years
may likewise apply and qualify for accreditation if it complies with all the other
accreditation requirements of and further meets any of the following conditions:
(a) Its managing health care professional has had a working experience in another
accredited health care institution for at least three (3) years;
(b) It operates as a tertiary facility or its equivalent;
(c) It operates in a LGU where the accredited health care provider cannot adequately or
fully service its population; and
(d) Other conditions as may be determined by the Corporation.
A health care provider found guilty of any violation of this Act shall not be eligible to
apply for the renewal of accreditation.
SEC. 23. Section 34 of the same Act is hereby amended to read as follows:
SEC. 34. Provider Payment Mechanisms. The following mechanisms for public and
private providers shall he allowed in the Program:
(a) Fee-for-service payments payments made by the Corporation for professional fees
or hospital charges, or both, based on arrangements with health care providers. This fee
shall be based on a schedule to be established by the Board which shall be reviewed
periodically but hot less than every three (3) years;
(b) Capitation of health care professionals and facilities, or networks of the same
including HMOs, medical cooperatives, and other legally formed health service groups;
(c) Case-based payment;
(d) Global budget; and
(e) Such other provider payment mechanisms that may be determined and adopted by
the Corporation.
Subject to the approval of the Board, the Corporation may adopt other payment
mechanism that are most beneficial to the members and the Corporation.
Each PhilHealth local office shall recommend the appropriate payment mechanism
within its jurisdiction for approval by the Corporation. Special consideration shall be given
to payment for services rendered by public and private health care providers serving
remote or medically underserved areas.
SEC. 24. A new Section 34-A shall be added to read as follows:
SEC. 34-A. Other Provider Payment Guidelines. No other fee or expense shall be
charged to the indigent patient, subject to the guidelines issued by the Corporation.
All payments for professional services rendered by salaried public providers shall be
allowed to be retained by the health facility in which services are rendered and be pooled
and distributed among health personnel. Charges paid to public facilities shall be retained
by the individual facility in which services were rendered and for which payment was
made. Such revenues shall be used to primarily defray operating costs other than
salaries, to maintain or upgrade equipment, plant or facility, and to maintain or improve
the quality of service in the public sector.
SEC. 25. Section 35 of the same Act is hereby deleted and replaced with a new section
to read as follows:
SEC. 35. Reimbursement and Period to File Claims. All claims for reimbursement or
payment for services rendered shall be filed within a period of sixty (60) calendar days
from the date of discharge of the patient from the health care provider.
The period to file the claim may be extended for such reasonable causes determined by
the Corporation.
66
SEC. 26. Section 36 of the same Act is hereby deleted and replaced with a new section
to read as follows:
SEC. 36. Role of Local Government Units (LGUs). Consistent with the mandates for
each political subdivision under Republic Act No. 7160 or The Local Government Code
of 1991, LGUs shall provide basic health care services.
To augment their funds, LGUs shall invest the capitation payments given to them by the
Corporation on health infrastructures or equipment, professional fees, drugs and
supplies, or information technology and database: Provided, That basic health care
services, as defined by the DOH and the Corporation, shall be ensured especially with
the end in view of improving maternal, infant and child health:
Provided, further, That the capitation payments shall be segregated and placed into a
special trust fund created by LGUs and be accessed for the use of such mandated
purpose.
SEC. 27. Section 41 of the same Act is hereby amended to read as follows:
SEC. 41. Grievance and Appeal Procedures. A member, a dependent, or a health care
provider may file a complaint for grievance based on any of the above grounds, in
accordance with the following procedures:
(a) A complaint for grievance must be filed with the Corporation which shall refer such
complaint to the Grievance and Appeal Review Committee. The Grievance and Appeal
Review Committee shall rule on the complaint through a notice of resolution within sixty
(60) calendar days from receipt thereof.
(b) Appeals from the decision of the Grievance and Appeal Review Committee must be
filed with the Board within thirty (30) calendar days from receipt of the notice of
resolution.
x x x.
SEC. 28. Section 42 of the same Act is hereby amended to read as follows:
SEC. 42. Grievance and Appeal Review Committee. The Board shall create a
Grievance and Appeal Review Committee, composed of five (5) members, hereinafter
referred to as the Committee, which, subject to the procedures enumerated above, shall
receive and recommend appropriate action on complaints from members and health care
providers relative to this Act and its implementing rules and regulations.
The Committee shall have as one of its members a representative of any of the
accredited health care providers as endorsed by the DOH.
SEC. 29. Section 44 of the same Act is hereby further amended to read as follows:
SEC. 44. Penal Provisions. Any violation of the provisions of this Act, after due notice
and hearing, shall suffer the following penalties:
(a) Violation by an Accredited Health Care Provider Any accredited health care
provider who commits a violation, abuse, unethical practice or fraudulent act which tends
to undermine or defeat the objectives of the Program shall be punished with a fine of not
less than Fifty thousand pesos (P50,000.00) but not more than One hundred thousand
pesos (P100,000.00) or suspension of accreditation from three (3) months to the whole
term of accreditation, or both, at the discretion of the Corporation: Provided, That
recidivists may no longer be accredited as a participant of the Program;
(b) Violations of a Member Any member who commits any violation of this Act
independently or in connivance with the health care provider for purposes of wrongfully
claiming NHIP benefits or entitlement shall be punished with a fine of not less than Five
thousand pesos (P5,000.00) or suspension from availment of NHIP benefits for not less
than three (3) months but not more than six (6) months, or both, at the discretion of the
Corporation.
(c) Violations of an Employer
(1) Failure/Refusal to Register/Deduct/Remit the Contributions Any employer who fails
or refuses to register employees, regardless of their employment status, or to deduct
contributions from the employees compensation or remit the same to the Corporation
shall be punished with a fine of not less than Five thousand pesos (P5,000.00) multiplied
by the total number of employees of the firm.
Any employer or any officer authorized to collect contributions under this Act who, after
collecting or deducting the monthly contributions from his employees compensation, fails
to remit the said contributions to the Corporation within thirty (30) days from the date they
become due shall be presumed to have misappropriated such contributions.
(2) Unlawful Deductions Any employer or officer who shall deduct directly or indirectly
from the compensation of the covered employees or otherwise recover from them his
own contribution on behalf of such employees shall be punished with a fine of Five
thousand pesos (P5,000.00) multiplied by the total number of affected employees.
If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing directors or partners or president or
general manager, or other persons responsible for the commission of the said act shall
be liable for the penalties provided for in this Act.
(3) Misappropriation of Funds by Employees of the Corporation Any employee of the
Corporation who receives or keeps funds or property belonging, payable or deliverable to
the Corporation, and who shall appropriate the same, or shall take or misappropriate or
shall consent, or through abandonment or negligence shall permit any other person to
67
take such property or funds wholly or partially, shall likewise be liable for misappropriation
of funds or property and shall be punished with a fine not less than Ten thousand pesos
(P10,000.00) nor more than Twenty thousand pesos (P20,000.00). Any shortage of the
funds or loss of the property upon audit shall be deemed prima facie evidence of the
offense.
(d) Other Violations Other violations of the provisions of this Act or of the rules and
regulations promulgated by the Corporation shall be punished with a fine of not less than
Five thousand pesos (P5,000.00) but not more than Twenty thousand pesos
(P20,000.00).
All other violations involving funds of the Corporation shall be governed by the applicable
provisions of the Revised Penal Code or other laws, taking into consideration the rules on
collection, remittances, and investment of funds as may be promulgated by the
Corporation.
The Corporation may enumerate circumstances that will mitigate or aggravate the
liability of the offender or erring health care provider, member or employer.
Despite the cessation of operation by a health care provider or termination of practice of
an independent health care professional while the complaint is being heard, the
proceeding against them shall continue until the resolution of the case.
The dispositive part of the decision requiring payment of fines, reimbursement of paid
claim or denial of payment shall be immediately executory.
SEC. 30. A new Section 56 is hereby added to read as follows and the numbering of the
succeeding sections are adjusted accordingly:
SEC. 56. Requisites for Issuance or Renewal of License or Permits. Notwithstanding
any law to the contrary, all government agencies issuing professional or business license
or permit, shall require all applicants to submit certificate or proof of payment of
PhilHealth premium contributions, prior to the issuance or renewal of such license or
permit.
SEC. 31. Section 54 of the same Act is hereby further amended to read as follows:
SEC. 54. Oversight Provision. There is hereby created a Joint Congressional
Oversight Committee to conduct a regular review of the NHIP which shall entail a
systematic evaluation of the Programs performance, impact or accomplishments with
respect to its objectives or goals. The Oversight Committee shall be composed of five (5)
members from the Senate and five (5) members from the House of Representatives to be
appointed by the Senate President and the Speaker of the House of Representatives,
respectively. The Oversight Committee shall be jointly chaired by the Chairpersons of the
Senate Committee on Health and Demography and the House of Representatives
Committee on Health.
The National Economic and Development Authority, in coordination with the National
Statistics Office and the National Institutes of Health of the University of the Philippines
shall undertake studies to validate the accomplishments of the Program. Such validation
studies shall include an assessment of the enrollees satisfaction of the benefit package
and services provided by the Corporation. These validation studies, as well as an annual
report, on the performance of the Corporation shall be submitted to the Congressional
Oversight Committee.
The Corporation shall annually transfer 0.001% of its income in the previous year for the
purpose of conducting these studies.
SEC. 32. Section 49 of the same Act is hereby amended to read as follows:
SEC. 49. Implementing Rules and Regulations. Within sixty (60) days from the
effectivity of this Act, the Corporation, in coordination with the DOH, shall issue the
necessary rules and regulations for its effective implementation.
SEC. 33. Separability Clause. If any part or provision of this Act shall be held
unconstitutional or invalid, other provisions which are not affected thereby shall continue
to be in full force and effect.
SEC. 34. Repealing Clause. All laws, issuances or parts thereof inconsistent with this
Act are hereby repealed or modified accordingly.
SEC. 35. Effectivity. This Act shall sake effect fifteen (15) days after its publication in
the Official Gazette or in at least two (2) newspapers of general circulation.
Approved,
This Act winch is a consolidation of Senate Bill No. 2849 and House Bill No. 6048 was
finally passed by the Senate and the House of Representatives on February 4, 2013.
Approved: JUN 19 2013
68
PART III SOCIAL LEGISLATION
G.R. No. 89222. April 7, 1993.
CARMEN SANTOS, petitioner,
vs. EMPLOYEES' COMPENSATION COMMISSION and GOVERNMENT SERVICE
INSURANCE SYSTEM (Philippine Navy), respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; EMPLOYEES COMPENSATION;
COMPENSABLE SICKNESS; DEFINED. The law defines compensable sickness as
any illness definitely accepted as occupational disease listed by the Commission, or any
illness caused by employment subject to proof that the risk of contracting the same is
increased by the working conditions. For sickness and the resulting death of an employee
to be compensable, the claimant must show either: (1) that it is a result of an
occupational disease listed under Annex A of the Amended Rules on Employees'
Compensation with the conditions set therein satisfied: or (2) if not so listed, that the risk
of contracting the disease is increased by the working conditions.
2. ID.; ID.; ID.; RULE WHEN AN ILLNESS IS NOT LISTED IN THE TABLE
OCCUPATIONAL DISEASES; CASE AT BAR. Where the claimant's illness is not
listed in the Table of Occupational Diseases embodied in Annex A of the Rules on
Employees' Compensation, said claimant must positively prove that the risk of contracting
the disease is increased by the working conditions. Cirrhosis of the liver is not listed as
an occupational disease. Nevertheless, in the very recent case of Librea v. Employees'
Compensation Commission (G.R. No. 58879, 203 SCRA 545 [119]). We do not pretend
to be an expert in the realm of medical discipline. However, We cannot discount the fact
that the cause of death of petitioner's husband could very well be related to his previous
working conditions. Even the Commission volunteered the theory that post necrotic
cirrhosis show that of the many types of advanced liver injury, one cause may be due to
toxins. As a welder, Francisco was exposed to heat, gas fumes and chemical substances
coming from the burning electrodes caused by welding. Generally, the metal burned is
iron. In the course thereof, other compounds and oxides, such as carbon monoxide,
carbon dioxide, sulfur and phosphorus, may be emitted in the process of welding,
depending on the kind of material used and extend of corrosion of the metal worked on.
These vaporized metals are inhaled by the welder in the process and significantly in this
case, Francisco had to do welding jobs within enclosed compartments. Research shows
that ingestion or inhalation of small amounts of iron over a number of years may lead to
siderosis. Acute poisoning brings about circulatory collapse which may occur rapidly or
be delayed to 48 hours with liver failure. These are industrial hazards to which Francisco
was exposed. And in the long course of time, 32 years at that, his continuous exposure to
burned electrodes and chemicals emitted therefrom would likely cause poisoning and
malfunction of the liver.
3. ID.; ID.; DOCTRINE OF COMPENSABILITY; EXPLAINED. The leading doctrine on
compensability is that laid down in the case of Raro v. Employees' Compensation
Commission, where this court said "There is a widespread misconception that the poor
employee is still arrayed against the might and power of his rich corporate employer.
Hence, he must be given all kinds of favorable presumptions. This is fallacious. It is now
the trust fund and not the employer which suffers if benefits are paid to claimants who are
not entitled under the law. The employer joins the employee in trying to have their claims
approved. The employer is spared the problem of proving a negative proposition that the
disease was not caused by employment." The decision of this Court in Raro v. ECC (172
SCRA 845) in effect supersedes the cases with conclusions different from that stated
therein, such as Nemaria v. ECC, 155 SCRA 166 (1987); Ovenson v. ECC, 156 SCRA
21 (1987); Mercado v. ECC, 127 SCRA 664 (1984). The reason behind the present
doctrine is that the New Labor Code has abolished the presumption of compensability for
illness contracted by a worker during employment. To be entitled to disability benefits, the
claimant has to present evidence to prove that his ailment was the result of, or the risk of
contracting the same were aggravated by working conditions or the nature of his work.
4. ID.; ID.; PROVISIONS THEREIN SHALL BE RESOLVED IN FAVOR OF LABOR.
While the presumption of compensability and theory of aggravation under the Workmen's
Compensation Act may have been abandoned under the new Labor Code, the liberality
of the law in general in favor of the working man still prevails. The Employees'
Compensation Act is basically a social legislation designed to afford relief to the working
man and woman in our society. The Employees' Compensation Commission, as the
agency tasked with implementing the social justice mandate guaranteed by the
Constitution, should be more liberal in resolving compensation claims of employees
especially where there is some basis in the facts for inferring a work connection to the
cause of death. this interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as embodied in Article 4 of the New Labor Code which
states that "all doubts in the implementation and interpretation of the provisions of the
Labor Code including its implementing rules and regulations shall be resolved in favor of
labor. The policy is to extend the applicability of PD 626 to a greater number of
employees who can avail of the benefits under the law, which is in consonance with the
avowed policy of the state to give maximum aid and protection to labor.
DECISION
NOCON, J p:
Is liver cirrhosis an illness which is compensable? This is the question put forth by
petitioner, Carmen Santos, whose husband died of liver cirrhosis while still a civilian
employee of the Philippine Navy.
Francisco Santos was employed as welder at the Philippine Navy and its Naval Shipyard
as early as March 22, 1955. He spent the last 32 years of his life in the government
service, the first year as a welder helper and the last two years as shipyard assistant.
69
On December 29, 1986, Francisco was admitted at the Naval Station Hospital in Cavite
City, on complaint that he was having epigastric pain and been vomiting blood 2 days
prior to his hospitalization. His case was diagnosed as bleeding Peptic Ulcer disease
(PUD), cholelithiasis and diabetes mellitus. On January 11, 1987, he died, the cause of
which as indicated in the Death Certificate was liver cirrhosis.
Mrs. Carmen A. Santos filed a claim for the death benefit of her husband, Francisco, on
January 28, 1987, pursuant to Presidential Decree No. 626, as amended. However, on a
letter dated April 30, 1987, the Government Service Insurance System (GSIS), denied
the claim on the ground that upon proofs and evidence submitted, Francisco's ailment
cannot be considered an occupational disease as contemplated under P.D. 626, as
amended.
Mrs. Santos then sought the assistance of the Commander of NASCOM, PN, who in turn
wrote the GSIS requesting for a favorable action on her claim. Said letter also
substantiated petitioner's claim that her husband's duties as Senior Welder, assigned at
the Structural Branch of the Naval Shipbuilding Facility, required him to perform delicate
welding jobs inside compartments of naval vessels, like compartmentation bulk heads;
CIC rooms; officers and PO's quarters; fuel, lube oil and fresh water tanks, where he was
exposed to heat and inhalation of burning chemical substances and gas fumes coming
from burning welding electrodes.
Despite such endorsement, petitioner's motion for reconsideration was likewise denied,
upon claim of the GSIS that Francisco's job as a welder would instead cause lung
disease rather than liver cirrhosis.
On appeal to the Employees' Compensation Commission (ECC), the Commission
affirmed the denial of the GSIS on petitioner's claim relying on the fact that the diagnosis
on Francisco's illness did not specify the type of cirrhosis which caused his death.
Nevertheless, the Commission took cognizant of the fact that the deceased employee did
not have a previous history of alcoholism, hepatitis or a previous history of biliary
condition which could give a clue to the nature of cirrhosis he had.
We find merit in this petition.
The law defines compensable sickness as any illness definitely accepted as occupational
disease listed by the Commission, or any illness caused by employment subject to proof
that the risk of contracting the same is increased by the working conditions. For sickness
and the resulting death of an employee to be compensable, the claimant must show
either: (1) that it is a result of an occupational disease listed under Annex A of the
Amended Rules on Employees' Compensation with the conditions set therein satisfied; or
(2) if not so listed, that the risk of contracting the disease is increased by the working
conditions. 1
Where the claimant's illness is not listed in the Table of Occupational Diseases embodied
in Annex A of the Rules of Employees' Compensation, said claimant must positively
prove that the risk of contracting the disease is increased by the working conditions. 2
Cirrhosis of the liver is not listed as an occupational disease. Nevertheless, in the very
recent case of Librea v. Employees' Compensation Commission 3 We took a liberal stand
and based on the evidence presented, pronounced the said sickness compensable. In
the cited case, a Division Physical Education Supervisor, who likewise spent the last 32
years of his life in public service was adjudged entitled to the benefits of the ECC, upon
his death due to liver cirrhosis.
In the said case, the ECC denied the claim of the heirs on the ground that the abundant
stress and strain experienced by the deceased employee were too farfetched to cause
the development of liver cirrhosis. According to the medical research made by the
Commission in the case, portal cirrhosis or cirrhosis of the liver occurs chiefly in males in
their late middle life. Malnutrition is believed to be a predisposing factor if not the primary
etiologic factor, and may account for its prevalence among alcoholics. This chronic
disease characterized by increased connective tissue that spreads from the portal
spaces, distorts the liver architecture thereby impairing liver functions. 4
In granting the petition, the Court correlated the fact that the deceased experienced
untold sufferings in the course of his inspection of barrio schools and that he became
malnourished because of the scarcity of food in the places he travelled to. All these
factors were found to have contributed to the weakening of his health rendering him
susceptible to malnutrition and eventually to contracting liver cirrhosis.
In the case at bar, the Commission said that liver cirrhosis may be classified by a mixture
of etiologically and morphologically defined entities as follows:
1) Alcoholic cirrhosis, chronic alcoholism is a major cause of alcohol cirrhosis. The
amount and duration of ethanol ingestion rather than the type of alcoholic beverage of the
pattern of ingestion, appear to be an important determinant of liver injury. Nutritional
factors may augment the detrimental effects of chronic alcohol ingestion on the liver.
2) Post necrotic cirrhosis is the final pathway of many types of advanced liver injury of
both specific and unknown causes. Viral hepatitis, (hepatitis B, Non A, Non B) may be an
antecedent. Other causes are drugs, toxins and alcoholic liver disease and primary biliary
cirrhosis.
3) Biliary cirrhosis results from injury to or prolonged obstruction of either the intrahepatic
or extrahepatic biliary system.
4) Cardiac cirrhosis prolonged severe right-sided congestive heart failure may lead to
chronic liver injury and cardiac cirrhosis.
70
5) Metabolic, hereditary, drug-related and other types.
We do not pretend to be an expert in the realm of medical discipline. However, We
cannot discount the fact that the cause of death of petitioner's husband could very well be
related to his previous working conditions. Even the Commission volunteered the theory
that post necrotic cirrhosis show that of the many types of advanced liver injury, one
cause may be due to toxins.
As a welder, Francisco was exposed to heat, gas fumes and chemical substances
coming from the burning electrodes caused by welding. Generally, the metal burned is
iron. In the course thereof, other compounds and oxides, such as carbon monoxide,
carbon dioxide, sulfur and phosphorus, may be emitted in the process of welding,
depending on the kind of material used and extent of corrosion of the metal worked on.
These vaporized metals are inhaled by the welder in the process and significantly in this
case, Francisco had to do welding jobs within enclosed compartments.
Research shows that ingestion or inhalation of small amounts of iron over a number of
years may lead to siderosis. Acute poisoning brings about circulatory collapse which may
occur rapidly or be delayed to 48 hours with liver failure. 5 These are industrial hazards to
which Francisco was exposed. And in the long course of time, 32 years at that, his
continuous exposure to burned electrodes and chemicals emitted therefrom would likely
cause poisoning and malfunction of the liver.
The leading doctrine on compensability is that laid down in the case of Raro v.
Employees' Compensation Commission, 6 where this Court said:
"There is a widespread misconception that the poor employee is still arrayed against the
might and power of his rich corporate employer. Hence, he must be given all kinds of
favorable presumptions. This is fallacious. It is now the trust fund and not the employer
which suffers if benefits are paid to claimants who are not entitled under the law. The
employer joins the employee in trying to have their claims approved. The employer is
spared the problem of proving a negative proposition that the disease was not caused by
employment."
However, while the presumption of compensability and theory of aggravation under the
Workmen's Compensation Act may have been abandoned under the new Labor Code,
the liberality of the law in general in favor of the working man still prevails. 8 The
Employees' Compensation Act is basically a social legislation designed to afford relief to
the working man and woman in our society. The Employees' Compensation Commission,
as the agency tasked with implementing the social justice mandate guaranteed by the
Constitution, should be more liberal in resolving compensation claims of employees
especially where there is some basis in the facts for inferring a work connection to the
cause of death. 9
This interpretation gives meaning and substance to the liberal and compassionate spirit
of the law as embodied in Article 4 of the New Labor Code which states that "all doubts in
the implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor." 10
The policy is to extend the applicability of PD 626 to a greater number of employees who
can avail of the benefits under the law, which is in consonance with the avowed policy of
the state to give maximum aid and protection to labor. 11
Premises considered, We find the petition meritorious. Liver cirrhosis, although not one
among those listed as compensable ailment, as considered in the case at bar as covered
under the Act, on the ground that the nature of the work of petitioner's husband, exposed
him to the risk of contracting the same.
WHEREFORE, petition is hereby GRANTED and the decision of the Employees'
Compensation Commission is REVERSED.
SO ORDERED.

The decision of this Court in Raro in effect supersedes the cases with conclusions
different from that stated therein, such as Nemaria v. ECC, 155 SCRA 166 (1987);
Ovenson v. ECC, 156 SCRA 21 (1987); Mercado v. ECC, 127 SCRA 664 (1984).

The reason behind the present doctrine is that the New Labor Code has abolished the
presumption of compensability for illness contracted by a worker during employment. To
be entitled to disability benefits, the claimant has to present evidence to prove that his
ailment was the result of, or the risk of contracting the same were aggravated by working
conditions or the nature of his work. 7

71
G.R. No. L-21223 August 31, 1966 2.5% 3.5% Total
(Employee) (Employer)
PHILIPPINE BLOOMING MILLS CO., INC. (As Employer) and FRANCISCO TONG (As
Assistant General Manager) and Attorney-in-Fact of SUSUMO SONODA, SENJI
TANAKA, TAKASHIKO KUMAMOTO, HITOSHI NAKAMURA, TETSUO KODU, Susumu Sonoda 03-075177 P520.00 P175.00 P245.00 P420.00
(Employees), petitioners and appellants,
vs. SOCIAL SECURITY SYSTEM, respondent and appellee. BARRERA, J.:
Senji Tanaka 03-075178 520.00 175.00 245.00 420.00
The facts of this case are not disputed:

The Philippine Blooming Mills Co., Inc., a domestic corporation since the start of its Kahei Tanaka 03-075179 500.00 175.00 245.00 420.00
operations in 1957, has been employing Japanese technicians under a pre-arranged
contract of employment, the minimum period of which employment is 6 months and the Takashiko
maximum is 24 months. 03-075180 500.00 175.00 245.00 420.00
Kumamoto

From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese
technicians. In connection with the employment of these aliens, it sent an inquiry to the Hitoshi Nakamura 03-075181 500.00 175.00 245.00 420.00
Social Security System (SSS) whether these employees are subject to compulsory
coverage under the System, which inquiry was answered by the First Deputy
Tetsuo Kudo 03-075182 500.00 175.00 245.00 420.00
Administrator of the SSS, under date of August 29, 1957, as follows:

SIR:

With reference to your letter of August 24, 1957, hereunder are our answers to your Total P1,050.00 P1,470.00 P2,520.00
queries:

Aliens employed in the Philippines:
Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens
who are employed temporarily shall, upon their departure from the Philippines, be entitled
to a rebate of a proportionate amount of their contributions; their employers shall be
entitled to the same proportionate rebate of their contributions in behalf of said aliens
employed by them. (Rule I, Sec. 3[d], Rules and Regulations.)
Starting September, 1957, and until the aforementioned Japanese employees left the
Philippines on October 26, 1958, the corresponding premium contributions of the
employer and the employees on the latter's memberships in the SSS were as follows:
On October 7, 1958, the Assistant General Manager of the corporation, on its behalf and
as attorney-in-fact of the Japanese technicians, filed a claim with the SSS for the refund
of the premiums paid to the System, on the ground of termination of the members'
employment. As this claim was denied, they filed a petition with the Social Security
Commission for the return or refund of the premiums, in the total sum of P2,520.00, paid
by the employer corporation and the 6 Japanese employees, plus attorneys' fees. This
claim was controverted by the SSS, alleging that Rule IX of the Rules and Regulations of
the System, as amended, requires membership in the System for at least 2 years before
a separated or resigned employee may be allowed a return of his personal contributions.
Under the same rule, the employer is not also entitled to a refund of the premium
contributions it had paid.

