The South Korean government and the People Power Party have jointly decided to implement a reduction in health insurance premiums for local subscribers who own houses and cars, with the changes set to take effect as early as February. Under this decision, the health insurance premium for 37 percent of local subscribers is expected to decrease by 25,000 won per month, providing relief to retirees who previously faced high insurance costs despite having no income.
However, the implementation of this new policy, announced just three months before the general election, raises concerns about depleting the government’s health insurance reserve at an accelerated pace.
The collaborative decision involves eliminating the portion of the health insurance premium linked to the engine displacement and years of use for cars owned by local subscribers, provided the cars are valued at over 40 million won. Furthermore, the criteria for property health insurance premiums, charged based on the value of houses, have doubled. This means that local subscribers with houses valued below 240 million won will be exempt from property premium payments. Approximately 3.53 million households currently pay automobile and property health insurance premiums, and as a result of the new policy, around 3.33 million households will experience an average annual reduction of 300,000 won in health insurance premiums.
In contrast to employee-insured individuals, whose health insurance premiums are solely income-based, 9.1 million households, encompassing 14.63 million people insured locally, have been subject to additional health insurance premiums based on car and property ownership. The introduction of this policy aimed to address criticism regarding the difficulty of identifying the income of the self-employed and the perceived unfairness of individuals with wealth paying lower health insurance premiums due to the absence of income criteria.
Nevertheless, a significant concern arises as the reduction in local health insurance premium revenue is estimated at one trillion won per year. Projected to be 98.8 trillion won this year, health insurance premium revenue faces expected expenses of 100.2 trillion won. With the aging population contributing to increased medical expenses for seniors, the current reserve of 23.8 trillion won is anticipated to be depleted in four years, resulting in a deficit.
While the government has suggested boosting revenue by enhancing expense efficiency, skepticism remains as other financial demands persist. The government’s proposal for nursing fees at the end of last year required an additional expenditure of 10.7 trillion won from health insurance and long-term nursing insurance over the next four years. This raises the possibility of arguments favoring a significant increase in health insurance premiums, currently at 7.09 percent, in the coming years to prevent reserve depletion. To address these concerns, the government is urged to transparently disclose the short-term and long-term impacts of the new policy on health insurance finance and subject it to public review.
