System needs to change

Kim Jin-hyun

National health insurance policy is a basic social security net the state provides to ensure its citizens get decent health care regardless of financial differences. The basic theory behind the program is to levy insurance rates according to financial affordability for universal benefits. The current system, however, fails to adequately reflect financial capacity of a subscriber.

A salary-earner and self-employed person with similarities in income, car, and other personal wealth should pay the same level of insurance fees. But they do not because they are subject to different levy scale. Subscribers on employers-subsidized package get rates automatically taken off from monthly paycheck. They are levied only on work salaries. On grounds that exact level of monthly income is hard to decipher, those on voluntary insurance policy are levied according to their income, gender, age, car, and real estate. The bill naturally comes with bigger number for voluntary policy-holders.

When one loses job or retires, he or she would have to shift to voluntary policy. Despite the decrease in income, their health insurance rates go up because they are levied for their rented homes or automobile. What’s comical is that parents of salary-earners get medical coverage because they can go on family package. But those of jobless must pay. If a salary-earner has children she or he does not need to pay extra. But independent holders must pay separately for their kids.

Rates are different among workers who only have salary income and those who have earnings through other means.

The dual complicated system had been adopted 25 years ago when income levels of voluntary subscribers were hard to estimate. Instead tangible properties like real estate and cars become the criteria on rate-setting. At the time, it had been practical idea. But self-employed people’s income levels have now become much easier to gauge.

Credit card use and cash receipts have become commonplace. Tax administration has also become effective. According to the National Tax Service, tax registration rate by self-employed business owners is at 96.7 percent. About 95 percent of individual incomes are traceable based on tax information from retirement funds, profit gains, transfer, financial transactions, and part-time work. Times have changed significantly from 25 years ago. We have reached a stage where insurance rates can be levied according to income levels. That would help to ease disparities in insurance fees and public complaint.

Salary-earners can protest that they contribute more because the fees go straight out from their paycheck. But when subscribers on employers and non-employers package subject to same level of premiums are compared on top of their overall income and assets, salary-earners are financially better off than voluntary subscribers.

There is an incremental way of improving the system while keeping current framework intact. But levies have already become too unbalanced. Rates should be singularized based on comprehensive income levels. The burden on some people whose insurance fees can shoot up sharply under the change could be allowed to pay in installment over the next three to five years. The free benefit for family members and separate levies according to gender and age also should be scrapped. Properties should be taxed only when steady income arises from them. Although without regular income, wealthy people should be levied according to their assets for a certain period of time.

Financial and pension income should be excluded from certain amount. They should be levied when they are beyond the cap and the rates should be cut to half. Whether insurance fees should be taxed on one-time income like retirement or severance fund and inheritance should be examined further. For those without any income, minimum rates would be more helpful to them instead of current levies on their age, gender, and car ownership. For low-income families, basic rates should be levied per family.

According to the National Health Insurance Service, about 80 percent of salary-earners will see their rates go down or unchanged from shift to income-based rate system. Those with incomes outside work will see their rates go up. Most voluntary policy-holders will get smaller bill. Time has come that we change the levy system to be singularized on income base for fair and balanced fees and ensure viability and sustainability of our public health insurance program.

Translation by the Korea JoongAng Daily staff.

*The author is a professor of the Nursing College, Seoul National University.

By Kim Jin-hyun