After hearing, the Commission denied the petition for the reason that, although under the
original provisions of Section 3 (d) of Rule I of the Rules and Regulations of the SSS,
alien-employees (who are employed temporarily) and their employers are entitled to a
rebate of a proportionate amount of their respective contributions upon the employees'
SS Monthly Amount of Premiums departure from the Philippines, said rule was amended by eliminating that portion
Name
Number Salary Contributed granting a return of the premium contributions. This amendment became effective on
January 14, 1958, or before the employment of the subject aliens terminated. The rights

72
of covered employees who are separated from employment, under the present Rules, are
covered by Rule IX which allows a return of the premiums only if they have been
members for at least 2 years.
It is this resolution of the Commission that is the subject of the present appeal, appellants
contending that the amendment of the Rules and Regulations of the SSS, insofar as it
eliminates the provision on the return of premium contributions, originally embodied in
Section 3(d) of Rule I, constituted an impairment of obligations of contract. It is claimed,
in effect, that when appellants-employees became members in September, 1957, and
paid the corresponding premiums to the System, it 1 is subject to the condition that upon
their departure from the Philippines, these employees, as well as their employer, are
entitled to a rebate of a proportionate amount of their respective contributions.
The contention cannot be sustained. Appellants' argument is based on the theory that the
employees' membership in the System established contractual relationship between the
members and the System, in the sense contemplated and protected by the constitutional
prohibition against its impairment by law. But, membership in this institution is not the
result of a bilateral, consensual agreement where the rights and obligations of the parties
are defined by and subject to their will. Republic Act 1161 requires compulsory coverage
of employers and employees under the System. It is actually a legal imposition, on said
employers and employees, designed to provide social security to the workingmen.
Membership in the SSS is, therefore, in compliance with a lawful exercise of the police
power of the State, to which the principle of non-impairment of the obligation of contract
is not a proper defense.
As pointed out by the Solicitor General, the issue that should be determined in this case
is whether, in implementing the SSS law and denying appellants' claim for refund of their
premium contributions, due process was observed.
The Rules and Regulations promulgated by the SSS, pursuant to the rule-making
authority granted in Section 4(a) of Republic Act 1161, was duly approved by the
President on July 18, 1957, and published in the Official Gazette on September 15,
1957.2 These rules and regulations, among others, provide:
I
DETERMINATION OF COMPULSORY COVERAGE
3. The determination of whether an employer or an employee shall be compulsorily
covered shall be vested in the Commission. The following general principles shall guide
the Commission in deciding each case:
xxx xxx xxx
(d) Aliens who are employed in the Philippines shall also be compulsorily covered. But
aliens who ate employed temporarily and whose visas are only for fixed terms shall, upon
their departure from the Philippines, be entitled to a rebate of a proportionate amount of
their contributions; their employers shall be entitled to the same proportionate rebate of
their contributions in behalf of said aliens employed by them.
XI
AMENDMENTS AND EFFECTIVITY
1. The Commission may, by appropriate resolution, amend, repeal, revise and/or modify
all or any part or parts of these Rules and Regulations, as well as adopt any additional
rule or rules, whenever the need therefor should arise. Any amendment and/or additional
rule, however, shall not take effect until and after the corresponding resolution of the
Commission has been submitted to and approved by the President of the Philippines.
2. These Rules and Regulations, any amendment thereof, or any additional rule or rules
subsequently adopted by the Commission, shall take effect on the date they are
approved by the President of the Philippines.
Rule I Section 3 (d) and Rule IX, however, were later amended, which amendment was
approved by the President on January 14, 1958, to read as follows:
(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec.
3, Rule I)
EFFECT OF SEPARATION FROM EMPLOYMENT
When an employee under compulsory coverage is separated from employment, his
employer's contribution on his account shall cease at the end of the month of separation;
but such employee may continue his membership in the System and receive the benefits
of the Act, as amended, in accordance with these rules. If he continues paying the 6 per
cent monthly premiums representing his as well as the employer's contribution, based on
his monthly salary at the time of his separation; but if at the time of his separation the
covered employee has been a member of the System for at least two years, he shall
have the option to choose any one of the following adjustments of his membership in the
System:
1. A refund of an amount equivalent to his total contributions of two and one-half per
centum plus interests at the rate of three per centum per annum, compounded annually;
xxx xxx x x x (Rule IX)
These amended Rules were published in the November 10, 1958 issue of the Official
Gazette.3
73
It is not here disputed that the Rules and Regulations of the SSS, having been
promulgated in implementation of a law, have the force and effect of a statute;" that the
amendment thereto, although approved by the President on January 14, 1958, was
published in the Official Gazette in November, 1958, or after the employment of the
Japanese technicians had ceased and the corresponding claim for the refund of the
premium contributions was filed with the System. The question pertinent to this case now
is whether or not appellants are bound by the amended Rules requiring membership for
two years before refund of the premium contributions may be allowed.1wph1.t
These rules and regulations were promulgated to provide guidelines to be observed in
the enforcement of the law. As a matter of fact, Section 3 of Rule I is merely an
enumeration of the "general principles to (shall) guide the Commission" in the
determination of the extent or scope of the compulsory coverage of the law. One of these
guiding principles is paragraph (d) relied upon by appellants, on the coverage of
temporarily-employed aliens. It is not here pretended, that the amendment of this Section
3(d) of Rule I, as to eliminate the provision granting to these aliens the right to a refund of
part of their premium contributions upon their departure from the Philippines, is not in
implementation of the law or beyond the authority of the Commission to do.
It may be argued, however, that while the amendment to the Rules may have been
lawfully made by the Commission and duly approved by the President on January 14,
1958, such amendment was only published in the November 1958 issue of the Official
Gazette, and after appellants' employment had already ceased. Suffice it to say, in this
regard, that under Article 2 of the Civil Code,5 the date of publication of laws in the
Official Gazette is material for the purpose of determining their effectivity, only if the
statutes themselves do not so provide.
In the present case, the original Rules and Regulations of the SSS specifically provide
that any amendment thereto subsequently adopted by the Commission, shall take effect
on the date of its approval by the President. Consequently, the delayed publication of the
amended rules in the Official Gazette did not affect the date of their effectivity, which is
January 14, 1958, when they were approved by the President. It follows that when the
Japanese technicians were separated from employment in October, 1958, the rule
governing refund of premiums is Rule IX of the amended Rules and Regulations, which
requires membership for 2 years before such refund of premiums may be allowed.
Wherefore, finding no error in the resolution of the Commission appealed from, the same
is hereby affirmed, with costs against the appellants. So ordered.
G.R. No. 119891 August 21, 1995
BEN STA. RITA, petitioner,
vs. THE COURT OF APPEALS, THE PEOPLE OF THE PHILIPPINES and THE SOCIAL
SECURITY SYSTEM, respondents. FELICIANO, J.:
This is a Petition for Review an Certiorari of the Decision of the Court of Appeals ("CA")
in CA-G.R. SP. No. 34384 which ordered the Regional Trial Court ("RTC"), Branch 92,
Quezon City, to reinstate Criminal Case No. Q-92-35426 filed against petitioner Ben Sta.
Rita.
Petitioner Sta. Rita was charged in the RTC with violating Section 2(a) in relation to
Sections 22(d) and 28(e) of Republic Act No. 1161, as amended, otherwise known as the
Social Security Law. The Information alleged that petitioner, "as President/General
Manager of B. Sta. Rita Co., Inc. a compulsorily (sic) covered employer under the Social
Security Law, as amended, did then and there willfully and unlawfully fail, neglect and
refuse and still fails, neglects and refuses to remit to the Social Security System
contributions for SSS, Medicare and Employees Compensation for its covered
employees." 1
Petitioner Sta. Rita moved to dismiss said criminal case on the following grounds:
1. That the facts charged do not constitute an offense, and;
2. That the RTC has no jurisdiction over this case. 2
The RTC sustained petitioner's motion and dismissed the criminal case filed against him.
It ruled that the Memorandum of Agreement entered into between the Department of
Labor and Employment ("DOLE") and the Social Security System ("SSS") extending the
coverage of Social Security, Medical Care and Employment Compensation laws to
Filipino seafarers on board foreign vessels was null and void as it was entered into by the
Administrator of the SSS without the sanction of the Commission and approval of the
President of the Philippines, in contravention of Section 4 (a) of R.A. No. 1161, as
amended. 3
The People, through the Solicitor General, filed in the Court of Appeals a petition for
certiorari, prohibition and mandamus assailing the order of dismissal issued by the trial
court. Respondent appellate court granted the petition and ordered the Presiding Judge
of the trial court to reinstate the criminal case against petitioner. A motion for
reconsideration thereof was denied by the CA in a Resolution dated 17 April 1995.
Thereafter, petitioner filed in this Court a motion for extension of thirty (30) days from the
expiration of reglementary period within which to file a petition for review on certiorari.
The Court granted the motion and gave petitioner until 9 June 1995 to file the petition
with warning that no further extension will be given. Despite the warning, the petition was
74
filed only on 13 June 1995 or four (4) days after the due date. Moreover, it failed to
comply with requirement no. 2 of Circular No. 1-88, as amended and Circular No. 19-91
of the Court as it did not contain an affidavit of service of copies thereof to respondents. It
was only on 14 July 1995, through an ex-parte manifestation, that the affidavit of service
was belatedly submitted to this Court.
In the Petition for Review, petitioner Sta. Rita contends that the Filipino seafarers
recruited by B. Sta. Rita Co. and deployed on board foreign vessels outside the
Philippines are exempt from the coverage of R.A. No. 1161 under Section 8 (j) (5)
thereof:
Terms Defined
EMPLOYMENT Any service performed by an employee for his employer, except
xxx xxx xxx
(5) Service performed on or in connection with an alien vessel by an employee if he is
employed when such vessel is outside the Philippines.
xxx xxx xxx
According to petitioner, the Memorandum of Agreement entered into by the DOLE and
the SSS is null and void as it has the effect of amending the aforequoted provision of
R.A. No. 1161 by expanding its coverage. This allegedly cannot be done as only
Congress may validly amend legislative enactments.
Petitioner prays that the Court set aside the decision of the Court of Appeals ordering the
reinstatement of Criminal Case No. Q-92-35426 and that the Order of the RTC
dismissing the same be upheld.
It is well-settled in our jurisdiction that the right to appeal is a statutory right and a party
who seeks to avail of the right must comply with the rules. 4 These rules, particularly the
statutory requirement for perfecting an appeal within the reglementary period laid down
by law, must be strictly followed as they are considered indispensable interdictions
against needless delays and for orderly discharge of judicial business. 5 Petitioner's
failure to seasonably file the Petition and its failure to comply with the aforequoted
Circulars of the Court necessitate the denial of the Petition.
Besides, even if the Petition had been filed on time and had complied with the Circulars,
it would still have to be denied as petitioner has failed to show that respondent appellate
court committed any reversible error in rendering the assailed decision.
The Court agrees with the CA that the Information filed against petitioner was sufficient
as it clearly stated the designation of the offense by the statute, i.e. violation of the Social
Security Law, and the acts or omissions complained of as constituting the offense, i.e.,
petitioner's failure to remit his contributions to the SSS. The CA found that there is prima
facie evidence to support the allegations in the Information and to warrant the
prosecution of petitioner.
Respondent appellate court correctly upheld the validity of the Memorandum of
Agreement entered into between the DOLE and the SSS. Upon the one hand, contrary to
the trial court's finding, the Memorandum of Agreement was approved by the Social
Security Commission per the Commission's Resolution No. 437, dated 14 July 1988. 6
Upon the other hand, the Memorandum of Agreement is not a rule or regulation enacted
by the Commission in the exercise of the latter's quasi-legislative authority Under Section
4 (a) of R.A. No. 1161, as amended, which reads as follows:
Sec. 4. Powers and Duties of the Commission. For the attainment of its main
objectives as set forth in section two hereof, the Commission shall have the following
powers and duties:
(a) To adopt, amend and rescind, subject to the approval of the President, such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act.
xxx xxx xxx
What the Memorandum of Agreement did was to record the understanding between the
SSS on the one hand and the DOLE on the other hand that the latter would include
among the provisions of the Standard Contract of Employment required in case of
overseas employment, a stipulation providing for coverage of the Filipino seafarer by the
SSS. The Memorandum of Agreement is not an implementing rule or regulation of the
Social Security Commission which, under Section 4 (a) abovequoted, is subject to the
approval of the President. Indeed, as a matter of strict law, the participation of the SSS in
the establishment by the DOLE of a uniform stipulation in the Standard Contract of
Employment for Filipino seafarers was not necessary; the Memorandum of Agreement
related simply to the administrative convenience of the two (2) agencies of government.
Moreover, the Court finds no merit in petitioner's contention that Section 8 (j) (5) of R.A.
No. 1161, as amended, absolutely exempts Filipino seafarers on board foreign vessels
from the coverage of the SSS statute. Section 8 (j) (5) simply defines the term
"employment" and does not in any way relate to the scope of coverage of the Social
Security System. That coverage is, upon the other hand, set out in Section 9 of R.A. No.
1161 as amended, which defines the scope of SSS coverage in the following terms:
Sec. 9 Compulsory Coverage. (a) Coverage in the SSS shall be compulsory upon all
employees not over sixty years of age and their employers; Provided, . . . .
(b) Fillpinos recruited in the Philippines by foreign employers for employment abroad may
be covered by the SSS on a voluntary basis. (As amended by Sec. 2, P.D. No. 177, S-
1973 and Sec. 6, P.D. No. 735-S-1975) (Emphasis supplied)
75
It will be seen that the Memorandum of Agreement is in line with paragraph 9 (b) of the
Social Security statute quoted above. The Memorandum of Agreement provides, inter
alia, that:
xxx xxx xxx
NOW THEREFORE, for and in consideration of the foregoing premises, the parties
hereto agree and stipulate that one of the conditions that will be imposed by the
Department of Labor and Employment is the contract for overseas employment is the
registration for coverage of seafarers with the Social Security System, through the
manning agencies as the authorized representatives of the foreign employers in
conformity with Section 9, paragraph (b) of the Social Security Law (R.A. No. 1161, as
amended), subject to the following terms and conditions:
xxx xxx xxx 7
(Emphasis supplied)
Thus, the Standard Contract of Employment to be entered into between foreign
shipowners and Filipino seafarers is the instrument by which the former express their
assent to the inclusion of the latter in the coverage of the Social Security Act. In other
words, the extension of the coverage of the Social Security System to Filipino seafarers
arises by virtue of the assent given in the contract of employment signed by employer
and seafarer; that same contract binds petitioner Sta. Rita or B. Sta. Rita Company, who
is solidarily liable with the foreign shipowners/employers.
It may be noted that foreign shipowners and manning agencies had generally expressed
their conformity to the inclusion of Filipino seafarers within the coverage of the Social
Security Act even prior to the signing of the DOLE-SSS Memorandum of Agreement.
Thus, the Whereas clauses of the Memorandum of Agreement state that:
It is, finally, worthy of special note that by extending the benefits of the Social Security
Act to Filipino seafarers on board foreign vessels, the individual employment agreements
entered into with the stipulation for such coverage contemplated in the DOLE-SSS
Memorandum of Agreement, merely give effect to the constitutional mandate to the State
to afford protection to labor whether "local or overseas." 9 Nullification of the SSS
stipulation in those individual employment contracts, through nullification of the
Memorandum of Agreement, constituted serious reversible error on the part of the trial
court. That petitioner should seek to deprive his countrymen of social security protection
after his foreign principal had agreed to such protection, is cause for dismay and is to be
deplored.
The Court of Appeals properly held that the reinstatement of the criminal case against
petitioner did not violate his right against double jeopardy since the dismissal of the
information by the trial court had been effected at his own instance. 10 There are only two
(2) instances where double jeopardy will attach notwithstanding the fact that the case
was dismissed with the express consent of the accused. The first is where the ground for
dismissal is insufficiency of evidence for the prosecution; and the second is where the
criminal proceedings have been unreasonably prolonged in violation of the accused's
right to speedy trial. 11 Neither situation exists in the case at bar. There is no legal
impediment to the reinstatement of Criminal Case No. Q-92-35426 against petitioner Sta.
Rita.
WHEREFORE, the Court Resolved to DENY the Petition for having been filed late, for
failure to comply with applicable Court Circulars and for lack of merit. The assailed
Decision of the Court of Appeals is hereby AFFIRMED. Cost against petitioner.

WHEREAS, in the 74th Maritime Session (ILO) held from September 24 to October 9,
1987 in Geneva, it was agreed that as an internationally accepted principle, seafarers
shall have the right to social security protection;

xxx xxx xxx

WHEREAS, after a series of consultations with seafaring unions and manning agencies,
it was the consensus that Philippine social security coverage be extended to seafarers
under the employ of vessels flying foreign flags;

xxx xxx xxx 8

(Emphasis supplied)

76
G.R. No. L-21448 August 30, 1967
POBLETE CONSTRUCTION CO., petitioner,
vs. JUDITH ASIAIN, SOCIAL SECURITY COMMISSION and BENITO MACRHON, in his
capacity as Sheriff of Rizal, respondents. MAKALINTAL, J.:
Miguel Asiain was an employee of the Poblete Construction Company from 1956 until his
death on November 22, 1959, with a monthly salary of P300. Upon his death his widow,
Judith Asiain, for herself and her minor children, filed a petition before the Social Security
Commission against the company and its manager, Domingo Poblete (Case No. 78), to
recover the following sum: (1) P3,600.00 equivalent to one year's salary of the deceased;
(2) P600.00 representing his unpaid salary for two months; (3) P288.00 "representing the
cash received by respondents from their laborers as contribution to the family of the
deceased;" and (4) P2,000.00 by way of attorney's fees.
The respondents below moved to dismiss the petition on the grounds that the Social
Security Commission had no jurisdiction over the subject-matter and that the petitioner
Judith Asiain had no capacity to sue. The Commission denied the motion to dismiss in its
order of February 25, 1960 and ordered the respondents to file their answer. When no
answer was forthcoming, the respondents were declared in default in an order dated
March 9, 1960, and the petitioners were allowed to present their evidence.
In its resolution of September 15, 1960 the Commission declared itself without jurisdiction
to entertain the claims in the petition except the one for the sum of P3,600, which it
awarded on the basis of the evidence adduced at the hearing and pursuant to Section 24
of Republic Act No. 1161, as amended. A subsequent motion for reconsideration filed by
the respondents was denied, and they elevated the case for review by the Court of
Appeals, which upon proper application issued a writ of preliminary injunction to stop all
further proceedings below, including execution of the award.
The case was afterwards certified to the Court for the reason that when the respondents
below were declared in default they lost their standing before the Commission, and not
having regained the same by a motion to set aside or petition for relief, they had no right
to appeal from the default judgment; and that in any event no questions of fact are
involved and hence, if at all appealable, the appeal should be directly to this Court.
The procedural issues, we believe, need not concern us. The main point raised here by
the Poblete Construction Company, which it raised also in its motion to dismiss before
the Commission, is that the said body had no jurisdiction to entertain the claim of P3,600,
which should have been presented before the ordinary courts. This claim was filed under
Section 24 of the Social Security Act (R.A. 1191 as amended), which provides:
Sec. 24. Employment records and reports.(a) Each employer shall report immediately
to the System the names, ages, civil status, occupations, salaries and dependents of all
his employees who are in his employ and who are or may later be subject to compulsory
coverage: Provided, That if an employee subject to compulsory coverage should die or
become sick or disabled without the System having previously received a report about
him from his employer, the said employer shall pay to the employee or his legal heirs
damages equivalent to the benefits to which said employee would have been entitled had
his name been reported on time by the employer to the System.
It appears that although the deceased Miguel Asiain had been employed in the Poblete
Construction Company since 1956 and had accomplished SSS Form E-1 (Employees'
Date Record) and transmitted the same to the said company's Manila Office, it was never
filed with the Social Security System for the reason, according to the company, that he
refused to have his share of the corresponding monthly contributions deducted from his
salary. Upon these facts the company maintains that the deceased was not a member of
the System when he died and hence the adjudication of the claim for damages under
Section 24, supra, does not pertain to the Commission but to the courts of justice.
We find the argument untenable. There is no question that the deceased Miguel Asiain
was subject to compulsory coverage in the Social Security System.1 It was the duty of the
employer to "report immediately to the System" his name, age, civil status, occupation,
salary and dependents. Compliance with this duty did not depend upon the employee's
willingness to give his share of the contribution. Section 24 is mandatory, to such an
extent that if the employee should die or become sick or disabled without the report
having been made by the employer, the latter is liable for an amount equivalent to the
benefits to which the employee would have been entitled had such report been made. It
is true that the provision uses the word "damages" in referring to the amount that may be
claimed. But this fact alone does not mean that the Social Security Commission lacks
jurisdiction to award the same. Section 5(a) of the Social Security Act provides that "the
filing, determination and settlement of claims shall be governed by the rules and
regulations promulgated by the Commission;" and the rules and regulations thus
promulgated state that "the effectivity of membership in the System, as well as the final
determination and settlement of claims, shall be vested in the Commission." The term
"claims" is broad enough to include a claim for "damages" under Section 24. Otherwise
an employer could nullify the jurisdiction of the Commission by the simple expedient of
not making a report as required by said Section. The collection of the employee's share is
a duty imposed by law, and his unwillingness to have it deducted from his salary does not
excuse the employer's failure to make the report aforesaid. It is precisely in this situation
that the employer is liable, and there is no question as to the amount of such liability in
this case.
The decision of the Social Security Commission is affirmed, and the writ of preliminary
injunction is dissolved, with costs against herein petitioner.
77
G.R. No. L-26298 September 28, 1984
CMS ESTATE, INC., petitioner,
vs. SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.
CUEVAS, J.:
This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security
Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System,
declaring CMS subject to compulsory coverage as of September 1, 1957 and "directing
the Social Security System to effect such coverage of the petitioner's employees in its
logging and real estate business conformably to the provision of Republic Act No. 1161,
as amended was certified to Us by the defunct Court of Appeals 1 for further disposition
considering that purely questions of law are involved.
Petitioner is a domestic corporation organized primarily for the purpose of engaging in the
real estate business. On December 1, 1952, it started doing business with only six (6)
employees. It's Articles of Incorporation was amended on June 4, 1956 in order to
engage in the logging business. The Securities and Exchange Commission issued the
certificate of filing of said amended articles on June 18, 1956. Petitioner likewise obtained
an ordinary license from the Bureau of Forestry to operate a forest concession of 13,000
hectares situated in the municipality of Baganga, Province of Davao.
On January 28, 1957, petitioner entered into a contract of management with one Eufracio
D. Rojas for the operation and exploitation of the forest concession The logging operation
actually started on April 1, 1957 with four monthly salaried employees. As of September
1, 1957, petitioner had 89 employees and laborers in the logging operation. On
December 26, 1957, petitioner revoked its contract of management with Mr. Rojas.
On August 1, 1958, petitioner became a member of the Social Security System with
respect to its real estate business. On September 6, 1958, petitioner remitted to the
System the sum of P203.13 representing the initial premium on the monthly salaries of
the employees in its logging business. However, on October 9, 1958, petitioner
demanded the refund of the said amount, claiming that it is not yet subject to compulsory
coverage with respect to its logging business. The request was denied by respondent
System on the ground that the logging business was a mere expansion of petitioner's
activities and for purposes of the Social Security Act, petitioner should be considered a
member of the System since December 1, 1952 when it commenced its real estate
business.
On November 10, 1958, petitioner filed a petition with the Social Security Commission
praying for the determination of the effectivity date of the compulsory coverage of
petitioner's logging business.
After both parties have submitted their respective memoranda, the Commission issued
on January 14, 1960, Resolution No. 91, 2 the dispositive portion of which reads as
follows:
Premises considered, the instant petition is hereby denied and petitioner is hereby
adjudged to be subject to compulsory coverage as of Sept. 1, 1957 and the Social
Security System is hereby directed to effect such coverage of petitioner's employees in
its logging and real estate business conformably to the provisions of Rep. Act No. 1161,
as amended.
SO ORDERED.
Petitioner's motion for reconsideration was denied in Resolution No. 609 of the
Commission.
These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits
that respondent Commission erred in holding
(1) that the contributions required of employers and employees under our Social Security
Act of 1954 are not in the nature of excise taxes because the said Act was allegedly
enacted by Congress in the exercise of the police power of the State, not of its taxing
power;
(2) that no contractee independent contractor relationship existed between petitioner
and Eufracio D. Rojas during the time that he was operating its forest concession at
Baganga, Davao;
(3) that a corporation which has been in operation for more than two years in one
business is immediately covered with respect to any new and independent business it
may subsequently engage in;
(4) that a corporation should be treated as a single employing unit for purposes of
coverage under the Social Security Act, irrespective of its separate, unrelated and
independent business established and operated at different places and on different
dates; and
(5) that Section 9 of the Social Security Act on the question of compulsory membership
and employers should be given a liberal interpretation.
Respondent, on the other hand, advances the following propositions, inter alia:
(1) that the Social Security Act speaks of compulsory coverage of employers and not of
business;
78
(2) that once an employer is initially covered under the Social Security Act, any other
business undertaken or established by the same employer is likewise subject in spite of
the fact that the latter has not been in operation for at least two years;
(3) that petitioner's logging business while actually of a different, distinct, separate and
independent nature from its real estate business should be considered as an operation
under the same management;
(4) that the amendment of petitioner's articles of incorporation, so as to enable it to
engage in the logging business did not alter the juridical personality of petitioner; and
(5) the petitioner's logging operation is a mere expansion of its business activities.
The Social Security Law was enacted pursuant to the policy of the government "to
develop, establish gradually and perfect a social security system which shall be suitable
to the needs of the people throughout the Philippines, and shall provide protection
against the hazards of disability, sickness, old age and death" (Sec. 2, RA 1161, as
amended). It is thus clear that said enactment implements the general welfare mandate
of the Constitution and constitutes a legitimate exercise of the police power of the State.
As held in the case of Philippine Blooming Mills Co., Inc., et al. vs. SSS 3
Membership in the SSS is not a result of bilateral, concensual agreement where the
rights and obligations of the parties are defined by and subject to their will, RA 1161
requires compulsory coverage of employees and employers under the System. It is
actually a legal imposition on said employers and employees, designed to provide social
security to the workingmen. Membership in the SSS is therefore, in compliance with the
lawful exercise of the police power of the State, to which the principle of non-impairment
of the obligation of contract is not a proper defense.
xxx xxx xxx
The taxing power of the State is exercised for the purpose of raising revenues. However,
under our Social Security Law, the emphasis is more on the promotion of the general
welfare. The Act is not part of out Internal Revenue Code nor are the contributions and
premiums therein dealt with and provided for, collectible by the Bureau of Internal
Revenue. The funds contributed to the System belong to the members who will receive
benefits, as a matter of right, whenever the hazards provided by the law occur.
All that is required of appellant is to make monthly contributions to the System for
covered employees in its employ. These contributions, contrary to appellant's contention,
are not 'in the nature of taxes on employment.' Together with the contributions imposed
upon employees and the Government, they are intended for the protection of said
employees against the hazards of disability, sickness, old age and death in line with the
constitutional mandate to promote social justice to insure the well-being and economic
security of all the people. 4
Because of the broad social purpose of the Social Security Act, all doubts in construing
the Act should favor coverage rather than exemption.
Prior to its amendment, Sec. 9 of the Act provides that before an employer could be
compelled to become a member of the System, he must have been in operation for at
least two years and has at the time of admission at least six employees. It should be
pointed out that it is the employer, either natural, or judicial person, who is subject to
compulsory coverage and not the business. If the intention of the legislature was to
consider every venture of the employer as the basis of a separate coverage, an express
provision to that effect could have been made. Unfortunately, however, none of that sort
appeared provided for in the said law.
Should each business venture of the employer be considered as the basis of the
coverage, an employer with more than one line of business but with less than six
employees in each, would never be covered although he has in his employ a total of
more than six employees which is sufficient to bring him within the ambit of compulsory
coverage. This would frustrate rather than foster the policy of the Act. The legislative
intent must be respected. In the absence of an express provision for a separate coverage
for each kind of business, the reasonable interpretation is that once an employer is
covered in a particular kind of business, he should be automatically covered with respect
to any new name. Any interpretation which would defeat rather than promote the ends for
which the Social Security Act was enacted should be eschewed. 5
Petitioner contends that the Commission cannot indiscriminately combine for purposes of
coverage two distinct and separate businesses when one has not yet been in operation
for more than two years thus rendering nugatory the period for more than two years thus
rendering nugatory the period of stabilization fixed by the Act. This contention lacks merit
since the amendatory law, RA 2658, which was approved on June 18, 1960, eliminated
the two-year stabilization period as employers now become automatically covered
immediately upon the start of the business.
Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:
Sec. 10. Effective date of coverage. Compulsory coverage of the employer shall take
effect on the first day of his operation, and that of the employee on the date of his
employment. (Emphasis supplied)
As We have previously mentioned, it is the intention of the law to cover as many persons
as possible so as to promote the constitutional objective of social justice. It is axiomatic
that a later law prevails over a prior statute and moreover the legislative in tent must be
given effect. 6
Petitioner further submits that Eufrancio Rojas is an independent contractor who engages
in an independent business of his own consisting of the operation of the timber
concession of the former. Rojas was appointed as operations manager of the logging
79
consession; 7 he has no power to appoint or hire employees; as the term implies, he only G.R. No. L-39949 October 31, 1984
manages the employees and it is petitioner who furnishes him the necessary equipment
for use in the logging business; and he is not free from the control and direction of his MANUEL H. SANTIAGO, ET AL., petitioners,
employer in matter connected with the performance of his work. These factors clearly vs. COURT OF APPEALS and SOCIAL SECURITY SYSTEM, respondents. MELENCIO-
indicate that Rojas is not an independent contractor but merely an employee of petitioner; HERRERA, J.:
and should be entitled to the compulsory coverage of the Act.
A Petition to review the Decision of the then Court of Appeals (in CA-G.R. No. SP-
The records indubitably show that petitioner started its real estate business on December 01897-R), which affirmed the Resolution of the Social Security Commission (in Case No.
1, 1952 while its logging operation was actually commenced on April 1, 1957. Applying 1073-SSC), denying the petition of Manuel H. Santiago, et als., to credit in their favor the
the provision of Sec. 10 of the Act, petitioner is subject to compulsory coverage as of salary deductions, by way of premium contributions and salary loan installment
December 1, 1952 with respect to the real estate business and as of April 1, 1957 with payments, made by their former employer, I-Feng Enamelling Company (Phil.) Inc., (the
respect to its logging operation. Employer, for brevity), but which the latter failed to remit to the Social Security System
(the System, for short).
WHEREFORE, premises considered, the appeal is hereby DISMISSED. With costs
against petitioner. There is no dispute as to the facts, as found by the then Court of Appeals.

