South Korea's health insurance authorities are moving to recalculate premiums each year based on actual income for individually insured subscribers (those not covered through a workplace) and salaried workers with income beyond their wages. According to the National Health Insurance Service's report to the National Assembly's parliamentary audit on the 20th, the authorities plan to introduce an income settlement system covering all subscribers to improve fairness and equity in premium burdens. By having administrative agencies verify income directly and settle accounts accordingly, the plan aims to block premium avoidance that arises when subscribers choose whether to settle. Once the new system takes effect, 3.94 million individually insured households are estimated to pay an additional 3.29 trillion won ($2.3 billion) in premiums, while 2.32 million households would receive refunds totaling 1.80 trillion won ($1.3 billion). That amounts to an extra 1.49 trillion won ($1.0 billion) in premiums collected annually.
Last month, the government froze next year's premium rate at 7.19% despite deep concerns about the depletion of health insurance finances. It said the finances were "stable," citing five years of surpluses and rising revenue from the semiconductor boom. But effectively raising the premium burden now is evidence that warning lights are flashing over the insurance fund. The National Assembly Budget Office has projected that health insurance finances will swing back into deficit this year for the first time in six years, with reserves running out by 2031. The structural cause is that the working-age population paying premiums is shrinking because of low birth rates and population aging, while the number of older adults surges and demand for medical care grows. The aftereffects of "Moon Jae-in Care," which sharply expanded health insurance coverage, and spending tied to measures addressing the doctors' strike have also worsened the finances. At this pace, the debt ratio for health insurance operations is expected to climb from 71.2% this year to 107.4% by 2030.
The latest step moves in the right direction for shoring up health insurance finances and improving equity among subscribers. But with spending increases unavoidable going forward, squeezing only the public's pockets cannot be a fundamental solution to the fiscal crisis. Raising subscribers' burdens while leaving sources of waste untouched will only deepen public resistance. Spending restructuring must proceed in parallel to plug the money leaking away through excessive testing, duplicate treatment and prescriptions, and improper billing. Structural reform of the broader medical system must also follow, including improving a medical environment that invites moral hazard while strengthening essential care.