8/12/2019 Philippine Health Care Providers Inc vs cir

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PHILIPPINE HEALTH CARE PROVIDERS, INC.VS. CIR

FACTS:The petitioner Philippine Health Care Providers

Inc. is a domestic corporation whose primary purpose isto provide or arrange for the provision of medicalservices through participating licensed physicians,specialists and other professional technical staff

participating in the group practice health delivery systemat a hospital or clinic owned, operated or accredited byit. The individuals enrolled in its health care programs

pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services.

On January !, """, respondent Commissioner of Internal #evenue $CI#% sent petitioner a formaldemand letter and the corresponding assessment noticesdemanding the payment of deficiency ta&es, includingsurcharges and interest, for the ta&able years '(() and'((! in the total amount of P *,!" ,)*'.'+. Thedeficiency $documentary stamp ta& - T/% assessmentwas imposed on petitioner0s health care agreement withthe members of its health care program pursuant toection '+1 of the '((! Ta& Code.

Petitioner protested the assessment in a letter dated 2ebruary 3, """. 4s respondent did not act onthe protest, petitioner filed a petition for review in theCourt of Ta& 4ppeals CT4/ see5ing the cancellation of the deficiency 64T and - T assessments. On 4pril 1,"" , the CT4 rendered a decision partially granting the

petitioner0s claim ordering it to still pay the deficiencyta& but cancelling its liability with regard to the paymentof the - T deficiency ta&. 4ggrieved, the respondentCI# appealed the given decision to the C4 insofar as itcancelled the - T assessment. He claimed that

petitioner0s health care agreement was a contract of insurance sub7ect to - T under ection '+1 of the '((!Ta& Code. On 4ugust '), ""*, the C4 reversed theaforementioned decision of the CT4 holding that

petitioner0s health care agreement was in the nature of anon8life insurance contract sub7ect to - T. Petitioner moved for reconsideration but the C4 denied it. Hence,

petitioner filed this case.

ISSUES:

'.9hether or not the petitioner as a H:O Health:aintenance Organi;ation/ is engaged in an insurance

business..9hether or not petitioner0s health care agreement wasa contract of insurance under ection '+1 of the '((!Ta& Code.3. 9hether or not the petitioner is sub7ect to pay the- T deficiency.

HELD:

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8/12/2019 Philippine Health Care Providers Inc vs cir

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d!sign!d to #r!%!nt or to $ini$i&! t ! #ossi'ility o( "ny "ss)$#tion o( ris* on its #"rt. Thus, itsunderta5ing under its agreements is not to indemnify itsmembers against any loss or damage arising from amedical condition but, on the contrary, to provide thehealth and medical services needed to prevent such lossor damage.

Overall, petitioner appears to provideinsurance8type benefits to its members with respect toits c)r"ti%! medical services/, but these are incidental tothe principal activity of providing them medicalcare. The =insurance8li5e> aspect of petitioner0s

business is miniscule compared to its noninsuranceactivities. Therefore, since it substantially provideshealth care services rather than insurance services, itcannot be considered as being in the insurance business.

Aastly, it is significant that petitioner, as anH:O, is not part of the insurance industry. This isevident from the fact that it is not supervised by theInsurance Commission but by the -epartment of Health. In fact, in a letter dated eptember 3, """, theInsurance Commissioner confirmed that petitioner is notengaged in the insurance business. This determinationof the commissioner must be accorded great weight.

. presuppose that a liability or claim has already beenincurred. There is no indemnity precisely because themember merely avails of medical services to be paid or already paid in advance at a pre8agreed price under theagreements.

$hird . 4ccording to the agreement, a member can ta5e advantage of the bul5 of the benefitsanytime, e.g. laboratory services, &8ray, routine annual

physical e&amination and consultations, vaccineadministration as well as family planningcounseling, even in the absence of any peril, loss or damage on his or her part.

-ourth . In case of emergency, petitioner isobliged to reimburse the member who receives care froma non8participating physician or hospital. However, thisis only a very minor part of the list of servicesavailable. The assumption of the e&pense by petitioner is not confined to the happening of a contingency butincludes incidents even in the absence of illness or in7ury.

-ifth . 4lthough ris5 is a primary element of aninsurance contract, it is not necessarily true that ris5 alone is sufficient to establish it. Indeed, petitioner, asan H:O, underta5es a business ris5 when it offers to

provide health services? the ris5 that it might fail to earna reasonable return on its investment. ut it is not theris5 of the type peculiar only to insurancecompanies. Insurance ris5, also 5nown as actuarial ris5,is the ris5 that the cost of insurance claims might behigher than the premiums paid. The amount of premiumis calculated on the basis of assumptions made relativeto the insured.

In sum, an e&amination of petitioner0sagreements with its members leads us to conclude that itis not an insurance contract within the conte&t of our Insurance Code.

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