SO ORDERED. There is no dispute that petitioners were employees of I-Feng Enamelling Company
(Phil.) Inc. for several years, some from 1950 up to the time the company closed its
business on May 1, 1965, and that since the enactment of the Social Security Act,
Republic Act No. 1161, as amended, said employees have been paying, through salary
deductions, their personal contributions to the System There is likewise no dispute that
appellants, during their employment, also enjoyed salary loan benefits, their installment
payments thereto were likewise deducted and collected by their employer, and that said
employer failed to remit to the System not only the installment payments to their salary
loans in the amount of P7,940.13 but also the back premiums in the amount of
P137,787.90 as of July 1966, excluding of course the penalties therefor in the amount of
P63,734.97 as of August 9,1966 (Exhibit "B" ). 1

Petitioners sought to have the amounts credited in their favor but the Commission denied
their petition, stating:

WHEREFORE, in the light of the foregoing discussion, the stand taken by petitioners in
its case is untenable, hence their petition is hereby dismissed. If it is the claim of
petitioner that there are deductions made on their salaries which were not remitted to the
System then petitioners should have proceeded against the I-Feng Enamelling Company
(Phil.) Inc., their alleged employer.

The System is likewise directed to study and determine what action to take under the
premises in order to protect the interest of the System.

Petitioners appealed to the then Court of Appeals, which, in its Decision promulgated on
December 23, 1974, upheld the findings of the Commission and affirmed the challenged
Resolution. Petitioners are now before us assailing the foregoing Resolution and
Decision on the following grounds:

80
I said to exist between the employer and the System. But petitioners also rely on the
The respondents erred in holding that there exists no contract Of agency between the
Social Security System and I-Feng Enamelling
Company (Phil.) Inc. in the collection of the salary loan installment payments from the
petitioners and, therefore, the said unremitted salary loan installment payments may not
be credited to petitioners.
II
The Respondents likewise erred in holding that the collections of premium contributions
by the I-Feng Enamelling Company (Phil.) Inc. is not a collection by the System and,
therefore, such unremitted premium contributions collected thru salary deductions from
the salaries of the petitioners by the I-Feng Enamelling Company (Phil.) Inc. and which
the latter failed to remit to the System may not be credited to the petitioners.
The sole issue for consideration is whether or not the premium contributions and
payments of salary loans by petitioners, which were deducted and collected from their
salaries by their Employer, but hot remitted to the System, should be credited in their
favor by the System.
Petitioners argue that they are entitled to full credit for the unremitted premium
contributions and salary loan installment payments deducted from their wages because,
by law, a contract of agency exists between the SSS and the Employer in the collection
of the salary loan installment payments, and therefore, as such agent, payment to the
Employer is payment to the principal, which is the System.
On the matter of payments of salary loans, SSS Circular No. 52 provides:
(2) in case the borrower is in active employment, payment shall be made thru this
employer by means of salary deductions. For this purpose, he shall expressly authorize
in the application form his employer and the subsequent employers to whom he may later
on transfer to deduct from his salaries the installments due. The employer, in turn shall
remit to the System these installments in accordance with the procedure laid down in
heading VII hereof.
lt should be noted from the abovequoted rule that it is the borrower who expressly
authorizes his employer and subsequent employers to deduct from his salary the
installments due on his salary loan. The employer then remits the installments due to the
System in accordance with rules that the System has laid down. The employer, in so
deducting the installment payments from the borrower, does so upon the latter's
authorization. The employer is merely the conduit for remitting the premiums for reasons
of administrative convenience and expediency iii order that SSS members may be served
efficiently and expeditiously. No contract of agency, in the legal sense, therefore may be
"Current Employer's Certification/Agreement" (Exhibits "N-1 ", "U-1 ", "V1" and "WI ")
providing that the employer is empowered:
1. To deduct monthly from the salaries of said employee the installments due on the loan
that may be granted by virtue of this application and to remit the same to the System not
later than the 20th day of the month following the end of each calendar quarter, the
employer being entitled to deduct from the total quarterly collections P.07 for every
P10.00 thereof as his collection fee.
The foregoing reiterates the proviso in SSS Circular No. 52, reading:
V. Service and Collection Fee. -The System shall charge a service fee of P3.50 for every
approved application deductible in advance from the proceeds of the loan.
However, the employer shall be entitled to deduct from the total quarterly collections that
he remits to the System a collection fee of seven centavos (P.07) for every ten pesos
(P10.00) or fraction thereof.
The entitlement to the collection fee by the employer neither makes the latter the agent of
the System. The fee was devised to encourage employers to be prompt in the remittance
of their collections to the System. As held by respondent Appellate Court:
To us, this negligible collection fee is only an incentive granted to all employers
throughout the country covered by the Social Security Act for their efforts in helping the
System collect the necessary contributions and payments made to the latter by the
innumerable individual members. This incentive is for administrative policy, efficiency and
expediency with the end in view that the purposes for which the System has been
created by law shall be effectively carried out. ... .
To rule otherwise would be to open the door for unscrupulous employers to circumvent
the law by not remitting their collections of salary loans installment payments from
employees since, anyway, the System would credit them with what they had paid to the
Employer even though the latter fails to remit them to the System.
There is a difference, however, in respect of premium contributions, by reason of the
explicit provision of Section 22(b) of the Social Security Act, reading:
(b) The contributions payable under this Act in cases where an employer refuses or
neglects to pay the same shall be collected by the System in the same manner as taxes
are made collectible under the National Internal Revenue Code, as amended, Failure or
refusal of the employer to pay or remit the contributions herein prescribed shall not
prejudice the right of the covered employee to the benefits of the coverage.
Clearly, if the employer neglects to pay the premium contributions, the System may
proceed with the collection in the same manner as the Bureau of Internal Revenue in
81
case of unpaid taxes. Plainly, too, notwithstanding non-remittance by employers of the
premium contributions, covered employees are entitled to the benefits of the coverage,
such as death sickness, retirement, and permanent disability benefits. 2 These benefits
continue to be enjoyed by the employees by operation of law and not, as petitioners
allege, because the premium contributions and salary loan installment payments have
already became the money of the System upon payment by the employees to the
employer. It should be remembered that funds contributed to the System by compulsion
of law are funds belonging to the members, which are merely held in trust by the
government.3 The mentioned benefits, however, do not include the salary loan privileges
that member-employees apply for. The System may or may not grant those loans
pursuant to its rules and regulations. The salary loans are not covered by law but by
contract between the System as lender, and the private employee, as borrower.
Contrary to petitioners' contention, the penalty of 3% per month imposed on the
employer, if any premium contribution is not paid to the System, prescribed by Section 22
of the Act from the date the contribution falls due until paid, does not necessarily make
the employer the agent of the System. The prescribed penalty is intended to exact
compliance by the employer. It is evidently of a punitive character to assure that
employers do not take lightly the State's exercise of the police power in the
implementation of the Republic's declared policy to develop, establish gradually, and
perfect a Social Security System which shag be suitable to the needs of the people
throughout the Philippines and to provide protection to employees against the hazards of
disability, sickness, old age, and death.'
WHEREFORE, the judgment under review is hereby modified in that only the premium
contributions paid by petitioners to its employer, the I-Feng Enamelling Company (Phil.)
Inc., shall be credited in petitioners' favor so that they may continue to enjoy the benefits
of the coverage as provided by law. No costs.
SO ORDERED.
G.R. No. 74689 March 21, 1990
ROBERTO R. BENEDICTO, petitioner,
vs. HON. QUIRINO D. ABAD SANTOS, JR., in his capacity as Presiding Judge of the
Regional Trial Court of Negros Occidental, and SOCIAL SECURITY SYSTEM,
respondents. FELICIANO, J.:
In this Petition for Prohibition and Mandamus with preliminary injunction, petitioner
Roberto R. Benedicto seeks to set aside the Orders of respondent Judge dated 3 March
1986 and 21 April 1986 denying, respectively, petitioner's Motion to Quash Criminal Case
No. 3863 and his related Motion for Reconsideration.
Petitioner Benedicto started a trucking business sometime in March 1971 in which
business he employed the late Salvador Pillon as truck driver. Petitioner, however, did
not report Pillon's employment to the Social Security System ("SSS") for compulsory
coverage and did not pay the corresponding SSS contributions.
The above facts came to the knowledge of the SSS sometime in 1975. On 19 October
1975, after Pillon's death, Mr. Antonio Obillos, Jr., an investigator of the SSS Regional
Office in Bacolod City, was deputized to conduct an enquiry in respect of Benedicto's
alleged violations of the Social Security Act (Republic Act No. 1161, as amended). In his
Field Investigation Report, dated 29 October 1975, 1 Obillos stated that Benedicto had
admitted having failed to report and to register with the SSS Pillon's employment for the
period from March 1971 up to the time of Pillon's death in 1974, and to pay the
corresponding SSS contributions; that upon Obillos' suggestion, petitioner Benedicto had
accomplished and submitted SSS Forms E-1 and R-1A reporting himself and Pillon for
SSS compulsory coverage; that Benedicto and Pillon were assigned SSS Identification
Nos. 07-17376-00 and 07-0687-312 effective 1 March 1971; that Benedicto was
assessed SSS premiums in the total amount of P491.70 excluding penalties. Obillos
recommended that his report be transmitted to the Legal Department of the SSS in
Quezon City for appropriate action.
Approximately ten (10) years later, on 18 July 1985, upon complaint of the Legal
Department of the SSS, the Assistant City Fiscal of Bacolod City filed an information
charging petitioner Benedicto with violations of Section 24 (a) in relation to Section 28 (e)
of the Social Security Act, as amended. The information read as follows:
That during the period from March 1971 to March 1974, in the City of Bacolod,
Philippines, and within the territorial jurisdiction of the Social Security System, Regional
Office 07, situated in Bacolod City, Philippines and within the jurisdiction of this
Honorable Court, the herein accused, with address at Punay Street, Silay City, did, then
and there, willfully, unlawfully and feloniously fail and refuse, without lawful cause to
report register on time for SSS Coverage his employee, the late Salvador Pillon, thereby
rendering him liable for damages in the amount of SIX THOUSAND THREE HUNDRED
EIGHTY ONE PESOS AND 00/100 CENTAVOS (P6,381.00), Philippine Currency, the
82
amount equivalent to the benefits the heirs of the late Salvador Pillon would have been
entitled to, had the name of the deceased member been reported/registered to the SSS
on time which the accused failed and refused to pay despite demands in violation of the
aforementioned law.
Not (sic) contrary to law. 2
Before arraignment, petitioner Benedicto moved to quash the information asserting that
his liability thereunder had already been extinguished by prescription. Upon the other
hand, the complainant SSS opposed the Motion to Quash contending that the offense
charged in the information had not yet prescribed since the applicable prescriptive period
was twenty (20) years and since the information was filed within this 20-year period.
In an Order dated 3 March 1986, respondent Judge denied petitioner Benedicto's Motion
to Quash stating, tersely that:
xxx xxx xxx
Paragraph B of Section 22 of the Republic Act 1161 as amended by Section 15 of the PD
1636 is quoted hereunder to wit:
The right to institute the necessary action against the employer may be commenced
within Twenty Years (20) from the time the Delinquency is known or the assignment is
made by the SSS, or from the time the Benefit Accrues, as the case may be.
In view of the foregoing, the motion to quash is denied for lack of merit.
SO ORDERED.
Petitioner moved for reconsideration of the above order, without success.
Hence the present Petition for Prohibition and Mandamus with preliminary injunction. The
Court ordered the SSS impleaded as party respondent and to file a Comment on the
Petition. The Solicitor General filed a Comment for the SSS.
The central issue here posed is whether or not the offense with which petitioner
Benedicto is charged has prescribed.
Petitioner Benedicto does not dispute that he had not reported his employee Pillon to the
SSS as required by the Social Security Act. He, however, argues that the 20-year
prescriptive period established in Section 22 (b) of the Social Security Act relied upon by
the respondent Judge, applies only in respect of administrative and civil actions involving
delinquency in the remittance of contributions to the SSS, and not to a criminal action like
that initiated in the case at bar. Section 22 (b) of the Social Security Act, as amended by
P.D. No. 1636 provides that:
Sec. 22. Remittance of Contributions.
xxx xxx xxx
(b) The contribution payable under this Act in cases where an employer refuses or
neglects to pay the same shall be collected by the SSS in the same manner as taxes are
made collectible under the National Internal Revenue Code, as amended. Failure or
refusal of the employer to pay or remit the contributions herein penalized shall not
prejudice the right of the covered employee to the benefits of the employee.
The right to institute the necessary action against the employer may be commenced
within twenty (20) years from the time the delinquency is known or the assessment is
made by the SSS, or from the time the benefit accrues, as the case may be. (Emphasis
supplied)
Section 28 (e) of Republic Act No. 1161 as amended by P.D. No. 177 (promulgated 23
April 1973) prescribed the penalty for the crime charged in the information:
Sec. 28. Penal Clause . . .
xxx xxx xxx
(e) Whoever fails or refuses to comply with the provisions of this Act or with the rules and
regulations promulgated by the Commission, shall be punished by a fine of not less than
five hundred pesos nor more than five thousand pesos, or imprisonment for not less than
six months nor more than one year, or both, at the discretion of the court: Provided, That,
where the violation consists in failure or refusal to register employees, or to deduct
contributions from employee's compensation and remit the same to the SSS, the penalty
shall be a fine of not less than five hundred pesos nor more than five thousand pesos and
imprisonment for not less than six months nor more than one year.
Upon the other hand, Act No. 3326, as amended by Act No. 3763 provides as follows:
Sec. 1. Violations penalized by special acts shall, unless otherwise provided in such acts,
prescribe in accordance with the following rules: (a) after a year for offenses punished
only by a fine or by imprisonment for not more than one month, or both; (b) after four
years for those punished by imprisonment for more than one month, but less than two
years; (c) after eight years for those punished by imprisonment for two years or more, but
less than six years; and (d) after twelve years for any other offence punished by
imprisonment for six years or more, . . .: Provided, however, That all offenses against any
law or part of law administered by the Bureau of Internal Revenue shall prescribe after
five years. Violations penalized by municipal ordinances shall prescribe after two months.
Violations of the regulations or conditions of certificates of public convenience issued by
the Public Service Commission, shall prescribe after two months. (Emphasis supplied)
83
Petitioner Benedicto argues that since the Social Security Act itself had not established a
prescriptive period in respect of criminal liability for violations of the Social Security Act or
the Rules and Regulations promulgated by the Social Security Commission concerning
registration of employees and remittance of contributions to the SSS, the applicable
statute of limitations was four (4) years under Act No. 3326, as amended, quoted above.
It was, however, argued by the SSS as complainant before the trial court, as it is argued
by the Solicitor General in the Petition at bar, that Act No. 3326, as amended, was not
applicable to the instant case for the reason that the Social Security Act itself had
established a statute of limitations in Section 22 (b) of the Social Security Act as
amended by P.D. No. 1636, quoted earlier. It appears to be the position of the SSS that
the 20-year statute of limitations embodied in Section 22 (b) is applicable in respect of all
kinds of actions against a delinquent employer, whether criminal or civil. We find it difficult
to accept this view as correct.
We note, in the first place, that the 20-year prescriptive period is found in Section 22 of
the Social Security Act which deals generally with the remittance of contributions to the
SSS. Section 22 (b) does not deal with penal sanctions for violations of provisions of the
Social Security Act nor of the rules and regulations promulgated by the Social Security
Commission. The penal sanctions established by the Social Security Act are found in
Section 28 which forms part of the final portion or chapter of the Act denominated as "G.
Miscellaneous Provisions." In contrast, Section 22 is found in chapter E entitled "Sources
of Funds Employment Records and Reports." But an examination of Section 28
entitled "Penal Clauses" shows that none of the subsections thereof purports to establish
a prescriptive period in respect of such criminal sanctions. If the 20-year period of
prescription had been intended by the legislative authority to apply to the penal sanctions
established by the statute, one would expect it either to be textually located in chapter G
"Miscellaneous Provisions" and not in chapter E "Sources of Funds," or at the very least
to refer to the sections on penal sanctions in chapter G. In other words, the context of
Section 22 (b) indicates that it does not relate to criminal sanctions at all.
Secondly, close examination of Section 22 (b) will show that the "necessary action
against the employer" referred to in the second paragraph thereof is an action that is
brought against the employer for the collection of contributions payable under the Social
Security Act which the employer has refused or neglected to pay.
Thirdly, a 20-year statute of limitation if made applicable in respect of criminal liability of
an employer for failure to remit contributions to the SSS would constitute a
disproportionately long statute of limitations if one compared it with either the applicable
prescriptive periods in respect of crimes punishable under the Revised Penal Code or the
prescriptive periods applicable to crimes punished by special statutes under Act No.
3326, as amended. Under Article 90 of the Revised Penal Code, only crimes punishable
by death, reclusion perpetua or reclusion temporal prescribe in twenty (20) years; all
other crimes prescribe in fifteen (15) years, ten (10) years, five (5) years, one (1) year, six
(6) months or two (2) months. Similarly, under Article 92 of the Revised Penal Code, only
the penalties of death and reclusion perpetua prescribe in twenty (20) years; all other
penalties prescribe in lesser periods of time ranging from fifteen (15) years to one (1)
year. The prescriptive periods for offenses penalized by special statutes established
under Act No. 3326, as amended, quoted above, are comparable; they range from twelve
(12) years (for offenses penalized with 6 years of imprisonment) to one (1) year (for
offenses penalized with a fine only or with one month of imprisonment). We note also that
under the National Internal Revenue Code (in the form it existed at the time of the
commission of the acts here involved) to which Section 22 (b) of the Social Security Act
refers, penal sanctions for violations of provisions of that Code prescribe in five (5) years
3 and that the period of prescription applicable in respect of civil remedies for the
collection of internal revenue taxes is also five (5) years. 4
Upon the other hand, the criminal penalties prescribed by the Social Security Act itself for
violations of its provisions and of rules and regulations promulgated by the Social
Security Commission, are significantly lighter than reclusion perpetua or reclusion
temporal. The most severe penalty imposed by the Social Security Act itself does not
exceed five (5) years. Of course, certain provisions of Section 28 of the Social Security
Act, as amended, refer to penalties provided for in certain articles of the Revised Penal
Code. Thus, Section 28 (a) refers to penalties established in Article 172 of the Revised
Penal Code (falsification of public and commercial documents and use thereof by private
individual); Section 28 (g) refers to Article 217 of the Revised Penal Code (malversation
of public funds and property); and Section 28 (h) refers to penalties established under
Article 315 of the Revised Penal Code (swindling and estafa). It thus appears to us that to
apply a single, uniform 20-year prescriptive period to both civil actions for collection of
unremitted SSS premiums and to criminal prosecutions for violations of provisions of the
Social Security Act and of rules and regulations promulgated by the Social Security
Commission, would be both grossly disproportional and too simplistic. Such a result
cannot lightly be assumed to have been intended by the legislative authority in enacting
Section 22 (b), second paragraph, of the Social Security Act.
In the case at bar, the information was filed against petitioner Benedicto ten (10) years
after the alleged violations had been discovered by the SSS. We hold that the statutory
crime here charged had prescribed by then, the prescriptive period here applicable being
four (4) years.
The foregoing, however, is concerned only with the extinguishment of the criminal liability
for the offense charged in the information. The general rule is, of course, that extinction of
the penal action does not carry with it the extinction of the civil action to enforce civil
liability arising from the offense charged, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil might arise did not exist. 5
In the case at bar, no final judgment had been rendered by the trial court since the
criminal case was in effect aborted by the Motion to Quash. Thus, the extinction of the
criminal liability of petitioner by reason of prescription has had no impact upon the related
civil action for enforcement of the civil liability of petitioner. Said civil action, in
84
accordance with the provisions of Section 22 (b), second paragraph quoted above of the
Social Security Act, may be brought within twenty (20) years from the time the employer's
delinquency was discovered. Since at the time of the institution of the criminal
proceedings against petitioner Benedicto, so far as the record shows, no reservation had
been made for institution of a separate civil action for recovery of the civil liability arising
from the criminal acts charged, such civil action must be deemed to have been instituted
simultaneously with the commencement of the criminal proceedings. Such civil action
may proceed notwithstanding the extinction of the criminal action against petitioner
Benedicto.
It remains only to note that the information against petitioner Benedicto itself specified the
amount of the civil liability P6,381.00, being the amount equivalent to the benefits
which the heirs of the deceased Salvador Pillon would have been entitled to had Pillon
been reported and registered with the SSS on the time and the necessary contributions
remitted to the SSS. That amount will, upon collection, be payable to Salvador Pillon's
heirs.
WHEREFORE, the Petition for Prohibition and Mandamus with preliminary injunction is
hereby GRANTED insofar as prosecution of the criminal action against petitioner
Benedicto is concerned. The same Petition is hereby DISMISSED insofar as the civil
action for the enforcement of the civil liability arising from the offense charged, is
concerned, and the case REMANDED to the trial court for continuation of such civil
action. The Temporary Restraining Order issued by the Court on 11 June 1986 is hereby
made PERMANENT insofar as Criminal Case No. 3863 is concerned and LIFTED insofar
as the related civil action is concerned. No pronouncement as to costs.
SO ORDERED.
G.R. No. 125837 October 6, 2004
REYNALDO CANO CHUA, doing business under the name & style PRIME MOVER
CONSTRUCTION DEVELOPMENT, petitioner,
vs. COURT OF APPEALS, SOCIAL SECURITY COMMISSION, SOCIAL SECURITY
SYSTEM, ANDRES PAGUIO, PABLO CANALE, RUEL PANGAN, AURELIO PAGUIO,
ROLANDO TRINIDAD, ROMEO TAPANG and CARLOS MALIWAT, respondents.
TINGA, J.:
This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. CV No.
38269 dated 06 March 1996, and its Resolution dated 30 July 1996 denying petitioners
Motion for Reconsideration,2 affirming the Order of the Social Security Commission
(SSC) dated 1 February 19953 which held that private respondents were regular
employees of the petitioner and ordered petitioner to pay the Social Security System
(SSS) for its unpaid contributions, as well as penalty for the delayed remittance thereof.
On 20 August 1985, private respondents Andres Paguio, Pablo Canale, Ruel Pangan,
Aurelio Paguio, Rolando Trinidad, Romeo Tapang and Carlos Maliwat (hereinafter
referred to as respondents) filed a Petition4 with the SSC for SSS coverage and
contributions against petitioner Reynaldo Chua, owner of Prime Mover Construction
Development, claiming that they were all regular employees of the petitioner in his
construction business.5
Private respondents claimed that they were assigned by petitioner in his various
construction projects continuously in the following capacity, since the period indicated,
and with the corresponding basic salaries,6 to wit:
Andres Paguio Carpenter 1977 P 42/day

