Health Insurance Premium Imposition Standards will be improved taking in account of Individuals’ Ability to Pay
- Regdate2011-11-17 15:39
- Hit5,344
Health Insurance Premium Imposition Standards will be improved taking in account of Individuals’ Ability to Pay
- High income individuals will pay more and those living in monthly rental/long-term lease houses will pay less
- Dependent members in a family with ability to pay will be also charged
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< Actual Case> #. Park (aged 28) who gets paid 1.5 million won every month pays 42 thousand won of health insurance premium once a month. His colleague, Ha (aged 36) also pays the same amount of the insurance premium since he gets paid the same amount of wage. However, Ha doesn’t pay a health insurance premium separately for his rental income (44 million won each month and 528 million won per year) that he earns from a commercial building he owns.
Sooner or later, this inequality is expected to be alleviated to some extent. Individuals who earn consolidated incomes will be charged with health insurance premiums for their consolidated incomes even if they are already health insurance subscribers at their workplaces. If this newly revised standard is implemented, Ha will have to pay 1 million and 282 thousand won in insurance premium each month combining the existing premium (42 thousand won) he has been paying and the additional amount (1.24 million won). |
Ministry of Health and Welfare (Minister Rim, Chae Min) disclosed the “improvement plan for fair imposition of the health insurance premium” as a follow-up action for the 2020 Future Vision for Healthcare and Medical Services which was announced earlier in Sep.
This improvement plan is focused on preparing short-term measures that will be in line with a long-term direction in reforming the imposition standards, which has been being discussed by the committee for the future of health and medical services, etc.
The imposition of insurance premiums on consolidated income earners such as high-end leasing business or other types of high-end business holders and the reduction of premiums on households living in monthly rental/lease houses, etc which are major topics recently discussed are all included in the improvement plan.
Ministry of Health and Welfare will basically simplify the imposition standards based upon the incomes under a long-term principle that “insurance premiums will be charged in proportion to individuals’ ability to pay” and will implement the plan in phases considering the status of health insurance finances and acceptability by insurance subscribers.
It also added that, in a short run, it will continuously seek to better the standards by preparing measures to secure equality within the current imposition system.
Under the current system, when high-end income earners who have consolidated incomes besides wages and salaries such as building or shopping center owners, independent businessmen, major stockholders are hired by companies, thus, making them health insurance subscribers through their workplaces, the insurance premium is charged to their labor incomes only, causing inequality between them and other ordinary salary workers to whom their labor incomes are the only source of income.
Category
Ha (aged 36)
Park(aged 28)
Consolidated incomes
550 million won of total income (46 million won for a month)
-Labor income 18 million won per year(1.5 million won for a month)
-Rental income 530 million won per year (44 million for a month)
Annual income; 18 million won (15 million won for a month)
-Labor income; 18 million won per year(1.5 million won for a month)
Insurance premium
․42 thousand won per month (0.09% of the entire income)
․ 42 thousand won per month (2.82% of the entire income)
Remark
․Unequal in terms of the proportion of the payment to the income as Ha, a high-income earner only pays 0.09% of the entire income while Park, a lower-income earner, pays 2.82% of the total income as insurance premium.
Voices of concern have been raised that such high-income earners pay insurance premiums less than regional subscribers who have similar amounts of incomes and properties and can avoid paying premiums through fake employment.
* 1,103 cases of having obtained qualifications for employment health insurance subscribers through fake employment were uncovered in 2010 and 4.9 billion won of insurance premiums were redeemed
From now on, for high-income earner whose non-labor income is 70 and 80 million won or more, even if they are covered by their employment insurance coverage, they will be charged with insurance premiums for their all consolidated incomes in addition to their labor incomes.
However, there will be no additional burden to users (subscribers pay 50% of the insurance premiums) and ordinary salary workers whose main income sources are labor incomes will just pay premiums for their labor incomes only as before.
This new plan will be applied to high income earners first and be eventually extended in phases considering the acceptability of the policy. Currently, those whose annual incomes exceed 70~80 million won besides labor incomes are being looked at.
