&#91EDITORIALS&#93The calculus of insurance

The Ministry of Health and Welfare and the National Pension Corporation plan to raise insurance premiums for regional policy holders whose reported income is much smaller than their actual earnings. The ministry has developed a model to calculate income levels of the insured, finding a big discrepancy between calculated and reported incomes. Among 5.83 million regional policy holders, 3.27 million reported income lower than the actual amount.
Determining the correct monthly income is important, it is the basis for pension payments after retirement. Consequently, corporate workers will suffer if regional policy holders pay less. Corporate workers are already at a disadvantage on tax and health insurance premium payments.
Under such circumstances, the government should adjust the income of some 1.16 million people whose reported income is more than 60 percent lower than actual earnings. The adjustment should be up to 80 percent of their real income. This would improve the imbalance in payments of insurance premiums. It would also ease the two umbrella labor unions’ opposition to reforms that reduce the amount of payouts while raising insurance premiums. The Welfare Ministry should be praised for developing an income calculation model, since the National Tax Service has collected only 34 percent of the materials needed to access the income of the self-employed.
But the model should be used discreetly. Use of the model was considered in 1999, when the pension plan was expanded to cover the urban self-employed, but it was canceled after an outcry among these workers. The plan also prompted violent protests among regional policy holders who refused to pay more. The government should consider that the economy is in bad shape and the self-employed are suffering the most. Also, there is no law to use the calculated income.
The model could be applied first to those in the upper half of the income range, where the discrepancy between what is calculated and reported is largest. But it is important to prepare a complete plan.