Pablo Canale Mason 1977 42/day

Ruel Pangan Mason 1979 39/day

Aurelio Paguio Fine grading 1979 42/day

Romeo Tapang Fine grading 1979 42/day

Rolando Trinidad Carpenter 1983 (Jan.) 39/day

85

Carlos Maliwat Mason 1977 42/day
Private respondents alleged that petitioner dismissed all of them without justifiable
grounds and without notice to them and to the then Ministry of Labor and Employment.
They further alleged that petitioner did not report them to the SSS for compulsory
coverage in flagrant violation of the Social Security Act. 7
In his Answer,8 petitioner claimed that private respondents had no cause of action
against him, and assuming there was any, the same was barred by prescription and
laches. In addition, he claimed that private respondents were not regular employees, but
project employees whose work had been fixed for a specific project or undertaking the
completion of which was determined at the time of their engagement. This being the
case, he concluded that said employees were not entitled to coverage under the Social
Security Act.9
Meanwhile, the SSS filed a Petition in Intervention10 alleging that it has an interest in the
petition filed by private respondents as it is charged with the implementation and
enforcement of the provisions of the Social Security Act. The SSS stated that it is the
mandatory obligation of every employer to report its employees to the SSS for coverage
and to remit the required contribution, including the penalty imposed for late premium
remittances.
On 01 February 1995, the SSC issued its Order11 which ruled in favor of private
respondents. The SSC, relying on NLRC Case No. RAB-III-8-2373-85,12 declared private
respondents to be petitioners regular employees. 13 It ordered petitioner to pay the SSS
the unpaid SS/EC and Medicare contributions plus penalty for the delayed remittance
thereof, without prejudice to any other penalties which may have accrued. 14 The SSC
denied the Motion for Reconsideration15 of petitioner for lack of merit.16
Petitioner elevated the matter to the Court of Appeals via a Petition for Review.17 He
claimed that private respondents were project employees, whose periods of employment
were terminated upon completion of the project. Thus, he claimed, no employer-
employee relation existed between the parties. 18 There being no employer-employee
relationship, private respondents are not entitled to coverage under the Social Security
Act.19 In addition, petitioner claimed that private respondents length of service did not
change their status from project to regular employees.20
Moreover, granting that private respondents were entitled to coverage under the Act,
petitioner claimed that the SSC erred in imposing penalties since his failure to include
private respondents under SSS coverage was neither willful nor deliberate, but due to the
honest belief that project employees are not regular employees. 21 Likewise, he claimed
that the SSC erred in ordering payment of contributions and penalties even for long
periods between projects when private respondents were not working. 22
Petitioner also questioned the failure to apply the rules on prescription of actions and of
laches, claiming that the case, being one for the injury to the rights of the private
respondents, should have been filed within four (4) years from the time their cause of
action accrued, or from the time they were hired as project employees. He added that
private respondents "went into a long swoon, folded their arms and closed their eyes" 23
and filed their claim only in 1985, or six (6) years or eight (8) years after they were taken
in by petitioner.24
In resolving the petition, the Court of Appeals synthesized the issues in the petition, to
wit: (1) whether private respondents were regular employees of petitioner, and whether
their causes of action as such are barred by prescription or laches; (2) if so, whether
petitioner is now liable to pay the SSS contributions and penalties during the period of
employment.25
The Court of Appeals, citing Article 280 of the Labor Code, 26 declared that private
respondents were all regular employees of the petitioner in relation to certain activities
since they all worked either as masons, carpenters and fine graders in petitioners
various construction projects for at least one year, and that their work was necessary and
desirable to petitioners business which involved the construction of roads and bridges. 27
It cited the case of Mehitabel Furniture Company, Inc. v. NLRC,28 particularly the ruling
therein which states:
By petitioners own admission, the private respondents have been hired to work on
certain special orders that as a matter of business policy it cannot decline. These projects
are necessary or desirable in its usual business or trade, otherwise they would not have
accepted . Significantly, such special orders are not really seasonal but more or less
regular, requiring the virtually continuous services of the "temporary workers." The NLRC
also correctly observed that "if we were to accept respondents theory, it would have no
regular workers because all of its orders would be special undertakings or projects." The
petitioner could then hire all its workers on a contract basis only and prevent them from
attaining permanent status.
Furthermore, the NLRC has determined that the private respondents have worked for
more than one year in the so-called "special projects" of the petitioner and so fall under
the second condition specified in the above-quoted provision (Article 280, Labor Code).29
The Court of Appeals rejected the claim of prescription, stating that the filing of private
respondents claims was well within the twenty (20)-year period provided by the Social
Security Act.30 It found that the principle of laches could not also apply to the instant case
since delay could not be attributed to private respondents, having filed the case within the
prescriptive period, and that there was no evidence that petitioner lacked knowledge that
private respondents would assert their rights.31
Petitioner filed a Motion for Reconsideration,32 claiming that the Court of Appeals
overlooked (1) the doctrine that length of service of a project employee is not the
86
controlling test of employment tenure, and (2) petitioners failure to place private
respondents under SSS coverage was in good faith. The motion was denied for lack of
merit.33
In the present Petition for Review, petitioner again insists that private respondents were
not regular, but project, employees and thus not subject to SSS coverage. In addition,
petitioner claims that assuming private respondents were subject to SSS coverage, their
petition was barred by prescription and laches. Moreover, petitioner invokes the defense
of good faith, or his honest belief that project employees are not regular employees under
Article 280 of the Labor Code.lawphil.net
Petitioners arguments are mere reiterations of his arguments submitted before the SSC
and the Court of Appeals. More importantly, petitioner wants this Court to review factual
questions already passed upon by the SSC and the Court of Appeals which are not
cognizable by a petition for review under Rule 45. Well-entrenched is the rule that the
Supreme Courts jurisdiction in a petition for review is limited to reviewing or revising
errors of law allegedly committed by the appellate court, the findings of fact being
generally conclusive on the Court and it is not for the Court to weigh evidence all over
again.34
Stripped of the lengthy, if not repetitive, disquisition of the private parties in the case, and
also of the public respondents, on the nature of private respondents employment, the
controversy boils down to one issue: the entitlement of private respondents to
compulsory SSS coverage.
The Social Security Act was enacted pursuant to the policy of the government "to
develop, establish gradually and perfect a social security system which shall be suitable
to the needs of the laborers throughout the Philippines, and shall provide protection
against the hazards of disability, sickness, old age and death." 35 It provides for
compulsory coverage of all employees not over sixty years of age and their employers.36
Well-settled is the rule that the mandatory coverage of Republic Act No. 1161, as
amended, is premised on the existence of an employer-employee relationship, the
essential elements of which are: (a) selection and engagement of the employee; (b)
payment of wages; (c) the power of dismissal; and (d) the power of control with regard to
the means and methods by which the work is to be accomplished, with the power of
control being the most determinative factor.37
There is no dispute that private respondents were employees of petitioner. Petitioner
himself admitted that they worked in his construction projects, 38 although the period of
their employment was allegedly co-terminus with their phase of work.39 Even without
such admission from petitioner, the existence of an employer-employee relationship
between the parties can easily be determined by the application of the "control test," 40 the
elements of which are enumerated above. It is clear that private respondents are
employees of petitioner, the latter having control over the results of the work done, as
well as the means and methods by which the same were accomplished. Suffice it to say
that regardless of the nature of their employment, whether it is regular or project, private
respondents are subject of the compulsory coverage under the SSS Law, their
employment not falling under the exceptions provided by the law. 41 This rule is in accord
with the Courts ruling in Luzon Stevedoring Corp. v. SSS42 to the effect that all
employees, regardless of tenure, would qualify for compulsory membership in the SSS,
except those classes of employees contemplated in Section 8(j) of the Social Security
Act.43
This Court also finds no reason to deviate from the finding of the Court of Appeals
regarding the nature of employment of private respondents. Despite the insistence of
petitioner that they were project employees, the facts show that as masons, carpenters
and fine graders in petitioners various construction projects, they performed work which
was usually necessary and desirable to petitioners business which involves construction
of roads and bridges. In Violeta v. NLRC,44 this Court ruled that to be exempted from the
presumption of regularity of employment, the agreement between a project employee and
his employer must strictly conform to the requirements and conditions under Article 280
of the Labor Code. It is not enough that an employee is hired for a specific project or
phase of work. There must also be a determination of, or a clear agreement on, the
completion or termination of the project at the time the employee was engaged if the
objectives of Article 280 are to be achieved. 45 This second requirement was not met in
this case.
Moreover, while it may be true that private respondents were initially hired for specific
projects or undertakings, the repeated re-hiring and continuing need for their services
over a long span of timethe shortest being two years and the longest being eight
have undeniably made them regular employees. 46 This Court has held that an
employment ceases to be co-terminus with specific projects when the employee is
continuously rehired due to the demands of the employers business and re-engaged for
many more projects without interruption.47 The Court likewise takes note of the fact that,
as cited by the SSC, even the National Labor Relations Commission in a labor case
involving the same parties, found that private respondents were regular employees of the
petitioner.48
Another cogent factor militates against the allegations of the petitioner. In the
proceedings before the SSC and the Court of Appeals, petitioner was unable to show that
private respondents were appraised of the project nature of their employment, the
specific projects themselves or any phase thereof undertaken by petitioner and for which
private respondents were hired. He failed to show any document such as private
respondents employment contracts and employment records that would indicate the
dates of hiring and termination in relation to the particular construction project or phases
in which they were employed.49 Moreover, it is peculiar that petitioner did not show proof
that he submitted reports of termination after the completion of his construction projects,
87
considering that he alleges that private respondents were hired and rehired for various
projects or phases of work therein.

Anent the issue of prescription, this Court rules that private respondents right to file their
claim had not yet prescribed at the time of the filing of their petition, considering that a
mere eight (8) years had passed from the time delinquency was discovered or the proper
assessment was made. Republic Act No. 1161, as amended, prescribes a period of
twenty (20) years, from the time the delinquency is known or assessment is made by the
SSS, within which to file a claim for non-remittance against employers.50

Likewise, this Court is in full accord with the findings of the Court of Appeals that private
respondents are not guilty of laches. The principle of laches or "stale demands" ordains
that the failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier, or the
negligence or omission to assert a right within a reasonable time, warrants a presumption
that the party entitled to assert it either has abandoned it or declined to assert it. 51 In the
instant case, this Court finds no proof that private respondents had failed or neglected to
assert their right, considering that they filed their claim within the period prescribed by
law.

This Court finds no merit in petitioners protestations of good faith. In United Christian
Missionary Society v. Social Security Commission,52 this Court ruled that good faith or
bad faith is irrelevant for purposes of assessment and collection of the penalty for
delayed remittance of premiums, since the law makes no distinction between an
employer who professes good reasons for delaying the remittance of premiums and
another who deliberately disregards the legal duty imposed upon him to make such
remittance.53 For the same reasons, petitioner cannot now invoke the defense of good
faith.

WHEREFORE, the Petition is DENIED. The Decision and Resolution of the Court of
Appeals promulgated on 6 March 1996 and 30 July 1996 respectively, are AFFIRMED.
Costs against petitioner.

SO ORDERED.

