In the Philippine labor landscape, the Philippine Health Insurance Corporation (PhilHealth) serves as the cornerstone of the country’s universal health care system. Under the Universal Health Care (UHC) Act (Republic Act No. 11223) and the National Health Insurance Act of 1995 (Republic Act No. 7875, as amended by RA 9241 and RA 10606), employers carry a mandatory legal obligation to deduct and remit the correct health insurance contributions for their employees.
Failure to comply with these mandates is not merely an administrative oversight; it is a criminal offense subject to severe penalties, interest, and civil liabilities.
I. The Nature of the Obligation
Employers are designated by law as the "withholding agents" of the government. This status imposes two primary duties:
- Deduction: Timely deducting the employee’s share from their monthly compensation.
- Remittance: Remitting both the employee’s share and the employer’s counterpart to PhilHealth within the prescribed period (typically within the first ten days of the following month).
Under the law, the failure of an employer to remit contributions after they have been deducted from the employee’s salary creates a legal presumption of malversation of public funds or estafa.
II. Administrative and Criminal Penalties
The legal framework provides for tiered penalties depending on the nature and duration of the violation.
1. Penal Sanctions (Imprisonment and Fines)
Pursuant to Section 44 of RA 11223 (UHC Act), any employer who fails or refuses to deduct contributions or remit the same shall be punished with:
- Fine: A fine of not less than Fifty Thousand Pesos (₱50,000.00) but not more than One Hundred Thousand Pesos (₱100,000.00) for each violation.
- Imprisonment: A prison sentence of not less than six (6) months but not more than one (1) year.
2. Interest and Surcharges
Late remittances are subject to a monthly interest rate. While the exact percentage may be adjusted via PhilHealth Circulars to align with market rates, the standard penalty for delayed payment typically involves:
- Interest: A penalty of 2% to 3% per month on the total amount of unremitted contributions, computed from the date the amount actually became due until it is fully paid.
III. Liability of Corporate Officers
If the employer is a juridical person (e.g., a corporation or partnership), the law pierces the corporate veil regarding criminal liability. The penalty of imprisonment shall be imposed upon the responsible officers, which may include:
- The President
- The Managing Director or General Manager
- The Treasurer
- Any officer directly responsible for the non-remittance.
IV. Civil Liability for Employee Hospitalization
One of the most significant risks for an employer is the civil liability for an employee's medical expenses.
If an employee (or their legal dependent) is denied PhilHealth benefits because the employer failed to remit contributions or failed to report the employee to PhilHealth, the employer is legally mandated to:
- Pay the full amount of the PhilHealth benefit that the employee would have been entitled to.
- Be held liable for any damages arising from the denial of coverage.
V. Operational Consequences
Beyond fines and jail time, non-compliance triggers administrative hurdles that can cripple business operations:
- Denial of PhilHealth Clearance: Businesses often require a PhilHealth Clearance to renew local business permits (Mayor’s Permit) and to bid on government contracts.
- Labor Inspections: Non-remittance is a high-priority trigger for the Department of Labor and Employment (DOLE) during routine inspections, often leading to broader audits of SSS and Pag-IBIG compliance.
- Permanent Record of Violation: Repeated failure to remit can lead to the revocation of the business license or the "Blacklisting" of the company from government-related transactions.
VI. Summary of Statutory Liabilities
| Type of Liability | Description |
|---|---|
| Criminal | 6 months to 1 year imprisonment and fines up to ₱100,000 per violation. |
| Civil | Reimbursement of the employee's lost PhilHealth benefits + damages. |
| Monetary | 2% to 3% monthly interest on all unremitted amounts. |
| Administrative | Withholding of Business Permits and PhilHealth Clearances. |
Conclusion
In the Philippine legal context, PhilHealth contributions are viewed as a social justice mechanism. The courts and the legislature treat the non-remittance of these funds with high severity, as it directly compromises the health and financial security of the Filipino workforce. Employers are advised to maintain rigorous accounting and remittance schedules to avoid the compounding costs of litigation, interest, and potential incarceration.