Income baseline
Basis for baselines
Subjects
Estimated total (yearly)
Additional premium(monthly)
Exceeds annual income of 88 million won
The top range of the progressive income tax rates
30 thousand persons
207.2 billion won
582 thousand won
Exceeds annual income of 72 million won
150% of the average income of wage earners’ households(‘10)
37 thousand persons
223.1 billion won
503 thousand won
*Total number of employment health insurance subscribers who have consolidated incomes: 1.53 million persons; total amount of incomes besides labor incomes: 19 trillion won
If this new standard is applied, for Ha in the above exemplary case, the monthly premium will rise from 42 thousand won to 1 million and 282 thousand won.
Ha(aged 36) before the revision
After the revision
Total income:550 million won(46 million won a month)
-Insurance premium for the labor income(1.5 million won a month): 42 thousand won
-Insurance premium for the rental income(44 million won for a month):0 won
➡
․42 thousand won for the labor income (same)
․insurance premium for the rental income료 1 million and 240 thousand won
․Monthly premium: 42 thousand won
․Monthly premium: 1 million and 282 thousand won
Prevent a free ride by dependent members of a family with ability to pay
The intention of the insurance coverage for dependent members of a family is to provide health care services for those who cannot make a living themselves at the expense of their family members who have the employment health insurance. However, there are cases that those who actually have an ability to pay are avoiding paying the insurance premiums.
Either those who don’t have any business income or those whose financial income is less than 40 million won are qualified as the dependent. Therefore, if one has financial income less than 40 million won can be benefited as the dependent.
Also, no matter how much pension income or other types of income one may have, that person still can be the dependent, indicating that there is inequity by income type.
Category
Kim(aged 62)
Choi (aged 60)
Property and income status, etc
․3.5 million a month in pension income( 42 million won per year)
․Apartment (40 pyong), car
․Car repair business(5.8 million a month in business income)
․Apartment (40 pyong), car
Insurance subion qualification
․Dependent
․Regional subscriber(he has children who have a job)
Insurance premium
․none
․200 thousand a month
Remark
․Both have children who have a job, but Park who has pension income can be registered as the dependent.
By revising the conditions for the dependent, which have been inconsistently applied for different types of income, in a way to reflect all types of consolidated income, individuals’ actual ability to pay will be considered regardless of types of income.
Particularly, if one has a total income of 40 million won and more including all types of income such as pension income and others which are not considered in the current conditions for the dependent, that individual will be excluded from the dependent and be converted to the regional subscriber.
Under this revised conditions, around 7,600 dependent persons will be converted to the regional subscriber, having to pay the insurance premium of 196,000 won on a monthly average.(18 billion won per year)
Kim(aged 62), before the revision
After the revison
․3.5 million won a month in pension income (42 million won per year)
․Apartment(40 pyong), car
․he is the dependent under his child’s insurance
➡
․Excluded from the dependent
․the premium will be charged to him as a regional subscriber
․he pays no insurance premium
․he will pay a monthly premium of 200 thousand won.
It has been consistently pointed out that there is disparity in terms of the insurance premium payment when an individual relocates from one area to another since the insurance premium burden that the regional subscriber has to bear for properties and cars is quite heavy.
* Increase/decrease of the insurance premium burden that the individual has to bear when his/her work place relocates from one area to another ('10): increase by 48.1%, decrease by 51.9%
Even though individuals’ income status is now better identified and more accurately investigated, the insurance premium portion for property has been consistently increasing, placing a greater pressure on the vulnerable class whose actual income is low.
* Income data retention rate: 23% (‘98) → 44%(’10), Insurance premium portion for property: 27%(’98) → 40%(’10)
In addition, the recent surge in monthly and long-term housing rent rates has increased the health insurance burden, which goes against the intention of imposing the insurance premiums according to individuals’ ability to pay.
* Monthly/long-term housing rent price index increase: 6.8% in 2010, 9.7% in 2011 (until Sep.)
When it comes to cars, the insurance premium is being imposed based on the displacement volume. However, this imposition method has been said to be unfair as well since prices of cars that have the same displacement volume greatly differ from one another.