88
G.R. No. 134028 December 17, 1999
EMPLOYEES' COMPENSATION COMMISSION (SOCIAL SECURITY SYSTEM),
petitioner,
vs. EDMUND SANICO, respondent. KAPUNAN, J.:
Through this petition for review, the Employees' Compensation Commission seeks to set
aside the decision of the Court of Appeals (CA) in CA G.R. SP No. 47804, dated 28 May
1998, reversing petitioner's decision, dated 20 March 1997, in ECC Case No. 8342 and
granting Edmund Sanico's (private respondent's) claim for compensation benefits under
Presidential Decree No. 626, as amended (Book IV, Title II of the Labor Code).
Private respondent was a former employee of John Gotamco and Sons. He worked in
said company as "wood filer" from 1986 until he was separated from employment on 31
December 1991 due to his illness. His medical evaluation report, dated 31 September
1991, showed that he was suffering from pulmonary tuberculosis (PTB). Subsequent
chest x-rays taken on 9 October 1994 and 3 May 1995 diagnostically confirmed his
illness.
On 9 November 1994, private respondent filed with the Social Security System (SSS) a
claim for compensation benefits under P.D. No. 626, as amended. On 23 April 1996, the
SSS denied private respondent's claim on the ground of prescription. The SSS ruled that
under Article 201 or the Labor Code, a claim for compensation shall be given due course
only when the same is filed with the System three (3) years from the time the cause of
action accrued. In private respondent's case, the SSS reckoned the three-year
prescriptive period on 21 September 1991 when his PTB first became manifest. When he
filed his claim on 9 November 1994, the claim had allegedly already prescribed.
On appeal, petitioner affirmed the decision of the SSS. Private respondent then elevated
the case to the CA, which reversed petitioner's decision and granted private respondent's
claim for compensation benefits. In ruling that private respondent's claim was filed well
within the prescriptive period under the law, the CA reconciled Article 201 of the Labor
Code with Article 1144(2) of the Civil Code. Under the latter provision of law, an action
upon an obligation created by law must be filed within ten (10) years from the time the
cause of action accrues. Thus, while private respondent's illness became manifest in
September 1991, the filing of his compensation claim on 9 November 1994 was within,
even long before, the prescriptive period.
The sole issue to be resolved in this case is whether or not private respondent's claim for
compensation benefit had already prescribed when he filed his claim on 9 November
1994.
We rule in favor of private respondent.
This Court has consistently ruled that "disability should not be understood more on its
medical significance but on the loss of earning capacity. Permanent total disability means
disablement of an employee to earn wages in the same kind of work, or work of similar
nature that [he] was trained for or accustomed to perform, or any kind of work which a
person of [his] mentality and attainment could do. It does not mean absolute
helplessness." 1 This Court has also held that:
In disability compensation, it is not the injury which is compensated, but rather it is the
incapacity to work resulting in the impairment of one's earning capacity. 2
Petitioner thus seriously erred when it affirmed the decision of the SSS denying private
respondent's claim on the ground of prescription. In determining whether or not private
respondent's claim was filed within the three-year prescriptive period under Article 201 of
the Labor Code, petitioner and the SSS reckoned the accrual of private respondent's
cause of action on 31 September 1991, when his PTB became known. This is erroneous.
Following the foregoing rulings, the prescriptive period for filing compensation claims
should be reckoned from the time the employee lost his earning capacity, i.e., terminated
from employment, due to his illness and not when the same first became manifest.
Indeed, a person's disability might not emerge at one precise moment in time but rather
over a period of time. 3 In this case, private respondent's employment was terminated on
31 December 1991 due to his illness, he filed his claim for compensation benefits on 9
November 1994. Accordingly, private respondent's claim was filed within the three-year
prescriptive period under Article 201 of the Labor Code.
In this light, the Court finds no need at this time to rule on the seeming conflict between
the prescriptive period for filing claims for compensation benefits under Article 201 of the
Labor Code and Article 1144(2) of the Civil Code.
In conclusion, the Court takes this opportunity to once again remind petitioner that P.D.
No. 626, as amended, is a social legislation whose primordial purpose is to provide
meaningful protection to the working class against the hazards of disability, illness and
other contingencies resulting in the loss of income. Thus:
As an official agent charged by law to implement social justice guaranteed and secured
by the Constitution, the ECC should adopt a liberal attitude in favor of the employee in
deciding claims for compensability especially where there is some basis in the facts for
inferring a work connection with the incident. This kind of interpretation gives meaning
and substance to the compassionate spirit of the law as embodied in Article 4 of the New
Labor Code which states that all doubts in the implementation and interpretation of the
provisions of the Labor Code including its implementing rules and regulations should be
resolved in favor of labor. 4
WHEREFORE, premises considered, the instant petition is hereby DISMISSED.
89
G.R. No. 152058 September 27, 2004
SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, petitioners, vs
COURT OF APPEALS and JOSE RAGO, respondents. DAVIDE, JR., C.J.:
This is a petition for the review of the decision1 of 18 October 2001 and the resolution of
30 January 2002 of the Court of Appeals in CA-G.R. SP No. 63389 entitled Jose Rago
vs. Social Security Commission and Social Security System. The decision reversed the
20 December 2000 Resolution of the Social Security Commission (SSC) in SSC Case
No. 4-15009-2000 denying respondent Jose Ragos request to convert his monthly
pension from permanent partial disability to permanent total disability. The resolution
denied the motion to reconsider the decision.
Private respondent Jose Rago (hereafter Rago) worked as an electrician for Legend
Engineering in Basak, Pardo, Cebu City. On 1 December 1993, at about 6:15 p.m., while
working on the ceiling of a building, he stepped on a weak ceiling joist. The structure
gave way and he crashed into the corridor twelve feet below. The x-rays taken that day
revealed that he had a (1) marked compression fracture of L1 vertebra without signs of
dislocation and bone destruction; and (2) slight kyphosis at the level of L1 vertebrae, with
the alignment of the spine still normal.2 He was confined at the Perpetual Succour
Hospital in Cebu City for twenty-four (24) days from 1 December 1993 to 24 December
1993,3 and, thereafter, he was confined in his home from 25 December 1993 to 25
August 1994.4
On 20 May 1994, Rago filed a claim for permanent partial disability with the Cebu City
office of the Social Security System (SSS). Since he had only 35 monthly contributions,
he was granted only a lump sum benefit.5 He made additional premium contributions on 6
November 1995, and sought the adjustment of his approved partial disability benefits
from lump sum to monthly payments. The adjustment was resolved in his favor on 18
October 1995.6
On 9 November 1995, Rago filed a claim for Employees Compensation (EC) sickness
benefit, which was supported by an x-ray report dated 1 December 1993. This was
approved for a maximum of 120 days to cover the period of illness from 1 December
1993 to 30 March 1994.
On 7 June 1996, Rago filed another claim to convert his SSS disability to EC disability.
Again, it was resolved in his favor on 14 June 1996.7
Two years later, on 16 June 1998, Rago claimed for the extension of his EC partial
disability. A rating of 50% OB (of the body) was granted corresponding to the maximum
benefit allowed under the Manual on Ratings of Physical Impairment. 8
Thereafter, Rago filed several requests for the adjustment of his partial disability to total
disability. This time, his requests were denied by the Cebu City office of the SSS in its
letters of 11 April 1999, 10 September 1999, 28 September 1999, 4 April 2000, and 17
April 2000. The denial was based on the medical findings of the Cebu City office that he
was not totally prevented from engaging in any gainful occupation. 9
Undaunted, on 3 April 2000, Rago filed with the petitioner Social Security Commission
(SSC) a petition for total permanent disability benefits based on the following grounds:
1. his convalescence period from the time of his hospital confinement to home
confinement totaled 268 days and under SSS guidelines, if the injury persisted for more
than 240 days, the injury would be considered as a permanent total disability;
2. his x-ray results showed a deterioration of his condition without any visible
improvement on the disabilities resulting from the accident; and
3. he had lost his original capacity to work as an electrician and has been unemployed
since the accident.
The petition was docketed as SSC Case No. 4-15009-2000.10
In its position paper dated 24 August 2000, the SSS argued that Rago had already been
granted the maximum partial disability benefits. The physical examination conducted by
the Cebu City office of the SSS showed that he was more than capable of physically
engaging in any gainful occupation and that there was no manifestation of progression of
illness. Thus, the SSS recommended the denial of Ragos petition. 11
In a resolution dated 20 December 2000, the SSC denied Ragos petition for lack of
merit. The SSC ruled that he was not entitled to permanent partial disability more than
what was already granted, more so to permanent total disability benefits since he was
already granted the maximum allowable benefit for his injury.12
Without filing a motion for reconsideration, Rago appealed to the Court of Appeals by
filing a petition for review and reiterating his claim for permanent disability benefits under
Section 13-A (g) of R.A. No. 1161, as amended by R.A. No. 8282.13 The petition was
docketed as CA-G.R. SP No. 63389.
In its decision of 18 October 2001, the Court of Appeals reversed the SSCs resolution,
and decreed as follows:
WHEREFORE, the assailed decision of the Social Security Commission is hereby
reversed and set aside. Petitioners plea for conversion of his disability status from
permanent partial to permanent total is granted. The SSS is hereby directed to pay him
the necessary compensation benefits in accordance with the proper computation.
The SSS seasonably filed a motion for reconsideration on the ground that the Court of
Appeals should have considered an order issued by the SSC dated 11 July 2001 which
affirmed, but clarified, its 20 December 2000 Resolution under appeal. The SSS then
90
referred to the findings and conclusions of the SSC in said 11 July 2001 order, which
emphasized that: (1) Rago failed to file a motion for reconsideration with the SSC, which
is mandatory, before filing a petition for review with the Court of Appeals; (2) the manual
verification of the monthly contributions of Rago revealed that he had only 35
contributions and not 59; and (3) thus, whether or not the sickness or disability of Rago
had showed signs of progression, a conversion of the same from permanent partial
disability to permanent total disability could not be granted. This is because Rago lacked
the required number of contributions mentioned in Section 13-A (a) of R.A. 1161, as
amended, which reads:
SEC. 13-A. Permanent disability benefits. (a) Upon the permanent total disability of a
member who has paid at least thirty-six (36) monthly contributions prior to the semester
of disability, he shall be entitled to the monthly pension: Provided, That if he has not paid
the required thirty-six (36) monthly contributions, he shall be entitled to a lump sum
benefit equivalent to the monthly pension times the number of monthly contributions paid
to the SSS or twelve (12) times the monthly pension, whichever is higher. A member who
(1) has received a lump sum benefit and (2) is re-employed or has resumed self-
employment or has resumed self-employment not earlier than one (1) year from the date
of his disability shall again be subject to compulsory coverage and shall be considered a
new member.
With that, the SSC ordered the SSS to re-compute the lump sum benefit due Rago and
his EC benefit on the basis of the actual monthly contributions remitted in his behalf and
to collect all excess payments made to him.14
In its resolution of 30 January 2002, the Court of Appeals denied the motion for
reconsideration. It explained the denial in this wise:
At the outset, the Court strikes down the Commissions July 11, 2001 clarificatory order
as an exercise of grave abuse of authority amounting to lack and/or excess of jurisdiction.
The said Order was issued at a time when the Commission itself was knowledgeable of
the petition for review pending before this Court. It must be pointed out that when
petitioner timely filed his petition for review, [the] appeal from the Commissions
resolution had thus become perfected, and it is this Court which therefore had jurisdiction
over the matter, and sole authority to make any affirmation or modification of the assailed
resolution. Once appeal is perfected, the lower tribunal loses its jurisdiction over the
case, in favor of the appellate tribunal. The Court deems it the height of injustice for the
Commission to add to and bolster its final ruling with additional observations and
justifications, not otherwise embodied in the original ruling, after the losing claimant had
already perfected and was actively pursuing his appeal. It behooves upon the
Commission, therefore, to refrain from making any substantial addition, or modification of
its assailed ruling, such authority in law, now having been transferred to this Court. What
prompted the Social Security Commission to issue its clarificatory order is not made clear
in its motion for reconsideration, nor in the clarificatory order itself. In any case, any
modification of the tenor and justification of the assailed resolution of the Commission by
the same body effectively altered the tenor of the earlier ruling, amounting to a violation
of the petitioners right to due process and fair play, and, therefore, null and void.
Moreover, the specific arguments raised by the Commission are not convincing to
encourage a reversal of our earlier decision.
To be sure, the alleged failure to file a motion for reconsideration of the Commissions
December 20, 2000 resolution is not a fatal mistake, it appearing that the same was in
clear violation of the petitioners rights and claims, as a member of the Social Security
System. It is the established rule that the filing of a motion for reconsideration may be
dispensed with when the assailed ruling is a patent nullity. Furthermore, the fact that the
petitioner as credited by SSS monthly contributions short to entitle him to be qualified for
permanent total disability benefits appear to be largely due to the SSS and its branches
failure to accurately account the petitioners total payments, and not on the petitioners or
his employers failure to do so. The same July 11, 2001 Order shows that the SSS
Cotabato City Branch and the SSS Davao Hub Branch Office were unable to account for
the complete contributions of the petitioner while he was employed by the San Miguel
Corporation.15
Thus, in their petition in the case at bar, the SSS and the SSC pray to set aside the Court
of Appeals decision of 18 October 2001 and resolution of 30 January 2002 and to
remand the case to the SSC for further proceedings.16
In support of their prayer, the petitioners assert that the Court of Appeals erred in
disregarding the established jurisprudence that the filing of a motion for reconsideration is
a prerequisite to the filing of a petition for review to enable the tribunal, board or office
concerned to pass upon and correct its mistakes without the intervention of the higher
court. Failure to do so is a fatal procedural defect.17
The petitioners likewise argue that they had not violated Ragos rights; hence, his case
does not fall within the purview of Arroyo v. House of Representatives Electoral Tribunal 18
where we held that a prior motion for reconsideration could be dispensed with if
fundamental rights to due process were violated.
Additionally, the petitioners contend that the SSCs 11 July 2001 clarificatory order was
issued to rectify its perceived error in the 20 January 2000 resolution relative to the
number of Ragos contributions which directly affected the computation of his disability
benefits. Petitioners further maintain that the Court of Appeals relied heavily on the x-ray
reports which contained no statement that Rago could no longer work. However, a
certain Alvin C. Cabreros attested in an affidavit that Rago went out "disco[e]ing" after the
accident, for which reason, Rago is not totally helpless as he portrayed himself to be.
On 20 March 2003, we received a handwritten letter from Rago informing us that his
lawyer had withdrawn from the case and of his difficulty in securing a new counsel. After
naming Attys. Pedro Rosito, Arturo Fernan or Fritz Quianola of the IBP Cebu City at
91
Capitol Compound as his "informal lawyers," he asked us to consider, in lieu of his
Comment, an attached copy of the opposition to the motion for reconsideration he filed
with the Court of Appeals. In said pleading, Rago argued that the word "may" as used in
the provision concerning the filing of a motion for reconsideration in the SSCs 1997
Revised Rules of Procedure is not mandatory but merely permissive. He also agreed with
the conclusion of the Court of Appeals that a very strict interpretation of procedural rules
would defeat the constitutional mandate on social justice.
We gave due course to the petition and required the parties to submit their Memoranda,
which they did.
We shall first dispose of the procedural issue of prematurity raised by petitioners which is
Ragos failure to file a motion for reconsideration. Section 5, Rule VI of the SSCs 1997
Revised Rules of Procedure provides:
The party aggrieved by the order, resolution, award or decision of the Commission may
file a motion for reconsideration thereof within fifteen (15) days from receipt of the same.
Only one motion for reconsideration shall be allowed any party.
The filing of the motion for reconsideration shall interrupt the running of the period to
appeal, unless said motion is pro forma.
The ordinary acceptations of the terms "may" and "shall" may be resorted to as guides in
ascertaining the mandatory or directory character of statutory provisions. As regards
adjective rules in general, the term "may" is construed as permissive and operating to
confer discretion, while the word "shall" is imperative and operating to impose a duty
which may be enforced.19 However, these are not absolute and inflexible criteria in the
vast areas of law and equity. Depending upon a consideration of the entire provision, its
nature, its object and the consequences that would follow from construing it one way or
the other, the convertibility of said terms either as mandatory or permissive is a standard
recourse in statutory construction.20
Conformably therewith, we have consistently held that the term "may" is indicative of a
mere possibility, an opportunity or an option. The grantee of that opportunity is vested
with a right or faculty which he has the option to exercise.21 If he chooses to exercise the
right, he must comply with the conditions attached thereto.22
Applying these guidelines, we can construe Section 5, Rule VI as granting Rago, or any
member of the System aggrieved by the SSCs resolution, the option of filing a motion for
reconsideration which he may or may not exercise. Should he choose to do so, he is
allowed to file only one motion for reconsideration within fifteen days from the
promulgation of the questioned resolution.
This is as far as we go in construing the provision in isolation because a second
procedural rule now comes into play: the requirements for appeals filed against the
rulings of quasi-judicial agencies in the exercise of its quasi-judicial functions.
Section 1 of Rule VII of the SSC rules provides:
[A]ny order, resolution, award or decision of the Commission, in the absence of an appeal
therefrom as herein provides, shall become final and executory fifteen (15) days after the
date of notification to the parties, and judicial review thereof shall be permitted only after
any party claiming to be aggrieved thereby has exhausted his remedies before the
Commission.
It now becomes apparent that the permissive nature of a motion for reconsideration with
the SSC must be read in conjunction with the requirements for judicial review, or the
conditions sine qua non before a party can institute certain civil actions. A combined
reading of Section 5 of Rule VI, quoted earlier, and Section 1 of Rule VII of the SSCs
1997 Revised Rules of Procedure reveals that the petitioners are correct in asserting that
a motion for reconsideration is mandatory in the sense that it is a precondition to the
institution of an appeal or a petition for review before the Court of Appeals. Stated
differently, while Rago certainly had the option to file a motion for reconsideration before
the SSC, it was nevertheless mandatory that he do so if he wanted to subsequently avail
of judicial remedies.
This rule is explicit in Rule 43 of the Rules of Court, which states:
Sec. 1. Scope This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions.
Among these agencies are theSocial Security Commission.
Sec. 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice
of the award, judgment, final order or resolution, or from the date of its last publication, if
publication is required by law for its effectivity, or of the denial of petitioners motion for
new trial or reconsideration duly filed in accordance with the governing law of the court or
agency a quo. Only one (1) motion for reconsideration shall be allowed.
The policy of judicial bodies to give quasi-judicial agencies, such as the SSC, an
opportunity to correct its mistakes by way of motions for reconsideration or other statutory
remedies before accepting appeals therefrom finds extensive doctrinal support in the
well-entrenched principle of exhaustion of administrative remedies.
The reason for the principle rests upon the presumption that the administrative body, if
given the chance to correct its mistake or error, may amend its decision on a given matter
and decide it properly.23 The principle insures orderly procedure and withholds judicial
interference until the administrative process would have been allowed to duly run its
92
course. This is but practical since availing of administrative remedies entails lesser
expenses and provides for a speedier disposition of controversies. 24 Even comity dictates
that unless the available administrative remedies have been resorted to and appropriate
authorities given an opportunity to act and correct the errors committed in the
administrative forum, judicial recourse must be held to be inappropriate, impermissible, 25
premature, and even unnecessary.26
However, we are not unmindful of the doctrine that the principle of exhaustion of
administrative remedies is not an ironclad rule. It may be disregarded (1) when there is a
violation of due process, (2) when the issue involved is purely a legal question, (3) when
the administrative action is patently illegal amounting to lack or excess of jurisdiction, (4)
when there is estoppel on the part of the administrative agency concerned, (5) when
there is irreparable injury, (6) when the respondent is a department secretary whose acts
as an alter ego of the President bears the implied and assumed approval of the latter, (7)
when to require exhaustion of administrative remedies would be unreasonable, (8) when
it would amount to a nullification of a claim, (9) when the subject matter is a private land
in land case proceedings, (10) when the rule does not provide a plain, speedy and
adequate remedy, (11) when there are circumstances indicating the urgency of judicial
intervention,27 (12) when no administrative review is provided by law, (13) where the rule
of qualified political agency applies, and (14) when the issue of non-exhaustion of
administrative remedies has been rendered moot.28
Fortunately for Rago, his case falls within some of these exceptions as discussed below.
Petitioners attempts to distinguish Arroyo v. House of Representatives Electoral
Tribunal29 from this case is misplaced. The ground relied upon by the Court of Appeals
for exempting this case from exhaustion of administrative remedies was not the denial of
due process but of the patent nullity of the SSC decision in question.
It is true that Rago disregarded procedural and curative rules in taking immediate
recourse to the appellate court. The Court of Appeals similarly erred in taking cognizance
of Ragos appeal. We likewise do not subscribe to issuing rulings or decisions that do not
acknowledge or give reason for the disregard of the procedural defect of the petition,
especially when it was specifically raised as an issue in respondents answer. 30
Nevertheless, to require Rago to comply with the principle of exhaustion of administrative
remedies at this stage of the proceedings would be unreasonable, unjust and inequitable.
It would prolong needlessly and uselessly the resolution of his claim.
Petitioners SSS and SSC have consistently shown their obstinacy in their stand to deny
Ragos request to convert his permanent partial disability to permanent total disability.
The SSCs reliance on the SSS recommendations, which did not consider other evidence
of the illness progression and its disregard of long-standing jurisprudence, made for the
patent nullity of the SSC decision. The error was made more blatant when, in the SSCs
clarificatory order, it classified the disability based on the amount of contributions Rago
had paid.31
To give the SSC another chance to rectify its error in accordance with the principle of
exhaustion of administrative remedies would inevitably result in the same inflexible
stance in defense of its error. We say another chance because we can consider the
SSCs clarificatory order as in the nature of a judgment on Ragos motion for
reconsideration as if he had filed one. Otherwise, to admit the misnamed order which was
issued when the SSC no longer had jurisdiction over the case, and which modified and
altered the contents and tenor of its original resolution, would have amounted to a
violation of Ragos right to due process. To this extent we give imprimatur to the assailed
decision and resolution of the Court of Appeals, and uphold its factual determination that
Rago is entitled to the conversion of his permanent partial disability to permanent total
disability. Thus:
There is merit in the petition. Evidently clear from the recitals of the assailed decision
some indicia of petitioners state of permanent total disability. To emphasize, he was
granted sickness benefit for a maximum period of 120 days from December 1, 1993 to
March 30, 1994. Then he was awarded lump sum permanent partial disability benefits
paid on June 15, 1994, which was then adjusted on October 18, 1995 to monthly pension
benefit covering the period of 30 months from May 20, 1994 to October 1996. More, the
permanent partial disability benefit was extended for another eight (8) months from July
3, 1998 to February 1999, all in all covering a period of 38 months. If temporary total
disability lasting continuously for more than 120 days is deemed total and permanent, it is
not therefore amiss to consider the payment of permanent partial disability benefits for 38
months as recognition of permanent total disability. Award of permanent partial disability
benefits for 19 months was considered by the Supreme Court as an acknowledgment
that the awardee was suffering from permanent total disability. (Diopenes vs. GSIS (205
SCRA 331[1992]).
xxx
The test of whether or not an employee suffers from permanent total disability is a
showing of the capacity of the employee to continue performing his work notwithstanding
the disability he incurred. (IJARES v. Court of Appeals, 313 SCRA 141 [1999]). The cited
radiologic report under date of February 26, 1999 is demonstrative of the fact that
petitioner is still in a state which at the time of the taking deters him from performing his
job or any such related function. It is evident that the pain caused to petitioner by his
injuries still persists even after more than 5 years when the accident occurred on
December 1, 1993. The disability caused thereby which had earlier been diagnosed as
permanent partial had possibly became permanent total. (GSIS vs. CA 260 SCRA 133,
[1996]). Also in the case of Tria vs. ECC, (supra) a disability is total and permanent if as
a result of the injury, the employee is not able to perform any gainful occupation for a
period exceeding 120 days.
93
Moreover, prior payment of compensation benefits for permanent partial disability may
not foreclose his right to compensation benefits for permanent total disability. Otherwise,
the social justice policy underlying the enactment of labor laws would lose its meaning.
Caution should be taken against a too strict interpretation of the rules lest the
constitutional mandate of social justice policy calls for a liberal and sympathetic approval
of the pleas of disabled employees like herein petitioner. Compassion for him is not a
dole out. It is a right. (GSIS vs. Court of Appeals, 285 SCRA 430 [1998]). 32
The Court of Appeals correctly observed that Ragos injury made him unable to perform
any gainful occupation for a continuous period exceeding 120 days. The SSS had
granted Rago sickness benefit for 120 days and, thereafter, permanent partial disability
for 38 months. Such grant is an apparent recognition by the SSS that his injury is
permanent and total as we have pronounced in several cases. 33 This is in conformity with
Section 2 (b), Rule VII of the Amended Rules on Employees Compensation which
defines a disability to be total and permanent if, as a result of the injury or sickness, the
employee is unable to perform any gainful occupation for a continuous period exceeding
120 days, and Section 1, b (1) of Rule XI of the same Amended Rules which provides
that a temporary total disability lasting continuously for more than 120 days, shall be
considered permanent.
In Vicente vs. Employees Compensation Commission,34 we laid down the litmus test and
distinction between Permanent Total Disability and Permanent Partial Disability, to wit:
[W]hile permanent total disability invariably results in an employees loss of work or
inability to perform his usual work, permanent partial disability, on the other hand, occurs
when an employee loses the use of any particular anatomical part of his body which
disables him to continue with his former work. Stated otherwise, the test of whether or not
an employee suffers from permanent total disability is a showing of the capacity of the
employee to continue performing his work notwithstanding the disability he incurred.
Thus, if by reason of the injury or sickness he sustained, the employee is unable to
perform his customary job for more than 120 days and he does not come within the
coverage of Rule X of the Amended Rules on Employees Compensability (which, in a
more detailed manner, describes what constitutes temporary total disability), then the
said employee undoubtedly suffers from permanent total disability regardless of whether
or not he loses the use of any part of his body.
We further reiterate that disability should be understood less on its medical significance
than on the loss of earning capacity. Permanent total disability means disablement of an
employee to earn wages in the same kind of work, or work of similar nature that he was
trained for or accustomed to perform, or any kind of work which a person of his mentality
and attainment could do. It does not mean absolute helplessness.35 Moreover, a persons
disability may not manifest fully at one precise moment in time but rather over a period of
time. It is possible that an injury which at first was considered to be temporary may later
on become permanent or one who suffers a partial disability becomes totally and
permanently disabled from the same cause.36
With this, petitioners additional arguments that the x-ray reports lacked a physicians
finding that Rago could no longer work and that Mr. Cabreros affidavit attested to the
contrary lose persuasive worth. X-ray reports and its confirmation by a physician are
simply appraised for their evidentiary value and are not considered as indispensable
prerequisites to compensation.37 Even then, the three x-ray reports submitted by Rago
clearly show the degenerative condition of his injury, viz.
(a) Radiology report stated 1 December 1993 revealed "Mark compression fracture o L1
vertebra without signs of dislocation and bone destruction and slight kyphosis at the level
of L1 vertebra but the alignment of the spine is normal";
(b) Radiology report dated 4 may 1994 showed that "consistent with compression fracture
with mild posterior dislocation of the L1"; and
(c) Radiology report dated 26 February 1999 showed anterior wedging or compression
fracture of L1 with gibbus deformity and thoraco-lumber junction and suggested lumbo-
sacral AP for further study. [emphasis supplied]
Clearly, Rago is entitled to permanent total disability benefits.
One final note. Although the SSS and the SSC should be commended for their vigilance
against unjustified claims that will deplete the funds intended to be disbursed for the
benefit only of deserving disabled employees, they should be cautioned against a very
strict interpretation of the rules lest it results in the withholding of full assistance from
those whose capabilities have been diminished, if not completely impaired, as a
consequence of their dedicated service. A humanitarian impulse, dictated by no less than
the Constitution under its social justice policy, calls for a liberal and sympathetic
approach to the legitimate appeals of disabled workers like Rago. Compassion for them
is not a dole out but a right.38
WHEREFORE, the decision of the Court of Appeals dated 18 October 2001 and its
resolution of 30 January 2002 in CA-G.R. SP No. 63389 reversing the Social Security
Commissions Resolution of 20 December 2000 in SSC Case No. 4-15009-2000 are
hereby AFFIRMED.
94
G.R. No. 117572 January 29, 1998
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner,
vs. THE HON. COURT OF APPEALS and ROSA BALAIS, respondents. ROMERO, J.:
This is a petition for review on certiorari seeking to annul and set aside decision 1
rendered by the Court of Appeals dated October 17, 1994 which reversed the decision
issued by the Employees. Compensation Commission (ECC) in ECC Case No. 6462
dated November 17, 1993, affirming the decision of petitioner Government Service
Insurance System (GSIS) that private respondent Rosa Balais is not entitled to
conversion of compensation benefits from partial disability for a 9-month period after
retirement to total disability.
Private respondent started working as an emergency employee of the National Housing
Authority (NHA) in 1952. She then rose from the ranks until she was promoted to Chief
Paying Cashier in 1984. 2
Medical records disclose that on December 17, 1989, private respondent suddenly
experienced chills, followed by loss of consciousness. She was brought to the Capitol
Medical Center where she was sedated but allowed to go home after three hours. Later,
on the same day, however, she vomited several times and suffered from parie-occipital
pains. She was again rushed to U.E.R.M. Medical Center where she underwent a
thorough medical examination. She was diagnosed be suffering from Subarachnoid
Hemorrhage Secondary to Ruptured Aneurysm. After undergoing craniotomy, she was
finally discharged from the hospital January 20, 1990. 3
Despite her operation, private respondent could not perform her duties as efficiently as
she had done prior to her illness. This forced her to retire
early from the government service on March 1, 1990 at the age of sixty-two (62) years. 4
On March 13, 1990, private respondent filed a claim for disability benefits with the GSIS
for the above-described ailment. Her illness was evaluated as compensable by the GSIS
Medical Evaluation and Underwriting Group. Accordingly, the GSIS granted her
temporary total disability (TTD) benefits for the period starting from December 17, 1989
to January 31, 1990 and subsequently, permanent partial disability (PPD) benefits for
nine months starting on March 2, 1990. 5
In a letter dated November 17, 1992, private respondent requested the GSIS for the
conversion of the classification of her disability benefits from permanent partial disability
(PPD) to permanent total disability (PTD). 6
Such plea, however, was denied by the GSIS in a letter dated December 8, 1992 on the
ground that the GSIS Medical Evaluation and Underwriting Department which evaluated
her claim found no basis to alter its findings. She was informed that the results of the
physical examination conducted on June 5, 1990 did not satisfy the criteria for permanent
total disability. Moreover, she was told that the pension granted to her was the maximum
benefit due her under the Rating Schedule established by the ECC. 7
The denial of her request then prompted private respondent to file on May 4, 1993 a
request for reconsideration of the earlier denial of her application for the conversion of
her disability benefits from permanent partial disability to permanent total disability,
explaining that since the time of her operation she continued to suffer from dizziness,
headaches, loss of memory and inability to properly sleep. Moreover, she contended that
there were instances when she felt extremely weak and could not walk without support.
She further stated that she was required to take medication for life. 8
The GSIS, however, denied reconsideration which denial was later on affirmed on appeal
by the ECC in its decision dated November 17, 1993. 9
Undaunted, private respondent filed a petition for review with the Court of Appeals, which
promulgated a decision favorable to her on October 17, 1994, the dispositive portion of
which reads:
WHEREFORE, this petition for review is granted and the decision of the Employees
Compensation Commission in ECC Case 6462 dated 17 November 1993 should be, as it
is hereby REVERSED . 10
Petitioner GSIS now comes to this Court by way of a petition for review on certiorari
alleging that the Court of Appeals erred:
1. In reversing and setting aside the decision of the Employees' Compensation
Commission which affirmed the decision of herein petitioner GSIS.
2. In considering the ailment of Subarachnoid Hemorrhage Secondary to Ruptured
Aneurysm as permanent total disability. 11
The sole issue to be resolved here is whether private respondent is entitled to conversion
of her benefits from permanent partial disability to permanent total disability.
Both petitioner and the Solicitor General argue against private respondent's request for
the conversion of her disability benefits on the ground that she had already been
awarded the benefits commensurate to the degree of her physical condition at the time of
her retirement. They contend that her ailment Subarachnoid Hemorrhage Secondary to
Ruptured Aneurysm only entitled her to receive benefits for permanent partial disability
and such illness does not satisfy the criteria for permanent total disability. Furthermore,
they aver that private respondent's request for conversion cannot be granted because
other than alleging abnormalities and non-improvement of memory she failed to show
sufficient medical basis that would warrant said conversion.
Petitioner also maintains that, although private respondent was awarded permanent
partial disability benefits for nine (9) months commencing on the day of her retirement, it
95
does not automatically follow that petitioner recognized her disability as permanent and
total because the period of 120 days mentioned in Sec. 2, Rule 7 of the Amended Rules
on Employees' Compensation is not the determining factor. Petitioner contends that an
injury or illness that goes beyond the said 120 days may still be considered as permanent
partial disability pursuant to Sec. 2, Rule 10 of the same rules.
The Court has already dismissed the same arguments before in similar cases.
Petitioner's insistence must therefore suffer the same fate in the instant case.
While it is true that the degree of private respondent's physical condition at the time of
her retirement was not considered as permanent total disability, yet, it cannot be denied
that her condition subsequently worsened after her head operation and consequent
retirement. In fact, she suffered afterwards from some ailments like headaches,
dizziness, weakness, inability to properly sleep, inability to walk without support and
failure to regain her memory. All these circumstances ineluctably demonstrate the
seriousness of her condition, contrary to the claim of petitioner. More than that, it was
also undisputed that private respondent was made to take her medication for life.
A person's disability may not manifest fully at one precise moment in time but rather over
a period of time. It is possible that an injury which at first was considered to be temporary
may later on become permanent or one who suffers a partial disability becomes totally
and permanently disabled from the same cause. 12
disability is permanent and total. As held by this Court, "the fact of an employee's
disability is placed beyond question with the approval of the employee's optional
retirement, for such is authorized only when the employee is physically incapable to
render sound and efficient service' . . . ." 7
In the case at bar, the denial of the claim for permanent total disability benefit of private
respondent who, for 38 long years during her prime had rendered her best service with
an unblemished record and who was compelled to retire on account of her worsening
condition, would indeed subvert the salutary intentions the law in favor of the worker. The
Court, therefore, affirms the decision of respondent Court of Appeals decreeing
conversion of private respondent's disability from permanent partial disability to
permanent total disability.
One final note. The GSIS and ECC should be commended for their vigilance against
unjustified claims that will deplete the funds intended to be disbursed for the benefit only
of deserving disabled employees. Nevertheless, we should caution them against a too
strict interpretation of the rules lest it result in the withholding of full assistance from those
whose capabilities have been diminished, if not completely impaired, as a consequence
of their dedicated service in the government. A humanitarian impulse, dictated by no less
than the Constitution itself under the social justice policy, calls for a liberal and
sympathetic approach to the legitimate appeals of disabled public servants like the herein
private respondent. Compassion for them is not a doleout but a right. 18

In the same vein, this Court has ruled that "disability should not be understood more on WHEREFORE, the instant petition is hereby DENIED, and the challenged decision of the
its medical significance but on the loss of earning capacity." 13 Private respondent's Court of Appeals dated October 17, 1994 is AFFIRMED in toto.
persistent illness indeed forced her to retire early which, in turn, resulted in her
unemployment, and loss of earning capacity. SO ORDERED.

Judicial precedents likewise show that disability is intimately related to one's earning
capacity. It has been a consistent pronouncement of this Court that "permanent total
disability means disablement of an employee to earn wages in the same kind of work, or
work of a similar nature that she was trained for or accustomed to perform, or any kind of
work which a person of her mentality attainment could do." 14 "It does not mean state of
absolute helplessness, but inability to do substantially all material acts necessary to
prosecution of an occupation for remuneration or profit in substantially customary and
usual manner." 15

The Court has construed permanent total disability as the "lack of ability to follow
continuously some substantially gainful occupation without serious discomfort or pain and
without material injury or danger to life." 16 It is, therefore, clear from established
jurisprudence that the loss of one's earning capacity determines the disability
compensation one is entitled to.

It is also important to note that private respondent was constrained to retire the age of 62
years because of her impaired physical condition. This, again, another indication that her

