Health insurance reforms to reduce burden on underprivileged
By Bang Moon-kyu
Bang Moon-kyu
The Ministry of Health and Welfare announced a plan on Jan. 23 to reform the national health insurance contribution scheme. Putting more weight on income, the scheme will go through three stages of gradual reforms.
The existing payment system applies different criteria to workplace health insurance enrollees (employers and employees) and those to local health insurance enrollees including the self-employed and retirees.
The insurance premiums are estimated based solely on income for the former, while those of the latter reflect personal wealth including property and vehicles.
Low-income local subscribers, who earn an annual income less than 5 million won ($4,300), pay their premium based on “income rating,” which takes into account gender, age, income, property and cars owned by their family members.
This income rating will be abolished after 17 years. The scale of imposition for property and vehicles will gradually dwindle. At the last phase of reform, 80 percent of local subscribers may bear only half of the current insurance premiums.
The insurance premium of most insured employees will not change, but those with high financial or rental income will face premium hike.
Currently, additional insurance fees are imposed on workplace health insurance subscribers who have a source of income such as interest or dividend exceeding 72 million won a year, other than company salary.
After the reforms, however, those who have more than 20 million won such earnings besides salary will have to pay higher premiums.
Regulations will be strengthened on dependents, often described as “free riders.”
Under the current standard, those who have an annual income of up to 120 million won qualify as dependents, meaning they are allowed to register as dependents of their workplace-insured family members.
After the reforms, however, those registered as dependents who earn more than 20 million won a year will be automatically registered as local subscribers.
The backbone of these reforms is to enhance fairness by abolishing the “income rating” applied to low-income local subscribers and gradually lowering the insurance premiums imposed based on property.
Of the total amount of premiums paid by local subscribers, almost 80 percent are levied based on income.
This proportion will be pushed up to 95 percent at the final stage of the reforms. In other words, only 5 percent of the premiums will be determined based on property, gradually obtaining the goal of income-based contribution.
The national health insurance system has seen rapid growth just like most other Korean social welfare programs.
It was first applied to businesses with more than 500 employees in 1977, and within a decade its coverage expanded to farming and fishing areas in 1988 and urban areas in 1989, laying the foundation for universal health insurance.
And the integration of workplace health insurance and local health insurance in 2000 gave birth to the current form of the national health insurance system.
This fair health coverage for almost all 50 million Koreans draws compliments from around the world. But such rapid development entailed dissatisfaction with the contribution system.
Local insurance enrollees complain their premiums are calculated based on the value of their property.
On the other hand, workplace-insured employees, who currently bear 80 percent of the total insurance premiums, are concerned about potential premium increases.
Some experts argue that contributions should be determined only based on income level. This seems ideal, but would generate issues of fairness in multiple dimensions.
While employees’ wages are fully disclosed, 76 percent of local subscribers declare their annual income is under 5 million won and 50 percent of them claim they have zero income; premiums of the former are calculated based on their entire wages, but the latter could pay only 10 percent of their stated income as a maximum of 90 percent of their income is recognized as deductible business expenses.
Another issue is to increase fairness between those whose fortunes are in real estate and cash. The government is working hard to raise the rental income declaration rate. Still, there is a long way to go.
Some say the whole picture may be grasped by bringing more data from the National Tax Service. However, as the majority of that income data concerns day laborers, the burden of insurance payments may be imputed to low-income workers instead of rich property owners.
The government will create a better environment for figuring out the income of local subscribers in a more transparent manner because accurate income verification is all the more critical in the income-based payment system.
To pinpoint the cause of the problem from various angles and draw up improvement measures, inter-governmental discussions will be conducted.
The Constitutional Court ruled on Jan. 15 that it was reasonable for the government to consider property, in addition to income, in calculating insurance premiums for local subscribers.
But minority opinions opposed the “income rating” for the number of household members because it was against the social solidarity principle.
There are underprivileged people who eke out an existence in shabby monthly-rent rooms in our neighborhoods.
One low-income family, widely known as the “family in Songpa,” committed suicide due to financial difficulties in 2014.
The National Health Insurance Service had imposed on the mother and two daughters, all unemployed, 48,000 won premiums a month, after classifying as property their 5 million won payment paid in advance to rent their apartment, where they paid 500,000 won in monthly rent.
For these marginalized residents, eliminating absurdity in the insurance payment plan is most pressing.
In this vein, the government will not spare any endeavors to succeed in this reform. Since national health insurance premiums involve almost all Koreans, the government will carefully carry out the overhaul through in-depth discussions with the National Assembly.
The writer is the health and welfare vice minister.