Behind the push by South Korea's health insurance authorities to introduce a nationwide income settlement system lies a steadily worsening financial position. Spending is rising as the population ages and medical costs climb, but premium rate increases are being held back out of concern for household budgets, while government subsidies have fallen short of the level required by law. The authorities aim to overhaul the current levy system, which fails to reflect changes in income, improving fairness while securing about 1.5 trillion won ($1.04 billion) in additional annual revenue.
According to documents the National Health Insurance Service (NHIS) submitted to the National Assembly on the 20th and its 2026-2030 medium- to long-term financial management plan, the agency's overall operating loss is projected to reach 6.9161 trillion won this year. A loss of 3.9714 trillion won is expected next year, followed by 4.2971 trillion won in 2028, 3.4415 trillion won in 2029 and 3.2932 trillion won in 2030 — losses in the trillions of won every year for the next five years.
The deterioration is pronounced in the health insurance business segment alone. Assets in the segment are expected to fall to 39.3503 trillion won in 2030 from 44.0234 trillion won this year, while insurance benefit provisions owed to medical institutions are projected to rise to 20.3753 trillion won from 18.3031 trillion won over the same period. As a result, the segment's debt ratio is expected to climb to 107.4% in 2030 from 71.2% this year, exceeding the 100% threshold the NHIS sets for its own management.
The problem is that spending pressures are mounting at a time when premium revenue is difficult to raise. In drawing up its medium- to long-term plan, the NHIS initially assumed the premium rate would rise 1.49% each year from 2027. The government, however, froze next year's health insurance premium rate at 7.19%, unchanged from this year, citing inflation and household burdens. Medical fees — the payments made to medical institutions for covered care — will rise an average of 1.65% next year, generating an estimated 1.2058 trillion won in additional spending. With medical costs for older adults surging as the population ages, the program's finances are being shaken.
Government subsidies have also fallen short of the statutory level. Current law requires the government to provide an amount equal to 20% of projected premium revenue from the general budget and the National Health Promotion Fund, but the actual rate averaged around 14% a year from 2016 through last year. The cumulative shortfall between the statutory standard and actual support totals 19.4531 trillion won. The subsidy rate in next year's budget proposal also stands at 14.4%.
Spending tied to medical reform has added to the strain, including about 3.1467 trillion won for emergency care operations, about 3.2514 trillion won for essential medical services and about 2.8695 trillion won for restructuring tertiary general hospitals. The NHIS estimates the health insurance program will post a current-account deficit of 2.8374 trillion won at the end of this year.
The authorities plan to cover the shortfall by expanding the income settlement system. Until now, income earned outside wages by both regional subscribers and workplace subscribers has not been subject to regular retroactive settlement, meaning changes in income were not reflected in premiums in a timely manner. The NHIS plans to address this by using confirmed income data from the National Tax Service to carry out settlements once a year on its own authority. Under the system, an additional 3.2911 trillion won would be collected from 3.94 million regional subscriber households, while 1.8014 trillion won would be refunded to 2.32 million households whose income declined. The net gain in revenue is estimated at 1.4897 trillion won a year.
Increases in the premium ceiling and floor are being pursued alongside the change. The documents submitted to the National Assembly call for raising the premium ceiling and gradually lifting the floor in line with the minimum wage, so that premiums are levied fairly in proportion to ability to pay. Under a plan the Ministry of Health and Welfare reported to a subcommittee of the Health Insurance Policy Deliberation Committee in July, the ceiling on premiums based on monthly wages for workplace subscribers would rise to 40 times the average premium from 30 times. That would raise the maximum monthly premium paid by a workplace subscriber to 6.12 million won from 4.59 million won. The maximum for regional subscribers would rise to the same level. The change was projected to apply to 7,060 workplace subscribers and 1,891 regional subscriber households.
The premium floor is also under review for an increase. The minimum monthly premium for workplace subscribers would rise to 22,260 won from 10,080 won, and for regional subscribers to 22,260 won from 20,160 won. An estimated 193,000 workplace subscribers and 4.86 million regional subscriber households would be affected. A phased approach was also proposed, applying only half the increase in 2027 and 2028 before full implementation from 2029, in consideration of low-income households.
One challenge is that the overhaul of the levy system could increase the burden on subscribers. In particular, some subscribers could face heavier costs if additional payments from income settlement coincide with a higher premium floor. A Health and Welfare Ministry official said several ideas are being reviewed to shore up the program's finances but nothing has been finalized, adding that any overhaul of the levy system must ultimately clear the Health Insurance Policy Deliberation Committee, which includes a range of stakeholders.
An official at the National Assembly Budget Office said that because the statutory level of government support is not being met in practice and the predictability of funding is low, efforts are needed to resolve the structural instability of government subsidies.