96
G.R. No. 132648 March 4, 1999
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner,
vs. COURT OF APPEALS and ROMEO S. BELLA, respondents. PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
seeking to set aside the Decision 1 of the Court of Appeals 2 dated February 12, 1998 in
CA-G.R. SP NO. 44465, reversing the Decision of the Government Service Insurance
System (GSIS), which affirmed the Decision of the Employees Compensation
Commission (ECC) in ECC Case No. M.G. 7872 - 1295.
The antecedent facts are, as follows:
On June 10, 1964, private respondent Romeo S. Bella was employed by the Bureau of
Animal Industry as a livestock inspector. He retired from the service on August 16, 1986.
On July 16, 1987, he was re-employed by the Department of Agriculture as Agricultural
Food Technologist and on March 1, !994, promoted to the position of Agriculturist II.
As disclosed by his records of employment, private respondent was suspended without
pay from September 1, 1993 to March 1, 1994. A month after, or on April 1, 1994, to be
precise, he was reinstated to his former position as Agriculturist II at the Provincial
Agricultural Office in Tacurong, Sultan Kudarat. On July 1, 1995, private respondent who
was then 56 3 years old, filed a terminal leave of absence due to physical disability.
The medical records of private respondent reveal that he was suffering from Acute
Myocardial Infraction 4 and was confined at the Notre Dame Hospital in Cotabato City
from September 13, 1988 to September 19, 1988 and at the Philippine Heart Center from
September 6, 1994 to September 26, 1994.
Thus, private respondent filed with the GSIS Cotabato Branch, a claim for compensation
benefits under P.D. 626, 5 as amended. Finding his application meritorious and his
ailment compensable, the GSIS awarded him a Temporary Total Disability income benefit
during the periods of July 16 to July 21, 1994 and August 24 to August 29, 1994, as well
as reimbursement for medical expenses. Private respondent Romeo S. Bella was also
granted a Permanent Partial Disability income benefit equivalent to thirty-eight (38)
months for his Ischemic Cardiomayopathy.
Private respondent requested for the conversion of his benefits from Permanent Partial
Disability to Permanent Total Disability, reasoning out that his ailments of Ischemic
Cardiomayopathy 6 and Chronic Obstructure Pulmonary Disease 7 rendered him unable
to engage in any gainful occupation for a continuous period exceeding 120 days, as
certified to by his attending physicians, Dr. Romulo Uy, Dr. Anne Marie Luat, Dr. Danilo
Rustia, Dr. Juanito Lastimosa and Dr. Eldefonso Maglasang. 8
But petitioner GSIS denied his request for Permanent Total Disability on the ground that
the degree of private respondent's disability as evaluated by, petitioner's medical officers,
did not satisfy the criteria for Permanent Total Disability. His motion for reconsideration
was similarly denied. On appeal, the Employees Compensation Commission (ECC)
affirmed the Decision of the GSIS, denying private respondent's request for conversion of
his Permanent Partial Disability benefit to Permanent Total Disability benefit.
Dissatisfied, private respondent went to the Court of Appeals on a Petition for Review.
On February 12, 1998, the Court of Appeals came out with its decision reversing the
Decision of the Employees Compensation Commission; disposing, thus:
WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE.
Accordingly, another judgment is rendered granting petitioner's claim for Permanent Total
Disability (PTD) benefits.
No Pronouncements as to costs.
SO ORDERED. 9
Therefrom, petitioner GSIS found its way to this Court via the present petition, theorizing:
I
THAT THE RESPONDENT HONORABLE COURT OF APPEALS GRAVELY ERRED IN
REVERSING AND SETTING ASIDE THE DECISION OF THE EMPLOYEES
COMPENSATION COMMISSION WHICH AFFIRMED THE DECISION OF HEREIN
PETITIONER GSIS.
II
THAT THE HONORABLE COURT OF APPEALS ERRED IN CONSIDERING THE
CONVERSION OF PERMANENT PARTIAL DISABILITY (PPD) BENEFITS OF HEREIN
RESPONDENT TO PERMANENT TOTAL DISABILITY UNDER P.D. 626, AS
AMENDED.
III
THAT THE DECISION OF THE RESPONDENT HONORABLE COURT OF APPEALS IS
CONTRARY TO LAW AND APPLICABLE JURISPRUDENCE.
The pivot of inquiry here is: whether or riot the private respondent is entitled to permanent
total disability benefits.
The labor Code classifies employees' disability into three distinct categories, namely: a)
10
temporary total disability; b) permanent total
97
disability; 11 and c) permanent partial disability. 12 Section 2, Rule VII, of the Rules and
Regulation Implementing Title II, Book IV of the Labor Code defines and clarifies these
categories, as follows:
Sec. 2. Disability. (a) A total disability is temporary if as a result of the injury or
sickness the employee is unable to perform any gainful occupation for a continuous
period not exceeding 120 days, except as otherwise provided for in Rule X of these
Rules.
(b) A disability is total and permanent if as a result of the injury or sickness the employee
is unable to perform any gainful occupation for a continuous period exceeding 120 days
except as otherwise provided for in Rule X 13 of these Rules.
(c) A disability is partial and permanent if as a result of the injury or sickness the
employee suffers a permanent partial loss of the use of any part of his body.
In Vicente vs. Employees Compensation Commission, 14 the Court laid down the litmus
test and distinction between Permanent Total Disability and Permanent Partial Disability,
to wit:
. . . While "permanent total disability" invariably results in an employee's loss of work or
inability to perform his usual work, "permanent partial disability," on the other hand,
occurs when an employee loses the use of any particular anatomical part of his body
which disables him to continue with his former work. Stated otherwise, the test of whether
or not an employee suffers from "permanent total disability" is a showing of the capacity
of the employee to continue performing his work notwithstanding the disability he
incurred. Thus, if by, reason of the injury or sickness he sustained, the employee is
unable to perform his customary job for more than 120 days and he does not come within
the coverage of Rule X of the Amended Rules on Employees Compensability (which, in a
more detailed manner, describes what constitutes temporary total disability). then the
said employee undoubtedly suffers from "permanent total disability" regardless of
whether or not he loses the use of any part of his body. 15
To justify its finding that private respondent's disability cannot be a Permanent Total
Disability, the ECC ratiocinated:
. . . Under the ECC Schedule of Compensation, appellant was already awarded the
maximum benefits commensurate to the degree of his disability. Under this schedule,
appellant's Ischemlc Cardiomyopathy merits a disability rating of 38 months Permanent
Partial Disability (PPD), and this has already been granted him. The nature of his ailment
and his present physical condition which the medical officers of the System were able to
evaluate when he came to follow-up his request showed that the criteria for Permanent
Total Disability (PTD) like the permanent complete paralysis of two limbs has not been
satisfied. Thus, we see no reason to alter the earlier ruling of the respondent System 16
Petitioner contends that the criteria for Permanent Total Disability, like permanent
complete paralysis of two, limbs have not been met 17 by private respondent's ailment
and physical condition. As aptly pointed out by the Solicitor General, "total disability does
not mean a state of absolute helplessness, but disablement of an employee to earn
wages in the same kind of work or a work of similar nature, that he was trained or
accustomed to perform, or any kind of work which a person of his mentality and
attachments could do. 18 The fact that he was forced to retire at the early age of 56, due
to a sickness disabling him from performing his job as Agriculturist II, qualifies his
disability as a Permanent Total Disability, though he lost no use of any particular
anatomical part of his body.
So also, no less than five doctors certified that private respondent's illness disabled him
from performing any gainful occupation for a continuous period exceeding 120 days.
Then too, even petitioner GSIS granted private respondent an income benefit amounting
to the equivalent of 38 months. Well settled is the rule that a physician's report of
sickness or accident substantiates the disability claim. 19 "A doctor's certification as to the
nature of the claimant's disability may be given credence as he would not normally make
false certification for the sake of a lowly school teacher." 20
It is then beyond cavil that the sickness of the private respondent made him unable to
perform any gainful occupation for a continuous period exceeding 120 days, thus entitling
him to permanent total disability benefits.
Clearly, the position taken by the GSIS and the ECC runs counter to the avowed policy of
the State to construe social legislations liberally in favor of the beneficiaries. "The court
takes this occasion to stress once more its abiding concern for the welfare of the
government workers, especially the humble rank and file, whose patience, industry and
dedication to duty have often gone unheralded, but who, in spite of every little
recognition, plod on dutifully to perform their appointed tasks. It is for this reason that the
sympathy of the law on social security is toward its beneficiaries, and the law, by its own
terms, requires a construction of utmost liberality in their favor." 21
Sec. 18, Article II of the Constitution, provides:
Sec. 18. The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.
All things studiedly considered, we are of the ineluctable conclusion that the Court of
Appeals erred not in granting private respondent's claim for Permanent Total Disability
benefits.
WHEREFORE, the petition is hereby DENIED, and the assailed Decision of the Court of
Appeals in CA-G.R. SP NO. 44465 AFFIRMED. No pronouncement as to costs.
SO ORDERED.
98
G.R. No. L-58445 April 27, 1989
ZAIDA G. RARO, petitioner,
vs. EMPLOYEES' COMPENSATION COMMISSION and GOVERNMENT SERVICE
INSURANCE SYSTEM (Bureau of Mines and Geo-Sciences), respondents.
GUTIERREZ, JR., J.:
Jurisprudence on the compensability of cancer ailments has of late become a source of
confusion among the claimants and the government agencies enforcing the employees'
compensation law. The strongly lingering influence of the principles of 94 presumption of
compensability" and "aggravation" found in the defunct Workmen's Compensation Act but
expressly discarded under the present compensation scheme has led to conflict and
inconsistency in employees' compensation decisions.
The problem is attributable to the inherent difficulty in applying the new principle of "proof
of increased risk." There are two approaches to a solution in cases where it cannot be
proved that the risk of contracting an illness not listed as an occupational disease was
increased by the claimant's working conditions. The one espoused by the petitioner
insists that if a claimant cannot prove the necessary work connection because the causes
of the disease are still unknown, it must be presumed that working conditions increased
the risk of contracting the ailment. On the other hand, the respondents state that if there
is no proof of the required work connection, the disease is not compensable because the
law says so.
The petitioner states that she was in perfect health when employed as a clerk by the
Bureau of Mines and Geo-Sciences at its Daet, Camarines Norte regional office on
March 17, 1975. About four years later, she began suffering from severe and recurrent
headaches coupled with blurring of vision. Forced to take sick leaves every now and
then, she sought medical treatment in Manila. She was then a Mining Recorder in the
Bureau.
The petitioner was diagnosed at the Makati Medical Center to be suffering from brain
tumor. By that time, her memory, sense of time, vision, and reasoning power had been
lost.
A claim for disability benefits filed by her husband with the Government Service
Insurance System (GSIS) was denied. A motion for reconsideration was similarly denied.
An appeal to the Employees' Compensation Commission resulted in the Commission's
affirming the GSIS decision.
The following issues are raised in this petition:
1. Whether brain tumor which causes are unknown but contracted during employment is
compensable under the present compensation laws.
2. Whether the presumption of compensability is absolutely inapplicable under the
present compensation laws when a disease is not listed as occupational disease. (p. 17,
Rollo)
The key argument of the petitioner is based on the fact that medical science cannot, as
yet, positively identify the causes of various types of cancer. It is a disease that strikes
people in general. The nature of a person's employment appears to have no relevance.
Cancer can strike a lowly paid laborer or a highly paid executive or one who works on
land, in water, or in the bowels of the earth. It makes the difference whether the victim is
employed or unemployed, a white collar employee or a blue collar worker, a
housekeeper, an urban dweller or a resident of a rural area.
It is not also correct to say that all cancers are not compensable. The list of occupational
diseases prepared by the Commission includes some cancers as compensable, namely
Occupational Diseases Nature of Employment
xxx xxx xxx xxx
16. Cancer of stomach and other Woodworkers, wood products lymphatic and blood
forming vessels; industry carpenters, nasal cavity and sinuses and employees in pulp
and paper mills and plywood mills.
17. Cancer of the lungs, liver Vinyl chloride workers, and brain plastic workers.
(Annex A, Amended Rules on Employees Compensation)
The petitioner questions the above listing. We see no arbitrariness in the Commission's
allowing vinyl chloride workers or plastic workers to be compensated for brain cancer.
There are certain cancers which are reasonably considered as strongly induced by
specific causes. Heavy doses of radiation as in Chernobyl, USSR, cigarette smoke over a
long period for lung cancer, certain chemicals for specific cancers, and asbestos dust,
among others, are generally accepted as increasing the risks of contracting specific
cancers. What the law requires for others is proof.
The first thing that stands in the way of the petition is the law itself.
Presidential Decree No. 422, as amended, the Labor Code of the Philippines defines
"sickness" as follows:
ART. 167. Definition of Terms. As used in this Title unless the context indicates
otherwise:
xxx xxx xxx
99
(1) Sickness means any illness definitely accepted as an occupational disease listed by
the Commission, or any illness caused by employment subject to proof by the employee
that the risk of contracting the same is by working conditions. For this purpose, the Co on
is empowered to determine and approve occupational and work- related illnesses that
may be considered compensable sable based on hazards of employment. (PD 1368,
May 1, 1978).
Section 1 (b), Rule III of the Amended Rules on Employees Compensation clearly defines
who are entitled. It provides:
SECTION 1.
xxx xxx xxx
(b) For the sickness and the resulting disability or death to be compensable, the sickness
must be the result of an occupational disease under Annex A of these rules with the
conditions set therein satisfied; otherwise, proof must be shown that the risk of
contracting the disease is increase by the working conditions. (Emphasis supplied)
The law, as it now stands requires the claimant to prove a positive thing the illness was
caused by employment and the risk of contracting the disease is increased by the
working conditions. To say that since the proof is not available, therefore, the trust fund
has the obligation to pay is contrary to the legal requirement that proof must be adduced.
The existence of otherwise non-existent proof cannot be presumed .
In Navalta v. Government Service Insurance System (G.R. No. 46684, April 27, 1988)
this Court recognized the fact that cancer is a disease of still unknown origin which
strikes; people in all walks of life, employed or unemployed. Unless it be shown that a
particular form of cancer is caused by specific working conditions (e. g. chemical fumes,
nuclear radiation, asbestos dust, etc.) we cannot conclude that it was the employment
which increased the risk of contracting the disease .
To understand why the "Presumption of compensability" together with the host of
decisions interpreting the "arising out of and in the course of employment" provision of
the defunct law has been stricken from the present law, one has to go into the distinctions
between the old workmen's compensation law and the present scheme.
On January 1, 1975, the Workmen's Compensation Act was replaced by a novel scheme
under the new Labor Code. The new law discarded, among others, the concepts of
"presumption of compensability" and "aggravation" and substituted a system based on
social security principles. The present system is also administered by social insurance
agencies the Government Service Insurance System and Social Security System
under the Employees' Compensation Commission. The intent was to restore a sensible
equilibrium between the employer's obligation to pay workmen's compensation and the
employee's right to receive reparation for work- connected death or disability. (Sulit v.
Employees' Compensation Commission, 98 SCRA 483 [1980]; Armena v. Employees'
Compensation Commission, 122 SCRA 851 [1983]; Erese v. Employees' Compensation
Commission, 138 SCRA 192 [1985]; De Jesus v. Employees' Compensation
Commission, 142 SCRA 92 [1986]; Sarmiento v. Employees' Compensation Commission,
et al., GR No. 65680, May 11, 1988).
Instead of an adversarial contest by the worker or his family against the employer, we
now have a social insurance scheme where regular premiums are paid by employers to a
trust fund and claims are paid from the trust fund to those who can prove entitlement.
In Sarmiento v. Employees' Compensation Commission (supra), we affirmed the validity
of the new law by explaining the present system as follows:
We cannot give serious consideration to the petitioner's attack against the
constitutionality of the new law on employee's compensation. It must be noted that the
petitioner filed his claim under the provisions of this same law. It was only when his claim
was rejected that he now questions the constitutionality of this law on appeal by certiorari.
The Court has recognized the validity of the present law and has granted and rejected
claims according to its provisions. We find in it no infringement of the worker's
constitutional rights.
xxx xxx xxx
The new law establishes a state insurance fund built up by the contributions of employers
based on the salaries of their employees. The injured worker does not have to litigate his
right to compensation. No employer opposes his claim There is no notice of injury nor
requirement of controversion. The sick worker simply files a claim with a new neutral
Employees' Compensation Commission which then determines on the basis of the
employee's supporting papers and medical evidence whether or not compensation may
be paid. The payment of benefits is more prompt. The cost of administration is low. The
amount of death benefits has also been doubled.
On the other hand, the employer's duty is only to pay the regular monthly premiums to
the scheme. It does not look for insurance companies to meet sudden demands for
compensation payments or set up its own fund to meet these contingencies. It does not
have to defend itself from spuriously documented or long past claims.
The new law applies the social security principle in the handling of workmen's
compensation. The Commission administers and settles claims from a fired under its
exclusive control. The employer does not intervene in the compensation process and it
has no control, as in the past, over payment of benefits. The open ended Table of
Occupational Diseases requires no proof of causation. A covered claimant suffering from
an occupational disease is automatically paid benefits.
100
Since there is no employer opposing or fighting a claim for compensation, the rules on
presumption of compensability and controversion cease to have importance. The
lopsided situation of an employer versus one employee, which called for equalization
through the various rules and concepts favoring the claimant, is now absent.
xxx xxx xxx
The petitioner's challenge is really against the desirability of the new law. There is no
serious attempt to assail it on constitutional grounds.
The wisdom of the present scheme of workmen's compensation is a matter that should
be addressed to the President and Congress, not to this Court. Whether or not the former
workmen's compensation program with its presumptions, controversions, adversarial
procedures, and levels of payment is preferable to the present scheme must be decided
by the political departments. The present law was enacted in the belief that it better
complies with the mandate on social justice and is more advantageous to the greater
number of working men and women. Until Congress and the President decide to improve
or amend the law, our duty is to apply it. (at pp. 4, 5, and 6)
The non-adversarial nature of employees' compensation proceedings is crucial to an
understanding of the present scheme. There is a widespread misconception that the poor
employee is still arrayed against the might and power of his rich corporate employer.
Hence, he must be given all kinds of favorable presumptions. This is fallacious. It is now
the trust fund and not the employer which suffers if benefits are paid to claimants who are
not entitled under the law. The employer joins its employees in trying to have their claims
approved. The employer is spared the problem of proving a negative proposition that the
disease was not caused by employment. It is a government institution which protects the
stability and integrity of the State Insurance Fund against the payment of non-
compensable claims. The employee, this time assisted by his employer, is required to
prove a positive proposition, that the risk of contracting the is increased by working
conditions.
The social insurance aspect of the present law is the other important feature which
distinguishes it from the old and familiar system.
Employees' compensation is based on social security principles. All covered employers
throughout the country are required by law to contribute fixed and regular premiums or
contributions to a trust fund for their employees. Benefits are paid from this trust fund. At
the time the amount of contributions was being fixed, actuarial studies were undertaken.
The actuarially determined number of workers who would probably file claims within any
given year is important in insuring the stability of the said fund and making certain that
the system can pay benefits when due to all who are entitled and in the increased
amounts fixed by law.
We have no actuarial expertise in this Court. If diseases not intended by the law to be
compensated are inadvertently or recklessly included, the integrity of the State Insurance
Fund is endangered. Compassion for the victims of diseases not covered by the law
ignores the need to show a greater concern for the trust fund to winch the tens of millions
of workers and their families look for compensation whenever covered accidents, salary
and deaths occur. As earlier stated, if increased contributions or premiums must be paid
in order to give benefits to those who are now excluded, it is Congress which should
amend the law after proper actuarial studies. This Court cannot engage in judicial
legislation on such a complex subject with such far reaching implications.
We trust that the public respondents and the Social Security System are continually
evaluating the actuarial soundness of the trust funds they administer. In this way, more
types of cancers and other excluded diseases may be included in the list of covered
occupational diseases. Or legislation may be recommended to Congress either
increasing the contribution rates of employers, increasing benefit payments, or making it
easier to prove entitlement. We regret that these are beyond the powers of this Court to
accomplish.
For the guidance of the administrative agencies and practising lawyers concerned, this
decision expressly supersedes the decisions in Panotes v. Employees' Compensation
Commission [128 SCRA 473 (1984)]; Mercado v. Employees' Compensation Commission
[127 SCRA 664 (1984)]; Ovenson v. Employees' Compensation Commission [156 SCRA
21 (1987)]; Nemaria v. Employees' Compensation Commission [155 SCRA 166 (1987)]
and other cases with conclusions different from those stated above.
WHEREFORE, the petition is hereby DISMISSED The questioned decision of the public
respondents is AFFIRMED.
SO ORDERED.
101
G. R. No. 84777 January 30, 1992
JOSE A. BEJERANO, petitioner,
vs. EMPLOYEES COMPENSATION COMMISSION, respondent. PADILLA, J.:
Assailed in this petition for review on certiorari is the decision of respondent Employees'
Compensation Commission (ECC) affirming the award of the Government Service
Insurance System (GSIS) to petitioner Jose Bejerano of temporary total disability benefits
for the period of 6-9 December 1985 and permanent partial disability benefits for nineteen
(19) months corresponding to the period from January 1986 to July 1987.*
Petitioner Jose Bejerano was a cash supervisor of the Development Bank of the
Philippines, Zamboanga City Branch Office. He retired at the age of sixty-two (62), after
having served the bank for almost twenty-nine (29) years. 1 Medical records disclose that
sometime in 1985, petitioner complained of dyspnea or shortness of breath accompanied
by productive cough. He was admitted to the Brent Hospital, where he was attended to
by Dr. Arcadio Salazar, who medically diagnosed his illness as Chronic Obstructive Lung
Disease Emphysema with severe asthmatic component. The medical certificate issued
by Dr. Salazar states that petitioner was admitted three (3) times to Brent Hospital in the
year 1985, not including the petitioner's confinement at Brent Hospital on 6-9 December
1985, for treatment of chronic obstructive lung disease. Dr. Salazar, in the same medical
certificate, classified petitioner's disability as permanent total. 2
Due to his disability, petitioner was forced to retire at the age of sixty-two (62) on 31
December 1985 and received the sum of P60,890.57 corresponding to five (5) years
lump sum of his annuity. 3
In the year 1987, petitioner was again confined at the Zamboanga Regional Hospital on
the following dates:
1. 27 February 1987 up to 2 March 1987;
2. 23 April 1987 up to 26 April 1987;
4
3. 5 May 1987 up to 18 May 1987.
Subsequently, petitioner filed a claim for compensation benefits with the Government
Service Insurance System (GSIS), which was favorably acted upon. The GSIS awarded
petitioner Bejerano benefits for temporary total disability for the period of 6-9 December
1985 and permanent partial disability from January 1986 to July 1987. 5
Not satisfied with the award, petitioner in a letter dated 17 March 1987 requested the
GSIS for a change of the classification of his disability benefits from permanent partial to
permanent total. Such request was denied by the GSIS, which prompted petitioner to file,
on 13 July 1987, a request for reconsideration of the earlier denial of his request for the
conversion of his disability benefits from permanent partial to permanent total. 6
On 29 September 1987, the GSIS again denied petitioner's request. 7 This denial was
appealed by the petitioner to the Employees' Compensation Commission (ECC) in a
letter dated 8 October 1987. On 5 July 1988, the ECC ruled that the disability benefits
previously awarded to the petitioner were already commensurate to the degree of the
petitioner's disability. In affirming the GSIS decision, the ECC declared, in part, that:
. . . Appellant's disability could not be considered permanent total disability in the sense
that he is not completely incapable of engaging in gainful occupation. . . . 8
Hence, this petition.
The only issue to be resolved is whether petitioner's disability would entitle him to
compensation benefits corresponding to permanent total disability.
Petitioner contends that there is substantial evidence showing that his disability is
permanent and total. On the other hand, respondent ECC argues that the petitioner's
disability was classified by respondent as permanent partial because the criteria for
permanent total disability, as laid down by the medical guidelines of the Commission,
were not satisfied. Respondent maintains that "disability should be understood more on
its medical significance rather than loss of earning capacity." 9
We find for petitioner.
Respondent ECC's contention that "disability should be understood more on its medical
significance rather than loss of earning capacity" is without basis in jurisprudence.
Precedents in earlier cases show that disability is intimately related to one's earning
capacity.
It has been repeatedly held by this Court that "permanent total disability means
disablement of an employee to earn wages in the same kind of work, or work of a similar
nature that she was trained for or accustomed to perform, or any kind of work which a
person of her mentality and attainment could do." 10
It does not mean state of absolute helplessness, but inability to do substantially all
material acts necessary to prosecution of an occupation for remuneration or profit in
substantially customary and usual manner. 11
Permanent total disability is the lack of ability to follow continuously some substantially
gainful occupation without serious discomfort or pain and without material injury or
danger to life. 12
It is therefore clear from the aforecited rulings that the loss of one's earning capacity
determines the disability compensation one is entitled to. Thus, this Court ruled:
102
In disability compensation, it is not the injury which is compensated, but rather it is the second certification on July 12, 1979, knowing fully well that he would be perpetuating an
incapacity to work resulting in the impairment of one's earning capacity (Ulibas vs. erroneous or false report. Under normal circumstances, he would not sacrifice his
Republic, 83 SCRA 819; Roma vs. WCC, 80 SCRA 1270). 13 medical career for the sake of a lowly public school teacher. 19

A thorough examination of the records convinces us that petitioner's claim is
substantiated with enough evidence to show that his disability is permanent and total.
First, the attending physician during the petitioner's treatment on 6-9 December 1985 at
Brent Hospital, Zamboanga Branch, Dr. Arcadio Salazar, diagnosed petitioner's condition
as Chronic Obstructive Lung Disease and classified petitioner's disability as permanent
and total. 14 Second, the Medical Examiner's report on Claim for Disability Benefits dated
26 August 1987 prepared by Medical Examiner Silvester L. Martinez also classified
petitioner's disability as total and permanent and described the symptoms of petitioner's
illness as follows:
Shortness of breath, difficulty of walking distances longer than ten (10) meters without
having respiratory problems; inability to walk a flight of stairs without intervals of rest. 15
Again, in another medical certificate dated 8 June 1988 issued by Dr. Arcadio Salazar,
the petitioner's disability was classified as total and permanent for the following reasons:
It is also of importance to note that petitioner was forced to retire at the age of 62
because of his physical condition. This, again, is another indication that petitioner's
disability is permanent and total. As held by this Court, "the fact of an employee's
disability is placed beyond question with the approval of the employee's optional
retirement, for such is authorized only when the employee is "physically incapable to
render sound and efficient service" . . ." 20
"Finally, denying petitioner's permanent total disability benefit, who for more than twenty
(20) years had rendered his best service unblemished and only because his ailments
forced him to retire, would subvert the very essence of the Workmen's Compensation Act
to implement the social justice provision of the Constitution." 21
WHEREFORE, the decision of the Employees' Compensation Commission is MODIFIED
and the GSIS is hereby ordered to pay petitioner compensation benefits for permanent
total disability effective January 1986, which is the start of the period when his earning
capacity was impaired due to his disability.

1. The patient has a tendency to develop acute exacerbation of his ailment resulting in SO ORDERED.
frequent hospitalizations (1985 to 1987);

2. The patient's condition stabilizes only on strict confinement at home;

3. The physical capacity of the patient has deteriorated markedly. He could walk a
distance of only 10 meters before dyspnea develops;

16
4. The patient is confined at home and under continuous medication.

It is evident from the foregoing that, as per his physician's opinion, petitioner is totally
incapacitated from engaging in any gainful occupation, and that therefore his disability is
permanent and total.

In earlier cases, this Court ruled that the physician's report of sickness or accident
substantiates the disability claim. 17

In one case, this Court ruled that a doctor's certification as to the nature of claimant's
disability may be given credence as he would not normally make a false certification for
the sake of a lowly school teacher. 18 According to this Court:

. . . No physician in his right mind and who is aware of the far-reaching and serious effect
that his statements would cause on a money claim filed with a government agency, would
issue certifications indiscriminately without even minding his own interests and protection.
In fact, if he were not sure of what he was certifying to, then he would not have issued the
103
G.R. No. 132558 May 9, 2000
BEBERISA RIO, petitioner,
vs. EMPLOYEES COMPENSATION COMMISSION and SOCIAL SECURITY SYSTEM,
respondents. PANGANIBAN, J.:
Death benefits under the Labor Code, as amended, are awarded only when the cause of
death is listed as an occupational disease by the Employees' Compensation
Commission, or when the claimant presents proof that the working conditions increased
the risk of contracting the fatal disease.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking to set aside the June 30, 1997 Decision1 of the Court of Appeals (CA)2 in CA-GR
SP No. 41257. The dispositive portion of the challenged CA Decision reads:
WHEREFORE, the decision of the Employees' Compensation Commission is
AFFIRMED, and the petition DISMISSED.3
The Decision of the Employees' Compensation Commission (ECC) affirmed by the CA
disposed as follows:
Based on the foregoing medical findings, it would appear that the etiology of deceased's
ailment which caused his death is not attributable to his employment. Since the ailment is
not deemed work-connected, the instant claim for death benefits cannot be given due
course.
WHEREFORE, the decision of the respondent Social Security System appealed from is
hereby AFFIRMED, and the instant case is dismissed for want of merit. 4
Petitioner also assails the January 29, 1998 Resolution5 of the appellate court denying
reconsideration.
The Facts
Virgilio T. Rio Sr., husband of herein petitioner, was employed by Allied Port Services
Inc. as stevedore since July, 1982. His duties included: (1) handling of steel cargoes; (2)
loading and unloading of silica sand; (3) handling, loading and unloading of lumber
products; (4) supervising other stevedores; and (5) performing other related work.6
On July 19, 1992, Virgilio Rio collapsed while working at the South Harbor, Manila. He
was rushed to the Philippine General Hospital (PGH) because of "melena, fever, chills
and abdominal pains 8 days [prior to confinement] . . . ." He died three days later.
According to the Medical Certificate issued by Fe B. Bais, chief of the PGH Medical
Records Division, the cause of death was "uremia [secondary] to chronic renal failure.
Chronic glomerulonephritis. . . ."7
Petitioner Beberisa Rio, his spouse, filed a claim for death benefits before the Social
Security System (SSS). However, the SSS denied the claim in this wise:8
The cause of death of your husband cannot be considered work-connected because
based on the clinical abstract you submitted, your husband had already on and off attack
of edema and hypertension which are signs of kidney disease even before his
employment with the company.9
On appeal, the ECC affirmed the findings of the SSS. 10 Ruling that petitioner failed to
present relevant evidence to establish the causal connection between the deceased's
ailment and his work as stevedore, the ECC held:
Moreover, medical evaluation suggests that Uremia is the sine qua non of chronic renal
failure. It results from the retention in the blood of urea and other end products of
metabolism normally excreted into the urine. Chronic Renal Failure on the other hand, is
a toxic clinical condition associated with renal insufficiency and retention in the blood of
nitrogenous waste products. It may be due to the following:
a) nephritis
b) congestive heart failure
c) couch syndrome
d) poison
(Reference: Harrison's Principles of Internal Medicine, 11th Edition p. 1155).
Based on the foregoing medical findings, it would appear that the etiology of deceased's
ailment which caused his death is not attributable to his employment. Since the ailment is
not deemed work-connected, the instant claim for death benefits cannot be given due
course. 11
After the ECC denied the Motion for Reconsideration, 12 petitioner appealed to the CA.
Ruling of the Court of Appeals
In affirming the ECC, the Court of Appeals ruled:
Since petitioner failed to establish any causal connection of the disease which led to the
death of her husband with the nature of his working conditions, and, in particular, that
said working condition had increased the risk of contracting the disease, then the claim
for death benefits must fail.
104
The former law on compensation, the Workmen's Compensation Act, was replaced by a
novel scheme in the New Labor Code under the title "Employees" Compensation and
State Insurance Fund.' The new law discarded, among others, the concept of
"presumption of compensability and aggravation" and substituted one based on social
security principles. The purpose was to restore a sensible equilibrium between the
employer's obligation to pay workmen's compensation and employee's right to receive
reparation for work-connected death or disability. . . .
While as a rule, labor and social welfare legislation should be liberally construed in favor
of the applicant, such liberal construction of labor laws may not be applied where the
pertinent provisions of law are clear and leave no room for interpretation. 1
Hence, this Petition for Review. 14
Issue
The lone issue submitted for this Court's resolution is:
Whether . . . petitioner's claim for death benefits under P.D. No. 626, as amended, shall
prosper under the increased risk theory. 15
This Court's Ruling
The Petition has no merit.
Main Issue:
Compensability of Rio's Death
Under the Labor Code, as amended, 16 the beneficiaries of an employee are entitled to
death benefits if the cause of death is a sickness listed as occupational disease by the
ECC; or any other illness caused by employment, subject to proof that the risk of
contracting the same is increased by the working conditions. 17
The primary and antecedent causes of Virgilio Rio's death are not listed as occupational
diseases. Hence, petitioner should have presented substantial evidence, or such relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion,
showing that the nature of her husband's employment or working conditions increased
the risk of uremia, chronic renal failure or chronic glomerulonephritis. 18 This the petitioner
failed to do.
Petitioner did not adduce any proof of a reasonable connection between the work of the
deceased and the cause of his death. There was no showing that the progression of the
disease was brought about largely by the conditions in Virgilio's job. Indeed, petitioner
presented no medical history, records or physician's report in order to substantiate her
claim that the working conditions at the Port Area increased the risk of uremia, renal
failure or
glomerulonephritis. 19
As we ruled in Sante v. Employees' Compensation Commission, 20 ". . . a claimant must
submit such proof as would constitute a reasonable basis for concluding either that the
conditions of employment of the claimant caused the ailment or that such working
conditions had aggravated the risk of contracting that ailment. What kind and quantum of
evidence would constitute an adequate basis for a reasonable man (not necessarily a
medical scientist) to reach one or the other conclusion, can obviously be determined only
on a case-to-case basis. That evidence must, however, be real and substantial, and not
merely apparent; for the duty to prove work-causation or work-aggravation imposed by
existing law is real . . . not merely apparent." At most, petitioner merely claims that:
. . . The nature of his work required physical strength in handling cargoes and at the
same time giving full attention in supervising his men as the group's leadman assigned at
Del Pan Area. It is worth mentioning that in the place where the deceased was assigned,
there were no available comfort rooms to enable him to answer the "call of nature". In
effect, delayed urination was a reality, coupled with the fact that being the leadman of his
group, his continuing physical presence at the work's premises was indispensable. . . . 21
Such bare allegation does not ipso facto make Virgilio's death compensable. Awards of
compensation cannot rest on speculations or presumptions. 22 The beneficiaries must
present evidence to prove a positive proposition. 2
While this Court has ruled that the sympathy of the law on social security is toward its
beneficiaries, 24 it is likewise important to note that such sympathy must be balanced by
the equally vital interest of denying undeserving claims for compensation. "Compassion
for the victims of diseases not covered by the law ignores the need to show a greater
concern for the trust fund to which the tens of millions of workers and their families to look
to for compensation whenever covered accidents, diseases and deaths occur." 25 In this
case, this Court has no other course but to apply the clear provisions of the law. 26
WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
105
G.R. No. 89168 May 14, 1991
ROSA LENTEJAS, petitioner,
vs. EMPLOYEES' COMPENSATION COMMISSION, respondent. FELICIANO, J.:p
Victorio Lentejas, the husband of petitioner Rosa Lentejas, entered the government
service on 13 January 1968 as Maintenance "Capataz" at the Bureau of Public Highways
in Calbayog City, Western Samar. He rose from the ranks until he became a
maintenance foreman in 1978, a construction foreman in 1979, and eventually general
foreman at the City Engineer's Office of Calbayog City. His official working hours were
from 8:00 A.M. to 5:00 P.M.
On 25 July 1984, Victorio as general foreman of the City Engineer's Office, went to
Barangay Banti, Tinambacan District, Calbayog City, there to inspect work being done on
a damaged seawall protecting the shoreline against encroachment by the sea. At around
4:30 P.M., being then (according to the police report) on his way home from that place,
Victorio was suddenly attacked and stabbed with a knife by Arnulfo Luaton who inflicted
upon him multiple stab wounds on different parts of the body causing his instantaneous
death.
Police investigation showed that the killing was brought about by a personal grudge. The
deceased Victorio and the killer Arnulfo were owners of adjoining lots situated in San
Vicente St., Tinambacan District, Calbayog City and they were in disagreement as to the
correct boundary between their respective lots. About six (6) months earlier, petitioner
and Arnulfo's father had a heated argument regarding this boundary dispute.
Because of Victorio's death, petitioner as the surviving spouse filed with the Government
Service Insurance System (GSIS) a claim for compensation benefits under the provisions
of Presidential Decree No. 626, as amended. The GSIS denied her claim upon the
ground that the killing was not work-connected since the motive of the assailant in slaying
her husband was a personal grudge. Petitioner filed a motion for reconsideration, which
motion was denied by the GSIS. This denial was elevated by the petitioner to public
respondent Employees' Compensation Commission (ECC). The ECC, however, in its
decision dated 24 May 1989, affirmed the decision of the GSIS denying petitioner's claim
for compensation benefits on the same basis that the cause of Victorio's death was not
work-connected.
Deliberating on the instant Petition for Review on Certiorari, the Court believes that the
decision of the ECC should be reversed and petitioner's claim for compensation benefits
granted.
Under, the Amended Rules on Employees' Compensation promulgated by the ECC and
relating to both government and private sector employees, more particularly Section 1 of
Rule III, the requirements for compensability of an injury and the resulting death are as
follows:
a) For the injury and the resulting death to be compensable, the injury must be the result
of an employment accident satisfying all of the following conditions:
1. the employee must have been injured at the place where his work requires him to be;
2. the employee must have been performing his official function petitions:
3. if the injury is sustained elsewhere, the employee must have been executing an order
for the employer.
xxx xxx xxx
It is not disputed that on 24 July 1984, Victorio Lentejas, a general foreman at the City
Engineer's Office, Calbayog City, was assigned the task of inspecting the construction or
rehabilitation work then in process on the damaged seawall along the shoreline of
Barangay Banti. While he was on his way from Barangay Banti, Arnulfo Luaton attacked
and stabbed him with deadly effect. He was dead when the police reached the scene of
the crime; the circumstances of Victorio's death were related by an eyewitness to the
police officers. Thus, there was no definite evidence to show that the deceased was
actually on his way home at the time of the attack upon him. The killing took place at 4:30
P.M., that is, during the deceased's official hours of work and hence, Victorio might well
have been on his way back to the City Engineer's Office when he was set upon and
killed. He was, in other words, on official time and in the course of performing his official
functions when he was attacked. The deceased was at a place where his work required
him to be, that is, at Barangay Banti and there is no evidence to show that the route he
took leaving the situs of the damaged seawall was not a usual or convenient route from
that place. He was not, to borrow a phrase from the common law of torts, on "a frolic of
his own." 1
In a line of cases, this Court has held that an injury sustained by the employee while on
his way to or from his place of work, and which is otherwise compensable, is deemed to
have arisen out of and in the course of his employment. In Vda. de Torbela V.
Employees' Compensation Commission, 2 the Court held:
It is a fact that Jose P. Torbela, Sr. died on March 3, 1975 at about 5:45 o'clock in the
morning due to injuries sustained by him in a vehicular accident while he was on his way
to school from Bacolod City, where he lived, to Hinigaran, Negros Occidental where the
School of which he was the principal was located and that at the time of the accident he
had in his possession official papers he allegedly worked on in his residence on the eve
of his death.
The claim is compensable. When an employee is accidentally injured at a point
reasonably proximate to the place at work, while he is going to and from his work, such
injury is deemed to have arisen out of and in the course of his employment. 3
106
 4
In Alano v. Employees' Compensation Commission, the Court had before it the
following facts:
Dedicacion de Vera, a government employee during her lifetime, worked as principal of
Salinap Community School in San Carlos City, Pangasinan. Her tour of duty was from
7:30 a.m. to 5:30 p.m. On November 29, 1976, at 7:00 A.M., while she was waiting for a
ride at Plaza Jaycee in San Carlos City on her way to the school, she was bumped and
run over by a speeding Toyota mini-bus which resulted in her instantaneous death. She
is survived by her four sons and a daughter.
xxx xxx xxx 5
and held as follows:
In this case, it is not disputed that the deceased died while going to her place of work.
She was at the place where, as the petitioner puts it, her job necessarily required to be if
she was to reach her place of work on time. There was nothing private or personal about
the school principal's being at the place of the accident. She was there because her
employment required her to be there. 6
The Vda. de Torbela and Alano cases were reiterated in Vano v. Government Service
Insurance System. 7 In the very recent case of Lazo v. Employees' Compensation
Commission, 8 the deceased, a security guard of the Central Bank, was injured when the
passenger jeepney he was riding on his way home from work turned turtle. In awarding
compensation, the Court held that:
In the case at bar, it can be seen that petitioner left his station at the Central Bank several
hours after his regular time off, because the reliever did not arrive, and so petitioner was
asked to go on overtime. After permission to leave was given, he went home. There is no
evidence on record that petitioner deviated from his usual, regular homeward route or
that interruptions occurred in the journey.
While the presumption of compensability in theory of aggravation under the Workmen's
Compensation Acts (under which the Baldebrin case was decided) may have been
abandoned under the new labor code it is significant that the liberality of the law in
general in favor of the working man still subsists. As agent charged by the law to
implement social justice guaranteed and secured by the Constitution, the Employees
Compensation Commission should adopt a liberal attitude in favor of the employee in
deciding claims for compensability, especially where there is some basis in the facts for
inferring a work connection to the accident. 9
We note that under the foregoing cases, it is quite clear that although Victorio might have
been on his way home from Barangay Banti at the time he was attacked and killed by
Arnulfo Luaton, that circumstance did not by itself operate to render his death non-
compensable. We note, at the same time, that in all the cases noted above from Vda. de
Torbela to Lazo, the events which caused or precipitated injury or death did not involve
the intentional inflicting of harm or injury or death upon the employee concerned. In the
instant case, however, as noted earlier, Victorio's death was the result of a murderous
assault upon him. Thus, the precise technical issue here is whether or not the
circumstance that Victorio's death was the result of a criminal attack by another person,
not a member of the staff of the Calbayog City Engineer's Office, had the effect of
rendering his death non-compensable although such death had occurred in the course of
performance of official functions.
After careful examination of the Vda. de Torbela, Alano and Lazo cases, we believe and
so hold that the case at bar falls within the scope of the rule set out in those cases. There
is no question that the deceased in the instant case did not foresee, and could not have
foreseen, the attack on himself when he undertook to go to Barangay Banti to inspect
and oversee the municipal construction work then on-going in that place. In so far as the
mind and will of the victim were concerned, the homicidal intent on the part of Arnulfo
Luaton was as external and fortuitous an event as a speeding mini-bus or a recklessly
negligent jeepney driver. In other words, we do not think that the third person's criminal
intent should be regarded as a supervening cause having the effect of nullifying the
circumstance that, when Victorio was attacked and killed, he was where his work
required him to be and that he was then in the course of performing his official duties. It
seems pertinent to note that inflicting physical injuries or death through negligence
constitutes a criminal offense both under the Revised Penal Code (Article 365) and a
special statute (Republic Act No. 4136, the Land Transportation and Traffic Code), just as
much as homicide or murder.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Review, to
TREAT the Comment of respondent Commission as its Answer, and to REVERSE and
SET ASIDE the decision of the Employees' Compensation Commission dated 24 May
1989. The case is hereby REMANDED to the ECC and the GSIS for disposition
conformably with this Resolution.
107
[G.R. No. 49454 : December 21, 1990.] 192 SCRA 548
PEOPLE OF THE PHILIPPINES, Appellant, vs. SALVADOR MONTEIRO, Appellee.
CRUZ, J.:
The appellant is questioning the order of the Court of First Instance of Laguna 1 dated
May 17, 1976, granting the motion to quash the following information against Salvador
Monteiro:
That on or about the period from January 1964 to May 31, 1974 at Liliw, Laguna and
within the jurisdiction of this Honorable Court, the above-named accused, being the
operator and owner of "Monteiro's Footwear," an establishment engaged in the
manufacture of footwear, did then and there wilfully, unlawfully and feloniously fail to
register and/or report to the Social Security System, Elizabeth Collantes as member
thereof who was employed in said firm or establishment from January 1964 to May 1974
in violation of the Social Security Laws; and despite demands failed to register aforesaid
employee to the damage and prejudice of the offended party.
The reason for the quashal was prescription. The trial court agreed with the appellee that
the crime charged, which is punishable only with a fine from P500.00 to P5,000.00 or
imprisonment of not less than six months to more than one year, or both, could no longer
be prosecuted. 2 The law applied was Section 1(b) of Act 3326, as amended, providing
that offenses punishable with imprisonment for more than one month but less than two
years prescribe after four years.
The trial court reckoned the 4-year prescriptive period from January 1964, holding that
the crime was deemed committed from the time the private respondent failed to register
the employee. No other act was needed to complete the crime. The Order applied the
case of People v. Ching Lak, 3 where this Court declared that the prescriptive period for
violation of the War Profits Tax Law commenced from the date the accused failed to pay
his war profits tax. As the information against Monteiro was filed only on November 10,
1975, it was clear that it was already time-barred under the cited provision.
The appellant contends otherwise. According to the Solicitor General, the 4-year period
should commence, not in January 1964, when the violation started, but in May 1974,
when it was discovered. He cites in support of his view Elizabeth Collantes's statements
4 at the preliminary investigation of the case and Section 2 of the same Act, providing as
follows:
SEC. 2. Prescription shall commence to run on the day of the commission of the violation
of the law and if the same be not known at that time, from the discovery thereof and the
institution of judicial proceedings for its investigation and punishment.:-cralaw
For his part, the appellee argues that the appellant cannot change its theory on appeal
from its original position that the offense was a continuing one. He insists that the
prescriptive period should be counted from the date of the alleged violation as this was
not concealed and did not have to be discovered. The statements of Collantes were not
admissible evidence because they had not been formally offered; hence, no proof of
discovery had been presented by the appellant. He also suggests that the subsequent
registration of Collantes with the SSS had the effect of extinguishing the offense and that
in any case the appeal would place him in double jeopardy.
In the recent case of Benedicto v. Abad Santos, 5 also involving the failure to register an
employee with the SSS, the Court declared:
In the case at bar, the information was filed against petitioner Benedicto ten (10) years
after the alleged violations had been discovered by the SSS. We hold that the statutory
crime here charged had prescribed by then, the prescriptive period here applicable being
four (4) years.
Although this was not the ratio decidendi of that case, we affirm the conclusion that the
period of prescription for the offense of failure to register with the SSS shall begin from
the day of the discovery of the violation if this was not shown at the time of its
commission. A contrary view would be dangerous as the successful concealment of an
offense during the period fixed for its prescription would be the very means by which the
offender may escape punishment.
The Solicitor General was, indeed, not changing his theory on appeal but merely shifting
his emphasis. Even in the lower court, he had consistently opposed the contention that
the offense had prescribed.
We cannot accept the appellee's argument that the appeal should be dismissed because
the appellant had failed to show that it was only in 1974 that the offense was discovered.
That was not his responsibility. On the contrary, the burden of proving that the crime had
prescribed fell on the appellee because it was he who was invoking that affirmative
defense. 6 The fact of prescription not being apparent on the face of the information, it
was incumbent on the appellee to establish the basis of that defense. 7
The trial court should have applied Section 7 of Rule 133 of the Rules of Court, providing
as follows:
Sec. 7. Evidence on Motion. When a motion is based on facts not appearing of record,
the court may hear the matter on affidavits or depositions presented by the respective
parties, but the court may direct that the matter be heard wholly or partly on oral
testimony or depositions.
In Sapida v. De Villanueva, 8 we held that "while the court may rule upon motions solely
on the basis of affidavits and counter-affidavits, if the affidavits contradict each other on
matters of fact, the court can have no basis to make its findings of facts and the prudent
108
course is to subject the affiants to cross-examination so that the court can decide whom
to believe."
We note that in the case at bar, the trial court resolved the motion merely on the basis of
the amended information, the motion to quash and the opposition thereto. These were
insufficient bases for the findings of fact needed to justify the grant of the motion. The trial
judge did not require submission of affidavits and counter-affidavits or hold a preliminary
hearing to inform himself of the date when the prescriptive period was supposed to have
commenced. This was because he assumed at the outset that the period of prescription
began in 1964.:-cralaw
In holding that the prescriptive period should begin in January 1964, the trial judge was
merely presuming that the appellant was already aware on that date of the commission of
the crime. There is no proof of this, nor is such knowledge deducible from a reading of
the information. Even the motion to quash did not allege that the appellant already knew
of the violation immediately when it began in January 1964.
The case of People v. Dinsay, 9 where the Court dismissed the information because it
had been filed beyond the prescriptive period is not in point. The estafa committed by the
accused was known to the offended party from the very start; one would say the
commission and the discovery of the offense were simultaneous. In the case at bar, it
does not appear that Collantes knew at the outset, that is, from January 1964, that she
had not been registered by the appellee with the SSS. In fact, she said she learned she
was not a member only much later, when she wanted to avail herself of SSS benefits
because of the hospitalization of her husband. 10
The appellee's claim that his subsequent registration of Collantes with the SSS
extinguished his current liability, if any, is not acceptable. If subsequent compliance with
the law were sufficient to condone past violation, then the penal clause might as well be
deleted from the statute. Many an unscrupulous employer could simply not register his
employees and, when found out and prosecuted, register them belatedly. Such an
interpretation would nullify the purpose of the law, which is precisely to protect the
members of the working class.
The invocation of the rule against double jeopardy must also be rejected. Double
jeopardy will attach only if there is: (a) a valid complaint or information; (b) filed before a
competent court; (c) to which the defendant had pleaded; and (d) of which he had been
previously acquitted or convicted or which was dismissed or otherwise terminated without
his express consent. 11 The herein appellee has not yet been arraigned and it was upon
his express motion that the information was quashed and the case dismissed.
WHEREFORE, the challenged Order dated May 17, 1976, is SET ASIDE. This case is
remanded to the Regional Trial Court of Laguna for determination, after hearing, of the
date when the alleged offense was discovered and the prescriptive period commenced to
run. No costs.:SO ORDERED.
G.R. No. 147745 April 9, 2003
MARIA BUENA OBRA, petitioner,
vs. SOCIAL SECURITY SYSTEM (Jollar Industrial Sales and Services Inc.),
respondents. PUNO, J.:
On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 60704 dated
September 27, 2000 sustaining the Decision 2 of the Employees' Compensation
Commission dated April 13, 2000, as well as its subsequent Resolution 3 dated March 6,
2001 denying petitioner's Motion for Reconsideration.
The facts of the case are as follows:
Juanito Buena Obra, husband of petitioner, worked as a driver for twenty-four (24) years
and five (5) months. His first and second employers were logging companies. Thereafter,
he was employed at Jollar Industrial Sales and Services Inc. as a dump truck driver from
January 1980 to June 1988. He was assigned to the following projects: 4
1. January 1980 to December 1981 F.F. Cruz Project, Nabua, Camarines Sur
hauling/delivery of filling materials from quarry to job site
2. January 1982 to December 1983 F.F. Cruz, 300 MW Coal Fire Thermal Plant,
Calaca, Bacungan and Makban Geothermal Plant, Los Baos, Laguna hauling/delivery
of filling materials from quarry to job site
3. January 1984 to December 1985 Dizon Copper Silver Mines, Pili, San Marcelino,
Zambales hauling/delivery filling materials from quarry to job site
4. January 1986 to June 1988 Metro Manila Hauling Project
On 27 June 1988, Juanito suffered a heart attack while driving a dump truck inside the
work compound, and died shortly thereafter. In the Report of Death5 submitted by his
employer to the Social Security System (SSS), Juanito expired at the Worker's Quarters
at 10:30 a.m., of Myocardial Infarction.
Petitioner Maria M. Buenaobra immediately filed her claim for death benefits under the
SSS law. She started receiving her pension in November 1988. Petitioner was, however,
unaware of the other compensation benefits due her under Presidential Decree No. 626,
as amended, or the Law on Employees' Compensation. In September 1998, or more than
ten (10) years after the death of her husband, that she learned of the benefits under P.D.
No. 626 through the television program of then broadcaster Ted Failon who informed that
one may claim for Employees Compensation Commission (ECC) benefits if the spouse
died while working for the company. Petitioner prepared the documents to support her
claim for ECC benefits. On 23 April 1999, she filed with the SSS her claim for funeral
benefits under P.D. No. 626, as amended, which was docketed as SSS # 04-0089326-0.6
109
On 28 July 1999, the SSS denied the claim of petitioner for funeral benefits ruling that the
cause of death of Juanito was not work-connected, absent a causal relationship between
the illness and the job. Caridad R. Borja, Assistant Vice-President National Capital
Region (AVP NCR) Central of the SSS Member Assistance Center in Quezon City
wrote:
"Please be informed that funeral claim under the Employees Compensation is hereby
denied. Per medical evaluation, cause of death of subject member's (sic) cannot be
considered work connected since there is no causal relationship between the illness and
the job."
On 8 October 1999, petitioner wrote to Atty. Teofilo E. Hebron, Executive Director of the
ECC, appealing the denial of her claim. On 11 November 1999, Atty. Hebron ordered Dr.
Simeon Z. Gonzales, Assistant Vice-President (AVP) of the Medical Services Group of
the SSS to review the claim of petitioner.
On 23 November 1999, the Medical Services Group through Dr. Perla A. Taday, AVP for
Medical Operations, concluded its re-evaluation and affirmed the denial of petitioner's
claim. It reiterated that "there is no causal relationship between the cause of death/illness
and member's job as dump truck driver." 7 Pursuant to Section 5, Rule XVIII of the
Implementing Rules of PD 626, the records of the deceased Juanito were elevated to the
Commission.
On 13 April 2000, the Commission rendered a decision, dismissing the appeal. 8 It ruled
that petitioner failed to show by substantial evidence that her husband's cause of death
was due to, or the risk of contracting his ailment was increased by his occupation and
working conditions, as per Section 1(b), Rule III of P.D. No. 626, as amended. In addition,
the Commission declared that petitioner's claim has prescribed, citing ECC Resolution
No. 93-08-0068.
Petitioner appealed to the Court of Appeals. She alleged that her cause of action had not
prescribed because the filing of her claim for SSS benefits shortly after Juanito's death
suspended the running of the prescriptive period for filing EC claims, as per Item No. III of
ECC Resolution No. 90-03-0022 dated 23 March 1990. The appellate court dismissed the
petition. It ruled that petitioner's filing of her claim for SSS benefits shortly after Juanito's
death did not suspend the running of the prescriptive period for filing EC claims. It
interpreted the aforementioned ECC Resolutions to mean that a claimant must indicate
the kind of claim filed before the running of the prescriptive period for filing EC claims
may be interrupted. In the case at bar, petitioner indeed filed a claim with SSS. In fact,
she has been receiving her pension since November 1988. However, she failed to
specify whether the basis of her claim was any contingency which may be held
compensable under the EC Program.9
In addition, the Court of Appeals cited P.D. No. 626 which states that a contingency may
be held compensable if listed in Annex "A" of the Rules Implementing Employees'
Compensation as an occupational disease, and satisfying all conditions set forth therein;
or if not listed as an occupational disease, or listed but has not satisfied the conditions set
forth therein, it must be proven by substantial evidence that the risk of contracting the
disease which caused the death of the member, was increased by the member's working
conditions.10
The appellate court likewise held that the three-year prescriptive period does not apply in
the instant case. Instead, it applied Art. 1142(2) of the Civil Code which reads:
"Art. 1144. The following actions must be brought within ten (10) years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. [Emphasis supplied.]"