* An imported car, Benz E200K (2,000 CC) is 65 million won while a domestic brand, Lotze, which has the same displacement volume is 17 million. Although Benz is four times more expensive than Lotze, the same amount of the insurance premium is being imposed.
The alleviation of the insurance premium burden for property and car will be eventually and consistently implemented considering the financial status of the health insurance. The insurance burden concerning monthly/long-term housing rent prices and car will be tackled first as recently many civil complaints have been raised about it.
To prevent the health insurance premiums from rising due to a surge in monthly/long-term housing rents, a ceiling on monthly/long-term housing rent increase rates to be applied to the insurance premiums will be adopted.
The upper limit on monthly/long-term housing rent prices to be applied to the insurance premiums will be 10% on a two-year basis given related to laws and the past increase rates of monthly/long-term housing rents and any increase beyond the limit will be excluded from calculation of the insurance premiums.
* Housing Lease Protection Act: Request for an increase by more than 1/20 of the existing deposit is banned (5% per year)
* Annual average increase rate of monthly/long-term housing rent prices: 5.2% over the past ten years and 5.5% over the past 20 years
This will be applied to a case when only a deposit is raised for the same house. If a deposit increases upon voluntary choice by a tenant, this benefit will not be granted.
Therefore, monthly insurance premiums for about 280 thousand households are expected to be reduced by around 9 thousand won for a year. (32.8 billion won per year)
A measure to deduct any debt occurring due to a monthly/long-term housing rent price increase even if the increase remains within the limit will be implemented.
In another words, if any debt is incurred due to a rise in monthly/long-term housing rent prices for the same house(within the same address), the debt portion will be deducted from the increase of the rent price and then, the rest will be reflected into the insurance premium.
However, debts that can be officially verifiable only* will be acknowledged and in the case of any personal debts between private individuals, those that have a ruling or reconciliation protocol will be accepted.
* Loans from financial institutions, loans from non-financial institutions (local governments, LH, etc), and loans from benefit societies (Military Mutual Aid Association, etc), etc
Along with this, a 3 million won basic deduction plan will be adopted for monthly/long-term housing rent prices, further easing the burden of insurance premiums for monthly/long-term housing rent prices.
* Basic deduction plan: Impose insurance premiums after deducting a certain amount of monthly/long-term housing rent prices e.g.; if a deposit is 18 million won, 15 million won will be acknowledged after 3 million won is deducted.
Upon implementation of the above plan, about 1.03 million households living in monthly/long-term rental houses will get to pay premiums 4 thousand won less a month each (54.6 billion won per year).
In the meantime, the application of the imposition standards for monthly/long-term housing rent prices surveyed in last Sep. has been put on hold considering the burden on the vulnerable class resulting from the recent drastic rise in monthly/long-term housing rent prices.
* The insurance premiums concerning the monthly/long-term housing rent prices are being imposed according to the imposition standards surveyed in Mar. and Sep. every year.
When the new imposition standards are adopted in next April, the burden caused by an increase in monthly/long-term housing rent prices is anticipated to be alleviated since the ceiling and the debt deduction will be applied.
By looking at ways to rationalize the insurance premium imposition standard such as changing the standard from the displacement volume-based standard of which irrationality has been pointed out to the car price-based one;
the insurance premium burden regarding the car will be alleviated step-by-step.
Future Plan
Currently, a revision of the law regarding the imposition of the health insurance premium on consolidated incomes such as high-end lease business and other types of high-end businesses, etc is still pending at the National Assembly and when passed at the regular session of the National Assembly this time, it will be able to be implemented from Sep. next year.
The plan of incorporating consolidated incomes in addition to business and financial incomes into conditions for the dependent will be executed after the related regulation is revised (notice) in the second half of next year.
The application of the ceiling for monthly/long-term housing rent prices and debts and the introduction of the basic deduction plan will be implemented in the first half of next year after the related law(enforcement decree) is revised and working-level preparations are made.
However, the rationalization of the insurance premium imposition standards and the alleviation of the insurance burden concerning the car will be carried out after in-depth reviews such as an impact on the health insurance finances, etc.
[ENG] Health Insurance Premium Imposition Standards will be improved taking in account of Individuals’ Ability to Pay.docx