"Concerns Over 17% Increase in Health Insurance Premiums"... '4th Extension' of Government Subsidy Set to Expire

Ruling Party: "Extend Sunset Clause First, Discuss Later"
Opposition: "Consider Aging Population... Provide Permanent Support"

[Asia Economy Reporter Kim Young-won] "Health insurance has a next year's budget of about 11 trillion won allocated, so there is room to spare." (Kim Mi-ae, Floor Spokesperson of the People Power Party)

"Although the budget is allocated, if the law sunsets, there remains the problem that the legal basis for execution is not clear." (Kang Hoon-sik, Member of the Democratic Party of Korea)

"To maintain the current level of coverage after the sunset of national treasury support for health insurance, the subscribers' health insurance premiums would need to be increased by about 17.6%." (National Health Insurance Service Union)

The ruling and opposition parties, along with employees of the National Health Insurance Service, are envisioning different futures over a single bill. The protagonist is the health insurance national treasury support bill, which is three days away from sunset. Since the ruling and opposition parties have not narrowed their differences over 'sunset extension' and 'sunset abolition,' the bill was not processed in this year's last plenary session, and discussions on the bill are expected to resume after the new year following the sunset.

According to the National Assembly on the 29th, nine amendment bills to the National Health Insurance Act and the National Health Promotion Act, which stipulate national treasury support for health insurance, are currently pending in the 2nd Subcommittee on Bills of the Health and Welfare Committee.

National treasury support for health insurance has undergone four sunset extensions since the enactment of the five-year temporary 'Special Act on Health Insurance Financial Soundness' in May 2002, the government's temporary support stipulated in the National Health Insurance Act in 2007, and extensions during 2012-2016, 2017, and 2018-2022.

According to the National Health Insurance Act, the general account supports health insurance with 14% of the expected insurance premium revenue for the year, and up to 6% from the health promotion fund borne by tobacco businesses under the National Health Promotion Act, totaling 20% of the expected revenue from national finances. A sunset clause applies, which means that if the law is not amended by the end of this month, national treasury support for health insurance premiums will end.

[Image source=Yonhap News]

Ruling Party: "Extend 5 Years as Is" vs Opposition: "Low Birthrate and Aging... Support Should Be Permanent"

The leadership of both parties agreed on the budget for next year in the early hours of the 24th plenary session and agreed to process the health insurance national treasury support sunset law in the plenary session the day before, but they failed to narrow their positions. Both the ruling and opposition parties agree that national treasury support for health insurance is immediately necessary. However, they are divided over whether to make the temporary national treasury support permanent or to extend it temporarily again.

The Ministry of Health and Welfare, the Ministry of Economy and Finance, and the ruling People Power Party emphasized extending the sunset. Considering the deficit occurring in other general accounts, fairness issues, and the characteristics of health insurance, which is not subject to spending regulations, their position is to extend first and continue discussions on amendments later.

At the Health and Welfare Committee's bill subcommittee on the 6th, the Ministry of Economy and Finance stated, "If the national treasury support rate linked to insurance premium revenue is legalized as it is now, there is a concern that government financial support for insurance spending will increase rapidly without any external control over insurance spending," adding, "Also, in a situation where national finances are operating at a deficit, supporting health insurance finances at a fixed rate may cause inefficient financial management where reserves accumulate in health insurance while the general national finances run deficits."

Minister of Health and Welfare Cho Kyu-hong also said at a press briefing on the 19th, "A 5-year extension is desirable," and added, "The government is promoting efficiency and structural reform measures for health insurance spending, and discussing national treasury support before these measures come out is not efficient."

The opposition Democratic Party argues that given the current situation of accelerating low birthrate and aging, and the need to strengthen coverage such as essential medical care, permanent national treasury support for health insurance is necessary. Democratic Party members of the Health and Welfare Committee held a press conference that day, stating, "Although insurance financial expenditures are expected to increase due to aging and demands for expanded coverage, considering the burden on citizens' insurance premiums, it is difficult to raise premium rates as fast as health insurance spending increases. This is an important issue directly related to citizens' health rights and medical welfare beyond a simple health insurance financial stability problem," and urged, "We ask the government and ruling party to actively participate in discussions to abolish the sunset clause."

The opposition also argues that the vague wording of "expected revenue" as the standard for financial support in the bill needs correction. Kang Hoon-sik, the Democratic Party's floor whip in the Health and Welfare Committee, pointed out, "So far, the Ministry of Economy and Finance has used the ambiguity of the regulation as an excuse to under-support below the statutory rate through the trick of underestimating expected insurance premium revenue, which has become a practice." The government support ratio compared to health insurance premium revenue over the past five years was 13.2% in 2018, 13.2% in 2019, 14.8% in 2020, 13.8% in 2021, and 14.4% this year, failing to exceed 15%.

Floor Leadership Likely to Continue Negotiations Next Year

The possibility of processing the health insurance-related sunset bill this year seems low. The plenary session the day before did not process any sunset bills, and the ruling and opposition parties are focusing on a power struggle over sunset clauses related to additional extended work hours and the safe freight system.

The ruling party has repeatedly emphasized that the health insurance law is "not urgent." Floor leader Joo Ho-young said at a party meeting, "Today (the 28th) will likely be the last plenary session of this year. We will continue to consult with the Democratic Party on the sunset law after today," and regarding the possibility of a plenary session on the 30th, he said, "I think the possibility is low." On the 27th, Floor Leader Joo also said, "Government support for health insurance is not something that cannot be provided just because the law does not exist, and since there is time, even if there is a sunset, if an agreement is reached later, a law can be made to support it again."

The opposition also sees it as difficult to process the bill within this year. Kang said in a phone interview with this paper, "Since the plenary session is the last one, I think it is difficult this year, but the leadership is saying that they want a decision to be made."

[Image source=Yonhap News]

Will Health Insurance Premiums Rise if the Law Sunsets?

Concerns have arisen that if the national treasury support, which accounts for about 15% of health insurance finances, ends, health insurance premiums will rise, and the burden will fall on citizens. The National Health Insurance Service Union predicted, "If the bill sunsets and the current level of coverage is maintained, premiums will need to be increased by 17.6%."

Kang said that since the government budget for next year's national treasury support has been prepared, there will be no premium increase. He said, "Some raise concerns that if a conclusion is not reached within this year, next year's national treasury support will disappear, leading to a surge in subscribers' premiums, but this is not true," adding, "The budget of 10.97 trillion won is allocated in next year's budget, so a premium surge will not occur immediately." However, he added, "There remains the problem that the legal basis for budget allocation and execution is not clear."

However, there is also an observation that the 'lack of legal basis' could ultimately cause instability in health insurance finances. Park Min-soo, Deputy Minister of Health and Welfare, explained at the bill subcommittee, "Practically speaking, if the law is absent, (according to internal regulations of the Ministry of Economy and Finance) budget allocation will not be made. Operations can be managed with insurance premium revenue until the first half of the year, but financial management will be unstable," and emphasized that the sunset should be extended first and then discussions on the amendment bill should continue.

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