The appellate court then held that the petitioner's cause of action has prescribed.
Petitioner's husband died on 27 June 1988. She filed her claim for funeral benefits under
P.D. No. 626 or the Law on Employees' Compensation only on 23 April 1999, or more
than ten (10) years from his death.
Lastly, the appellate court ruled that even assuming petitioner's cause of action has not
prescribed, her claim for Employees' Compensation benefits cannot prosper because of
her failure to prove by substantial evidence that her husband's working conditions
increased the risk of contracting the myocardial infarction that caused his death.
Petitioner's Motion for Reconsideration dated 27 September 2000 was denied by the
appellate court in a Resolution promulgated on 6 March 2001.
Hence, this petition. The following issues are raised: 11
(1) WHETHER, INDEED, THE CLAIM OF PETITIONER, HAD PRESCRIBED.
(2) WHETHER OR NOT THE ILLNESS OF PETITIONER'S HUSBAND, MYOCARDIAL
INFARCTION, IS WORK-RELATED.
On the first issue, we rule that the claim of petitioner for funeral benefits under P.D. No.
626, as amended, has not yet prescribed.
The issue of prescription in the case at bar is governed by P.D. No. 626, or the Law on
Employees' Compensation. Art. 201 of P.D. No. 626 and Sec. 6, Rule VII of the 1987
Amended Rules on Employees' Compensation both read as follows:
110
"No claim for compensation shall be given due course unless said claim is filed with the
System within three years from the time the cause of action accrued."
This is the general rule. The exceptions are found in Board Resolution 93-08-0068 and
ECC Rules of Procedure for the Filing and Disposition of Employees' Compensation
Claims. Board Resolution 93-08-0068 issued on 5 August 1993, states:
"A claim for employee's compensation must be filed with System (SSS/GSIS) within three
(3) years from the time the cause of action accrued, provided however, that any claim
filed within the System for any contingency that may be held compensable under the
Employee's Compensation Program (ECP) shall be considered as the EC claim itself.
The three-year prescriptive period shall be reckoned from the onset of disability, or date
of death. In case of presumptive death, the three (3) years limitation shall be counted
from the date the missing person was officially declared to be presumptively dead."
(emphasis supplied)
In addition, Section 4(b), Rule 3 of the ECC Rules of Procedure for the Filing and
Disposition of Employees' Compensation Claims, reads:
"RULE 3. FILING OF CLAIM
Section 4. When to file.
(a) Benefit claims shall be filed with the GSIS or the SSS within three (3) years from the
date of the occurrence of the contingency (sickness, injury, disability or death).
(b) Claims filed beyond the 3-year prescriptive period may still be given due course,
provided that:
1. A claim was filed for Medicare, retirement with disability, burial, death claims, or life
(disability) insurance, with the GSIS within three (3) years from the occurrence of the
contingency.
2. In the case of the private sector employees, a claim for Medicare, sickness, burial,
disability or death was filed within three (3) years from the occurrence of the contingency.
3. In any of the foregoing cases, the employees' compensation claim shall be filed with
the GSIS or the SSS within a reasonable time as provided by law. [Emphasis supplied.]"
We agree with the petitioner that her claim for death benefits under the SSS law should
be considered as the Employees' Compensation claim itself. This is but logical and
reasonable because the claim for death benefits which petitioner filed with the SSS is of
the same nature as her claim before the ECC. Furthermore, the SSS is the same agency
with which Employees' Compensation claims are filed. As correctly contended by the
petitioner, when she filed her claim for death benefits with the SSS under the SSS law,
she had already notified the SSS of her employees' compensation claim, because the
SSS is the very same agency where claims for payment of sickness/disability/death
benefits under P.D. No. 626 are filed.
Section 4(b)(2), Rule 3 of the ECC Rules of Procedure for the Filing and Disposition of
the Employees' Compensation Claims, quoted above, also provides for the conditions
when EC claims filed beyond the three-year prescriptive period may still be given due
course. Section 4(b)(2) states the condition for private sector employees, requiring that a
claim for Medicare, sickness, burial, disability or death should be filed within three (3)
years from the occurrence of the contingency. In the instant case, the petitioner was able
to file her claim for death benefits under the SSS law within the three-year prescriptive
period. In fact, she has been receiving her pension under the SSS law since November
1988.
It is true that under the proviso, the employees' compensation claim shall be filed with the
GSIS/SSS within a reasonable time as provided by law. It should be noted that neither
statute nor jurisprudence has defined the limits of "reasonable time." Thus, what is
reasonable time depends upon the peculiar facts and circumstances of each case. 12 In
the case at bar, we also find petitioner's claim to have been filed within a reasonable time
considering the situation and condition of the petitioner. We have ruled that when the
petitioner filed her claim for death benefits under the SSS law, her claim for the same
benefits under the Employees' Compensation Law should be considered as filed. The
evidence shows that the System failed to process her compensation claim. Under the
circumstances, the petitioner cannot be made to suffer for the lapse committed by the
System. It is the avowed policy of the State to construe social legislations liberally in favor
of the beneficiaries.13 This court has time and again upheld the policy of liberality of the
law in favor of labor. Presidential Decree No. 626 itself, in its Art. 166 reads:
"ART. 166. Policy. The State shall promote and develop a tax-exempt employees'
compensation program whereby employees and their dependents, in the event of work-
connected disability or death, may promptly secure adequate income benefit, and
medical or related benefits." (emphasis supplied)
Furthermore, Art. 4 of P.D. No. 442, as amended, otherwise known as the Labor Code of
the Philippines, which P.D. No. 626 forms a part of, reads as follows:
"ART. 4. Construction in favor of labor. All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor."
Particularly, the policy of liberality in deciding claims for compensability was given
emphasis by this court in the case of Employees' Compensation Commission vs. Court of
Appeals,14 where it held that:
". . . the liberality of law in favor of the working man and woman still prevails and the
official agency charged by law to implement the constitutional guarantee of social justice
111
should adopt a liberal attitude in favor of the employee in deciding claims for
compensability, especially in light of compassionate policy towards labor which the 1987
Constitution vivifies and enhances. Elsewise stated, a humanitarian impulse, dictated by
no less than the Constitution itself under the social justice policy, calls for a liberal and
sympathetic approach to legitimate appeals of disabled public servants; or that all doubts
to the right to compensation must be resolved in favor of the employee or laborer. Verily
the policy is to extend the applicability of the law on employees' compensation to as
many employees who can avail of the benefits thereunder."
Claims falling under the Employees' Compensation Act should be liberally resolved to
fulfill its essence as a social legislation designed to afford relief to the working man and
woman in our society.15
The second issue of whether or not the illness of petitioner's husband, myocardial
infarction which was the cause of his death is work-related, must likewise be resolved in
favor of the petitioner.
Under the law on employees' compensation, death is compensable only when it results
from a work-connected injury or sickness. In the instant case, the cause of petitioner's
husband's death was myocardial infarction and it must be considered work-connected.
While it is true that myocardial infarction is not among the occupational diseases listed
under Annex "A" of the Amended Rules on Employees' Compensation, the Commission,
under ECC Resolution No. 432 dated July 20, 1977, laid down the conditions under
which cardio-vascular or heart diseases can be considered as work-related and thus
compensable, viz:
(a) If the heart disease was known to have been present during employment, there must
be proof that an acute exacerbation was clearly precipitated by the unusual strain by
reasons of the nature of his/her/her work.
(b) The strain of work that brings about an acute attack must be of sufficient severity and
must be followed within 24 hours by the clinical signs of a cardiac insult to constitute
causal relationship.
(c) If a person who was apparently asymptomatic before being subjected to strain at work
showed signs and symptoms of cardiac injury during the performance of his/her work and
such symptoms and signs persisted, it is reasonable to claim a causal relationship.
Myocardial infarction is also known as heart attack. It results in permanent heart damage
or death. A heart attack is called myocardial infarction because part of the heart muscle
(myocardium) may literally die (infarction). This occurs when a blood clot blocks one of
the coronary arteries (the blood vessels that bring blood and oxygen to the heart muscle).
When the heart muscle does not obtain the oxygen-rich blood that it needs, it will begin to
die. The severity of a heart attack usually depends on how much of the heart muscle is
injured or dies during the heart attack. Heart attack accounts for 1 out of every 5 deaths.
It is a major cause of sudden death in adults. Heavy exertion or emotional stress can
trigger a heart attack.16
In the case at bar, the petitioner's husband's heart disease falls under the second
condition of ECC Resolution No. 432 dated July 20, 1977 which states that the strain of
work that brought about the acute attack must be of sufficient severity and must be
followed within 24 hours by the clinical signs of a cardiac insult to constitute causal
relationship. Petitioner's husband was driving a dump truck within the company premises
where they were stacking gravel and sand when he suffered the heart attack. He had to
be taken down from the truck and brought to the workers' quarters where he expired at
10:30 a.m., just a few minutes after the heart attack, which is much less than the 24
hours required by ECC Resolution No. 432. This is a clear indication that severe strain of
work brought about the acute attack that caused his death.
Professional drivers, especially truck drivers like the decedent in the instant case, carry
the burden of being more exposed and subjected to the stress and strain of everyday
traffic, and the greater physical exertion brought about by driving a large and heavy
vehicle. In addition, according to the petitioner, her husband was under a lot of stress in
the workplace. He was a model worker and his employer highly depended on him. He
became the object of envy of his co-workers which caused him much emotional stress.
Add to this the fact that he has been a truck driver for more than twenty-four (24) years.
Due to the combination of emotional stress and vigorous physical exertion, it was easy
for him to succumb to the heart ailment. We hold that the illness of the decedent which
caused his death is work-connected, and thus compensable by virtue of ECC Resolution
No. 432 dated 20 July 1977.
As a final note, we find it necessary to reiterate that P.D. No. 626, as amended, is a
social legislation whose primordial purpose is to provide meaningful protection to the
working class against the hazards of disability, illness and other contingencies resulting in
the loss of income. Thus, as the official agents charged by law to implement social justice
guaranteed by the Constitution, the ECC and the SSS should adopt a liberal attitude in
favor of the employee in deciding claims for compensability especially where there is
some basis in the facts for inferring a work connection with the illness or injury, as the
case may be. It is only this kind of interpretation that can give meaning and substance to
the compassionate spirit of the law as embodied in Article 4 of the New Labor Code
which states that all doubts in the implementation and interpretation of the provisions of
the Labor Code including its implementing rules and regulations should be resolved in
favor of labor.17
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of Appeals in
CA-G.R. SP No. 60704 dated 27 September 2000 and its Resolution dated 06 March
2001 are hereby SET ASIDE. The SSS is hereby directed to pay herein petitioner the
death/funeral benefits due him under the existing law.
SO ORDERED.
112
G.R. No. L-43674 June 30, 1987
YSMAEL MARITIME CORPORATION, petitioner,
vs. HON. CELSO AVELINO, in his capacity as Presiding Judge of Branch XIII, Court of
First Instance of Cebu and SPOUSES FELIX C. LIM and CONSTANCIA GEVEIA
respondents. FERNAN, J.:
This special civil action for certiorari raises the question of whether the compensation
remedy under the Workmen's Compensation Act [WCA], and now under the Labor Code,
for work-connected death or injuries sustained by an employee, is exclusive of the other
remedies available under the Civil Code.
It appears that on December 22, 1971. Rolando G. Lim, single, a licensed second mate,
was on board the vessel M/S Rajah, owned by petitioner Ysmael Maritime Corporation,
when the same ran ground and sank near Sabtan Island, Batanes. Rolando perished as
a result of that incident.
Claiming that Rolando's untimely death at the age of twenty- five was due to the
negligence of petitioner, his parents, respondents Felix Lim and Consorcia Geveia, sued
petitioner in the Court of First Instance on January 28, 1972 for damages [Civil Case No.
R-12861].
In its answer, petitioner-defendant alleged by way of affirmative defenses [1] that the
complaint stated no cause of action; [2] that respondent-plaintiffs had received P4,160
from petitioner and had signed release papers discharging petitioner from any liability
arising from the death of their son, and [3] that most significantly, the respondents had
already been compensated by the Workmen's Compensation Commission [NCC] for the
same incident, for which reason they are now precluded from seeking other remedies
against the same employer under the Civil Code.
A protracted legal battle over procedural points ensued. Finally, on July 30, 1975, the
case was set for pre-trial. Petitioner sought the dismissal of the complaint on the ground
that the trial court had no jurisdiction over the subject matter of the action.
In his order of December 29, 1975, respondent Judge Avelino upheld respondents'
vigorous opposition and denied petitioner's motion to dismiss for being unmeritorious. Its
motion for reconsideration having met the same fate on February 3, 1976, petitioner filed
the instant special civil action for certiorari, prohibition and mandamus with preliminary
injunction, contending that respondent judge acted with grave abuse of discretion when
he refused to dismiss the complaint for damages on the ground of lack of jurisdiction.
This Court subsequently granted a temporary restraining order prohibiting the trial court
from proceeding with the hearing of the case.
At issue is the exclusory provision of Section 5 of the Workmen's Compensation Act
reiterated in Article 173 of the Labor Code 7
Sec. 5 Exclusive right to compensation. The rights and remedies granted by this Act to
an employee by reason of a personal injury entitling him to compensation shall exclude
all other rights and remedies accruing to the employee, his personal representatives,
dependents or nearest of kin against the employer under the Civil Code and other laws,
because of said injury,
Art. 173 Exclusive of liability. Unless other wise provided, the liability of the State
Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the
employer to the employee, his dependents or anyone otherwise entitled to receive
damages on behalf of the employee or his dependents. The payment of compensation
under this Title shall bar the recovery of benefits as provided for in Section 699 of the
Revised Administrative Code, Republic Act No. 1161, as amended, Commonwealth Act
No. 186, as amended, Republic Act No. 610, as amended, Republic Act No. 4864, as
amended, and other laws whose benefits are administered by the System, during the
period of such payment for the same disability or death, and conversely.
In the recent case of Floresca vs. Philex Mining Company, L-30642, April 30, 1985, 136
SCRA 141, involving a complaint for damages for the death of five miners in a cave in on
June 28, 1967, this Court was confronted with three divergent opinions on the exclusivity
rule as presented by several amici curiae One view is that the injured employee or his
heirs, in case of death, may initiate an action to recover damages [not compensation
under the Workmen's Compensation Act) with the regular courts on the basis of
negligence of the employer pursuant to the Civil Code. Another view, as enunciated in
the Robles case, is that the remedy of an employee for work connected injury or accident
is exclusive in accordance with Section 5 of the WCA. A third view is that the action is
selective and the employee or his heirs have a choice of availing themselves of the
benefits under the WCA or of suing in the regular courts under the Civil Code for higher
damages from the employer by reason of his negligence. But once the election has been
exercised, the employee or his heirs are no longer free to opt for the other remedy. In
other words, the employee cannot pursue both actions simultaneously. This latter view
was adopted by the majority, in the Floresca case, reiterating as main authority its earlier
decision in Pacaa vs. Cebu Autobus Company, L-25382, April 30, 1982, 32 SCRA 442.
In so doing, the Court rejected the doctrine of exclusivity of the rights and remedies
granted by the WCA as laid down in the Robles case. 'Three justices dissented.
It is readily apparent from the succession of cases dealing with the matter at issue * that
this Court has vacillated from one school of thought to the other. Even now, the concepts
pertaining thereto have remained fluid. But unless and until the Floresca ruling is
modified or superseded, and We are not so inclined, it is deemed to be the controlling
jurisprudence vice the Robles case.
As thus applied to the case at bar, respondent Lim spouses cannot be allowed to
maintain their present action to recover additional damages against petitioner under the
Civil Code. In open court, respondent Consorcia Geveia admitted that they had
previously filed a claim for death benefits with the WCC and had received the
113
compensation payable to them under the WCA [Rollo, pp. 22-23, 29-30]. It is therefore
clear that respondents had not only opted to recover under the Act but they had also
been duly paid. At the very least, a sense of fair play would demand that if a person
entitled to a choice of remedies made a first election and accepted the benefits thereof,
he should no longer be allowed to exercise the second option. "Having staked his
fortunes on a particular remedy, [he] is precluded from pursuing the alternate course, at
least until the prior claim is rejected by the Compensation Commission." [See Separate
Opinion by Justice Teehankee in Robles vs. Yap Wing, supra on pp. 281-282].
In the light of this Court's recent pronouncement in the Floresca case, respondent Judge
Avelino's denial order of petitioner's motion to dismiss is adjudged to be improper.
WHEREFORE, respondent Judge Avelino's orders dated December 29, 1975 and
February 3, 1976 are reversed and set aside, Civil Case No. 12861, entitled "The
Spouses Felix C. Lim, and Consorcia Geveia vs. Ysmael Maritime Corp." is hereby
ordered dismissed. The temporary restraining order issued by this Court on May 5, 1978
enjoining respondent Judge Avelino from conducting further proceedings in said case is
made permanent. No costs.
SO ORDERED.
G.R. No. 84307 April 17, 1989
CIRIACO HINOGUIN petitioner,
vs. EMPLOYEES' COMPENSATION COMMISSION and GOVERNMENT SERVICE
INSURANCE SYSTEM (Armed Forces of the Philippines), respondents. FELICIANO, J.:
This Petition for Review is directed against the Decision of the Employees' Compensation
Commission ("ECC") in ECC Case No. 3275 (Ciriaco Hinoguin v. Government Service
Insurance System [Armed Forces of the Philippines]) which affirmed the decision of the
Government Service Insurance System ("GSIS") denying petitioner's claim for
compensation benefit on account of the death of petitioner's son, Sgt. Lemick G.
Hinoguin
The deceased, Sgt. Hinoguin started his military service in 1974, when he was called to
military training by the Philippine Army. He later on enlisted in the Philippine Army as a
private first class. At the time of his death on 7 August 1985, he was holding the rank of
Sergeant per Special Order P-4200, HPA dated 15 October 1985, in "A" company 14th
Infantry Battalion, 5th Infantry Division, PA. The Headquarters of the 14th Infantry
Battalion was located at Bical, Muoz, Nueva Ecija. Sgt. Hinoguin was Detachment Non-
Commissioned Officer at Capintalan, Carranglan, Nueva Ecija, "A" Company being
stationed at Carranglan, Nueva Ecija.
On 1 August 1985, Sgt. Hinoguin and two (2) members of his Detachment, Cpl. Rogelio
Clavo and Dft. Nicomedes Alibuyog, sought permission from Captain Frankie Z. Besas,
Commanding Officer of "A" Company to go on overnight pass to Aritao, Nueva Viscaya,
"to settle [an] important matter thereat." 1 Captain Besas orally granted them permission
to go to Aritao and to take their issued firearms with them, considering that Aritao was
regarded as "a critical place " 2 that is, it had peace and order problems due to the
presence of elements of the New People's Army ("NPA!') in or in the vicinity of Aritao.
Sgt. Hinoguin, Cpl. Clavo and Dft. Alibuyog left Carranglan, Nueva Ecija, about noon on 1
August 1985 and arrived in Aritao, Nueva Viscaya, about 1:30 o'clock P.M. on the same
day. 3 They proceeded to the home of Dft. Alibuyog's parents where they had lunch.
About 4:00 o'clock P.M., the three (3) soldiers with a fourth man, a civilian and relative of
Dft. Alibuyog, had some gin and beer, finishing a bottle of gin and two (2) large bottles of
beer. Three hours later, at about 7:00 o'clock P.M., the soldiers left the Alibuyog home to
return to their Company Headquarters. They boarded a tricycle, presumably a motor-
driven one, Sgt. Hinoguin and Cpl. Clavo seating themselves in the tricycle cab while Dft.
Alibuyog occupied the seat behind the driver. Upon reaching the poblacion of Aritao, Dft.
Alibuyog dismounted, walked towards and in front of the tricycle cab, holding his M-16
rifle in his right hand, not noticing that the rifle's safety lever was on semi automatic (and
not on "safety"). He accidentally touched the trigger, firing a single shot in the process
and hitting Sgt. Hinoguin, then still sitting in the cab, in the left lower abdomen. The
Sergeant did not apparently realize immediately that he had been hit; he took three (3)
steps forward, cried that he had been hit and fell to the ground.
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His companions rushed Sgt. Hinoguin to a hospital in Bayombong, Nueva Viscaya, for
treatment. Their Company Commander, Capt. Besas, hurried to the hospital upon being
notified of the shooting and there talked with the wounded Sergeant. The latter confirmed
to Capt. Besas that he had indeed been accidentally shot by Dft. Alibuyog Sgt. Hinoguin
was later moved to the AFP Medical Center in Quezon City and there he died on 7
August 1985. The Death Certificate lists "septic shock" as immediate cause of death, and
"generalized septicemia of peritonitis" as antecedent cause, following his sustaining a
gunshot wound.
An investigation conducted by H.Q., 14th Infantry Battalion on 11 August 1985 concluded
that the shooting of Sgt. Hinoguin was "purely accidental in nature." 4 On 19 November
1985, a "Line of Duty Board of Officers" was convened by H.Q. 14th Infantry Battalion, "to
determine Line of Duty Status of [the] late Sgt. Lemick Hinoguin 640407 (Inf.) PA, a
member of "A" Co., 14IB, 5 ID, PA who died ... due to Gun Shot Wound as a result of an
accidental fire (sic) committed by Dft. Nicomedes Alibuyog 085-5009 (Inf.) PA ... ." After
receiving and deliberating . g on the Investigation Report dated 11 August 1985 together
with the sworn statements of witnesses Alibuyog, Clavo and Besas, and after some
further questioning of Capt. Besas, the Line of Duty Board reached the following
conclusion and recommendation:
Sgt. Hinoguin was then the designated Detachment Commander of Capintalan
detachment. On or about 011300H August 1985 Dft. Alibuyog invited Sgt. Hinoguin and
Cpl. Clavo to his home to celebrate at Aritao, Nueva Viscaya. They asked permission to
go on overnight and to allow them to carry their firearms with them because the place
where they were going is critical. They were given such permission verbally by their
Commanding Officer. The death of Sgt. Hinoguin was purely accidental as the
Investigation Report presented here proved beyond reasonable [doubt] the fact that Dft.
Alibuyog had no grudge either [against] Cpl. Clavo or Sgt. Hinoguin
RECOMMENDATION:
The recommendation written by the Chairman and unanimously voted for by the
members contain the following:
The Board after a thorough deliberation on presented evidences declares that the Death
of Sgt. Lemick Hinoguin 640407 (Inf.) PA is in Line of Duty.
The Board recommend farther that all benefits due the legal dependents of the late Sgt.
Lemick Hinoguin be given. 5 (Emphasis supplied)
Sometime in March 1986, petitioner filed his claim for compensation benefits under P.D.
No. 626 (as amended), claiming that the death of his son was work-connected and
therefore compensable. This was denied 6 by the GSIS on the ground that petitioner's
son was not at his work place nor performing his duty as a soldier of the Philippine Army
at the time of his death.
Petitioner filed a Motion for Reconsideration which Motion was, however, denied by the
GSIS. This denial was confirmed by the Workmen's Compensation Commission ("WCC")
in a Decision dated 24 May 1988 which stated that:
[F]rom the recital of the facts therein [we found it] very difficult for us to perceive where
the work-connection of the events that led to appellant's son's death lies. Under the law,
death resulting from injury is considered compensable if it arises out of and in the course
of employment. Definitely, the death of Hinoguin did not arises out of employment.
Clearly, the facts showed that he was not on his place of work nor was he performing
official functions. On the contrary, he was on pass and had just came from a
merrymaking when accidentally shot by his companion, 7 (Emphasis supplied)
The sole issue to be resolved in this case is whether or not the death of Sgt. Lemick
Hinoguin is compensable under the applicable statute and regulations.
Considering that Sgt. Hinoguin died on 7 August 1985, the applicable law is to be found
in Book Four, Title III of the Labor Code, as amended. It may be noted at the outset that
under Article 167 (g) of the Labor Code, as amended and Section 4 (b) (1) of Rule I of the
Amended (Implementing) Rules on Employees' Compensation, the term "employee"
includes a "member of the Armed Forces of the Philippines." Rule XIII entitled "Death", of
the Amended (Implementing) Rules provides in part as follows:
SECTION 1. Conditions to Entitlement. (a) The beneficiaries of a deceased employee
shall be entitled to an income benefit if all of the following conditions are satisfied:
(1) The employee had been duly reported to the System;
(2) He died as a result of injury or sickness; and
(3) The System has been duly notified of his death, as well as the injury or sickness
which caused his death. His employer shall be liable for the benefit if such death
occurred before the employee is duly reported for coverage of the System.
xxx xxx xxx
Article 167 (k) of the Labor Code as amended defines a compensable "injury" quite
simply as "any harmful change in the human organism from any accident arising out of
and in the course of the employment." The Amended (Implementing) Rules have,
however, elaborated considerably on the simple and succinct statutory provision. Rule III,
Section 1 (a) reads:
SECTION 1. Grounds. (a) For the injury and the resulting disability or death to be
compensable, the injury must be the result of an employment accident satisfying all of the
following grounds:
(1) The employee must have been injured at the place work requires him to be;
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(2) The employee must have been performing his official functions; and
(3) If the injury is sustained elsewhere, the employee must have been executing an order
for the employer.
xxx xxx xxx
(Emphasis supplied)
It will be seen that because the Amended (Implementing) Rules are intended to apply to
all kinds of employment, such rules must be read and applied with reasonable flexibility
and comprehensiveness. The concept of a "work place" referred to in Ground 1, for
instance, cannot always be literally applied to a soldier on active duty status, as if he
were a machine operator or a worker in an assembly line in a factory or a clerk in a
particular fixed office. Obviously, a soldier must go where his company is stationed. In the
instant case, Aritao, Nueva Viscaya was not, of course, Carranglan, Nueva Ecija. Aritao
being approximately 1-1/2 hours away from the latter by public transportation. But Sgt.
Hinoguin, Cpl. Clavo and Dft. Alibuyog had permission from their Commanding Officer to
proceed to Aritao, and it appears to us that a place which soldiers have secured lawful
permission to be at cannot be very different, legally speaking, from a place where they
are required to go by their commanding officer. We note that the three (3) soldiers were
on an overnight pass which, notably, they did not utilize in full. They were not on vacation
leave. Moreover, they were required or authorized to carry their firearms with which
presumably they were to defend themselves if NPA elements happened to attack them
while en route to and from Aritao or with which to attack and seek to capture such NPA
elements as they might encounter. Indeed, if the three (3) soldiers had in fact
encountered NPAs while on their way to or from Aritao and been fired upon by them and
if Sgt. Hinoguin had been killed by an NPA bullet, we do not believe that respondent
GSIS would have had any difficulty in holding the death a compensable one.
unless he is shown to have clearly and unequivocally put aside that status or condition
temporarily by, e.g., going on an approved vacation leave. 8 Even vacation leave may, it
should be remembered, be preterminated by superior orders.
More generally, a soldier in the Armed Forces must accept certain risks, for instance, that
he will be fired upon by forces hostile to the State or the Government. That is not, of
course, the only ask that he is compelled to accept by the very nature of his occupation
or profession as a soldier. Most of the persons around him are necessarily also members
of the Armed Forces who carry firearms, too. In other words, a soldier must also assume
the risk of being accidentally fired upon by his fellow soldiers. This is reasonably
regarded as a hazard or risk inherent in his employment as a soldier.
We hold, therefore, that the death of Sgt. Hinoguin that resulted from his being hit by an
accidental discharge of the M-16 of Dft. Alibuyog, in the circumstances of this case, arose
out of and in the course of his employment as a soldier on active duty status in the Armed
Forces of the Philippines and hence compensable.
It may be well to add that what we have written above in respect of performance of official
functions of members of the Armed Forces must be understood in the context of the
specific purpose at hand, that is, the interpretation and application of the compensation
provisions of the Labor Code and applicable related regulations. It is commonplace that
those provisions should, to the extent possible, be given the interpretation most likely to
effectuate the beneficient and humanitarian purposes infusing the Labor Code.
ACCORDINGLY, the Decision of the GSIS taken through its Claim Review Committee
dated 20 November 1986 and the Decision dated 24 May 1988 of the Employees'
Compensation Commission in ECC Case No. 3275, are hereby REVERSED and the
GSIS is hereby DIRECTED to award all applicable benefits in respect of the death of Sgt.
Lemick G. Hinoguin, to petitioner. No pronouncement as to costs.

Turning to the question of whether Sgt. Hinoguin was performing official functions at the SO ORDERED.
time he sustained the gunshot wound, it has already been pointed out above that the Line
of Duty Board of Officers of the 14th Infantry Battalion Headquarters had already
determined that the death of Sgt. Hinoguin had occurred "in line of duty." It may be noted
in this connection that a soldier on active duty status is really on 24 hours a day official
duty status and is subject to military discipline and military law 24 hours a day. He is
subject to call and to the orders of his superior officers at all times, 7 days a week,
except, of course, when he is on vacation leave status (which Sgt. Hinoguin was not).
'Thus, we think that the work-connected character of Sgt. Hinoguins injury and death was
not effectively precluded by the simple circumstance that he was on an overnight pass to
go to the home of Dft. Alibuyog, a soldier under his own command. Sgt. Hinoguin did not
effectively cease performing "official functions" because he was granted a pass. While
going to a fellow soldier's home for a few hours for a meal and some drinks was not a
specific military duty, he was nonetheless in the course of performance of official
functions. Indeed, it appears to us that a soldier should be presumed to be on official duty
116