From September, 'Income-Centered' National Health Insurance Phase 2 Reform... 65% of Regional Subscribers to Receive Premium Reduction

Approval of the Amendment to the Enforcement Decree of the Health Insurance Act at the Cabinet Meeting
Reduced Insurance Premiums on Property and Cars for Regional Subscribers
Dependents Excluded if Annual Income Exceeds 20 Million Won

[Asia Economy Reporter Jo In-kyung] The second phase of the health insurance contribution system reform, focusing on income, will be implemented as scheduled from the 1st of next month.

On the 30th, the government announced that it had approved the revision of the Enforcement Decree of the Health Insurance Act at the Cabinet meeting, which includes reducing health insurance premiums imposed on the property and automobiles of regional subscribers such as sole proprietors, daily workers, special employment workers, and retirees, and introducing a flat-rate income system.

According to the revision of the enforcement decree, the insurance premiums imposed on the property and automobiles of regional health insurance subscribers will decrease, resulting in an average monthly reduction of 36,000 KRW in health insurance premiums for 5.61 million households (9.92 million people), accounting for 65% of regional subscribers.

This reform will not affect most workplace subscribers, but the insurance premium burden will increase for high-income workplace subscribers with substantial income beyond their salary. Additionally, 180,000 households of dependents with payment ability will be reclassified as regional subscribers and required to pay premiums. The premiums affected by the reform will be notified from the 26th of next month.

Lee Ki-il, the 2nd Vice Minister of the Ministry of Health and Welfare, said, "This reform of the health insurance premium contribution system is expected to significantly help regional subscribers such as self-employed and small business owners who are struggling due to inflation and COVID-19," adding, "We will continue to improve the health insurance premiums to be more income-centered to enhance fairness and equity in premium burdens."

Regional Subscribers Receive a Uniform Deduction of 50 Million KRW in Property... Insurance Premiums Increase for High Pension Income Earners

Previously, regional subscribers received deductions ranging from 5 million to 13.5 million KRW depending on the level of their owned property such as houses and land, but from next month, a uniform deduction of 50 million KRW will be applied to property tax bases. As a result, 37.1% of regional subscribers who pay property insurance premiums will no longer have to pay these premiums. The proportion of households paying property insurance premiums among all regional subscribers will decrease from 60.8% to 38.3%.

The average property insurance premium for all regional subscribers will decrease from 51,000 KRW per household per month to 38,000 KRW, resulting in an overall annual reduction effect of approximately 1.28 trillion KRW.

The income insurance premium for regional subscribers will change from a graded system to a flat-rate system. Starting in September, a certain percentage of income will be charged as insurance premiums, similar to workplace subscribers. Regional subscribers were previously divided into 97 grades for premium calculation, but this system was criticized for being regressive as low-income groups faced relatively higher premium rates.

Automobile insurance premiums will only be imposed on vehicles valued over 40 million KRW, reducing the number of vehicles subject to automobile insurance premiums from 1.79 million to 120,000.

The proportion of pension income reflected in insurance premiums will also increase, raising the premium burden for some retirees. For regional subscribers, only 30% of public pension income (National, Government Employee, Private School, Military pensions) and temporary labor income were previously considered when calculating income insurance premiums; this will be expanded to 50%. Consequently, 4.2% of pension income holders (those with annual pension income over 41 million KRW) will pay higher premiums.

The minimum insurance premium for low-income regional subscribers will be expanded in scope while increasing the premium amount. Previously, low-income individuals earning less than 1 million KRW annually paid only a fixed 'minimum insurance premium' of 14,650 KRW, but from next month, the minimum insurance premium will apply to a broader group earning less than 3.36 million KRW annually.

The minimum insurance premium will be raised to 19,500 KRW, aligned with the minimum premium for workplace subscribers. However, to prevent sudden increases in burden, the full amount of the increase will be reduced for two years, and thereafter, 50% of the increase will be reduced for another two years.

Workplace Employees with Over 20 Million KRW in Non-Salary Income Pay Additional Premiums... Dependent Income Criteria Lowered

Even after this reform, 98% of workplace subscribers will see no change in their premiums, but those with high financial or rental income beyond their salary will have to pay more. Previously, additional 'income monthly insurance premiums' were charged if non-salary income exceeded 34 million KRW annually, but this threshold has been lowered to 20 million KRW.

Additionally, dependents with combined taxable income of 20 million KRW or more annually will be reclassified as regional subscribers and required to pay premiums. The dependent system allows family members registered as dependents under workplace subscribers to be exempt from paying health insurance premiums. The previous threshold before the reform was 34 million KRW annually. As a result, 273,000 people, accounting for 1.5% of existing dependents, will be reclassified as regional subscribers.

However, to mitigate the impact, premiums for dependents newly reclassified as regional subscribers will be reduced by 80% in the first year, 60% in the second year, 40% in the third year, and 20% in the fourth year. The property requirement for dependents remains unchanged at a property tax base of 360 million KRW.

This reform is expected to reduce annual health insurance premium revenue by about 2 trillion KRW. The Ministry of Health and Welfare explained, "Since this reform has been planned since 2017, it can be implemented within the predicted financial scope based on previous financial forecasts and health insurance financial management."

This content was produced with the assistance of AI translation services.