Bring down the rates

Kim Won-shik

The National Health Insurance Service has posted surpluses for the last three consecutive years. Its reserves reached 8.2 trillion won at the end of last year largely because fewer people received hospital care amid slow economy. But the state agency plans to raise insurance rates on mandatory subscribers on employers’ package by 1.35 percentage points to 6.07 percent from current 5.99 percent that is taken off automatically from monthly check. Medical cost has reached over 100 trillion won, tantamount to nearly 8 percent of the country’s gross domestic product. Due to increased aging population, cost of public medical care is expected to increase by more than 10 percent a year. Public health insurance fees will rise accordingly.

The Ministry of Health and Welfare recently announced a proposal to restructure the health insurance rate system. In gist, it is proposing to singularly calculate rates based on various incomes of subscribers from both salary-based package and individual volunteer policy. It hopes to ease disparities and various problems from incoherent rate charges. But at the same time, it is suspected of trying to increase reserve base in preparation for future payout for aging and expanded coverage on major illnesses. The extra burden will make subscribers consider health insurance as a type of tax and could resist payment.

Public health insurance system was merged in 2000, but the revenue sources ? subscribers on employers-backed package and individual policy-holders ? remained separate. Inequalities in payment had long caused complaint and disputes. Salary-earners whose insurance rates are taken directly off their paycheck complain that they have dutifully paid their dues while individual policy-holders enjoy the same medical care benefits with less payment as they can more easily hide their income. But individual policy subscribers have more to say. Unlike subscribers on employers’ package, their insurance fees are levied not only for their income, but also cars plus interest rate and rent profits. They have to pay extra for medical care for their family members while those on employers’ package do not. When one registers for individual policy after retirement, insurance fees suddenly shoot up even if there is no longer stable monthly income. Because of inconsistencies and frequent changes in billing, the health insurance body gets over 57 million complaints.

But the 5.99 percent deduction off monthly salary is not a small sum for workers. The rate is higher than real labor income tax rate of 4 percent in 2012. It would be extra burden if salary-earners have to pay additional insurance fees for other incomes such as from rent and interest rates. Of their monthly contribution, 6.55 percent goes out to help finance the long-term state subsidies for nursing home care. Public health insurance program is different from national pension where the subscribers can get reimbursed in old age. It is why low-income subscribers do not pay insurance fees.

Instead of rushing to singularize rate charges based on income, incremental changes to fix current problems would be more desirable. First of all, levies on non-income-regenerating assets and random counting of cars and rents as income should be revised. A house, car, and rented home per family should be regarded as basic essentials for livelihood and should not be charged. In this way, volunteer program subscribers will have less to complain about.

Uniform family benefit for subscribers on employers’ package also should be revised. If the number of family members goes over a certain number, extra per head should be charged. Health insurance should incorporate social changes where individual value now comes ahead of family values. If a family member has financial, rent, and pension income, he or she should be separated from the family package. Public health insurance should gradually shift to rate-per-person system.

Due to fast aging process, senior citizens would soon make up the lion’s share of individual health insurance subscription. These people make ends meet mostly with interest rate and rent income. They must not be demanded of same level of rates charged on working population. The public health insurance fund should realign its portfolio to bring down rates for senior subscribers. If rate system is singularly based on income, the burden would be too heavy for the young and working population. Precursory steps should be taken to alleviate obvious disparities and gradually expand the scope to incorporate income levels.

Translation by the Korea JoongAng Daily staff.

*The author is a professor of economics at Konkuk University.

By Kim Won-shik