Current State of the Contribution Scheme

In Korea, the national health insurance system was introduced in 1977, and universal healthcare was achieved in 1989. At the time of introduction, insurance contribution was imposed and levied on employees by each workplace association and on the self-employed by separate associations organized at Si/Gun/Gu level.

However, as the NHIS became a single insurer in July 2000, a single contribution assessment standard was needed. Initially, the government intended to consolidate the contribution scheme with an income-based standard, but the preexisting separate contribution schemes by employment status were maintained after all because a proper system was not in place to track down individual incomes.

Currently, the health insurance contribution scheme¹⁾ is largely divided into two parts: the employee insured and the self-employed insured. Looking at each part, however, the scheme can be divided, again, into several groups based on income. In the case of the employee insured, the contribution is imposed per each employee and calculated by multiplying the monthly salary by the rate of contribution (6.12% as of 2016), half of which (3.06%) is paid by the employer. Here, the calculation is based on the monthly salary reported in the

1) Refer to the “Introduction to the System” section in the NHIS homepage.

http://www.nhis.or.kr/menu/retriveMenuSet.xx?menuId=B2230 (Accessed 2016. 7.22.)

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previous year (business income in case of the employer), and the amount is settled based on the total amount of wages of the pertinent year reported after contribution is imposed. Contribution by the employee insured has upper and lower limits. If the monthly salary exceeds 78.1 million KRW, 78.1 million KRW (contribution: 4,779,729 KRW) is applied as the upper limit, and if the monthly salary is less than 0.28 million KRW, 0.28 million KRW (contribution:

17,136 KRW) is applied as the lower limit.

Starting from September 2012, if the income other than the wage of a wage earner exceeds 72 million KRW per year, the additional contribution has been imposed on the monthly income based on the income other than wage. The monthly income refers to the income of the employee insured excluding the wage included in the monthly wage, and it is calculated by dividing the sum of the interest income, dividend income, business income, earned income, annuity income and other incomes by 12. Here, the sum reflects 100% of the interest, dividend, business and other incomes and 20% of earned and annuity incomes.

For the rate of contribution, 3.06%, which is the rate borne by the employee, is applied on wage income. The rate of contribution for the monthly income does not have a lower limit, but the upper limit is the same as that of the monthly wage of 78.1 million KRW.

Contribution for the self-employed insured is imposed per household. The amount of contribution is assessed by calculating a household’s score based on the self-employed subscriber’s income, property, automobile, the standard of living, and labor force participation rate and multiplying the total score by the amount per point. Here, different contribution standards apply based on an annual income of 5 million KRW. For low-income class with an annual income of 5 million KRW or less, income assessment is based on the standard of living and labor force participation rate, and for the households with an annual income of more than 5 million KRW, taxable income is calculated based on global income (20% of wage and annuity incomes and 100% of interest, dividend, business and other incomes). The score for the standard of living and labor force participation rate are divided into 30 grades and taxable income into 75 grades.

As for property, which is included in the contribution assessment base regardless of annual income, the score is divided into 50 grades, and the object of contribution assessment includes housing, buildings, lands, ships, airplanes (100%

of the assessment standard property tax) and key-money lease/monthly rent (30%

of key-money lease/monthly rent). In the case of automobiles, the score is divided into 7 grades considering type, displacement volume and the years of use. As the self-employed insured have no employer who pays half of the contribution, unlike the employee insured, the whole contribution should be paid by households.

In the case of the self-employed insured, the minimum contribution is a monthly payment of 3,590 KRW with a score of 20 assessment points and the maximum contribution is a monthly payment of 2,277,330 KRW with 12,680 assessment points.

<Table II-1> presents changes in the rate of contribution for the monthly wage and monthly income of the employee insured and the amount of contribution paid by the self-employed insured per assessment point. As of 2016, the rate of contribution for the monthly wage of the employee insured is 6.12%

and that for the monthly income is 3.06%, half of the former, and the amount borne by the self-employed insured per point is 179.6 KRW.

〈Table II-1〉Changes in the Rate of Health Insurance Contribution for the Employee Insured and the Amount borne by the Self-Employed Insured per Point

(Unit: %, KRW) Rate of contribution for the employee insured Amount borne by the

self-employed insured per point Rate of contribution for

monthly salary

Rate of contribution for monthly income

2006 4.48 - 131.4

2007 4.77 - 139.9

2008 5.08 - 148.9

2009 5.08 - 148.9

2010 5.33 - 156.2

2011 5.64 - 165.4

2012 5.80 2.90 170.0

2013 5.89 2.95 172.7

2014 5.99 3.00 175.6

2015 6.07 3.04 178.0

2016 6.12 3.06 179.6

Source: NHIS, http://www.nhis.or.kr/menu/retriveMenuSet.xx?menuId=B2230 (Accessed 2016.7.22).

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<Table II-2> presents the current state of health insurance subscribers by employment status. The number of the employee insured is steadily increasing:

in 2005, the number of the employee insured was 27 million (57%) and the self-employed insured 20 million (43%); in 2014, the figures posted 36 million (71%) and 15 million (29%), respectively. This is because employees working at workplaces with fewer than five employees became eligible for the employee insured status as the criteria was eased in 2003; and currently, employees working at workplaces have just one or more full-time employees are classified as the employee insured. On the contrary, the rate of dependents of the employee insured decreased steadily from 64% in 2005 to 57% in 2014, which is can be attributed to the strengthened eligibility criteria for the dependent status during this period.

〈Table II-2〉Current State of the Employee Insured and the Self-Employed Insured

(Unit: 1 mil. people, 1 mil. households, %) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Health Insurance

Subscribers (A) 4,739 4,741 4,782 4,816 4,861 4,891 4,930 4,966 4,999 5,032

The employee

insured

Sub-total

(B) 2,723 2,845 2,942 3,042 3,141 3,238 3,326 3,411 3,501 3,560 Subscribers 975 1,042 1,117 1,162 1,215 1,276 1,340 1,399 1,461 1,514 Dependents

(C) 1,749 1,803 1,825 1,880 1,927 1,962 1,986 2,012 2,040 2,046 The

self-employed insured

Subscribers

(D) 2,016 1,896 1,840 1,774 1,720 1,652 1,604 1,556 1,498 1,471 (Number of

Households) 838 811 814 806 811 794 790 783 771 775

Percentage of the

Source: NHIS, ｢National Health Insurance Statistical Yearbook｣, Each year

<Table II-3> presents the contribution revenue by employment status. As of 2002, of the total contribution revenue of 11 trillion KRW, the contribution paid by the employee insured and the self-employed insured was 7 trillion KRW (63%) and 4 trillion KRW (37%), respectively. In 2014, however, the total revenue was 42 trillion KRW—34 trillion KRW (83%) paid by the employee insured and 7 trillion KRW (17%) by the self-employed insured—, which indicates that the contribution paid by the former group represented an absolute share. In other words, this shows that the finance of Korea’s national health insurance is highly dependent on contributions imposed on earned income.

〈Table II-3〉Insurance Contribution Revenue by Year

(Unit: KRW 100 million, %) Insurance Contribution Percentage of

contribution by the employee insured (B/A)

Percentage of contribution by the

self-employed insured (C/A) Total (A) The employee

insured (B)

The self-employed

insured (C)

2002 109,277 68,719 40,558 63 37

2003 137,409 91,684 45,725 67 33

2004 156,142 108,283 47,859 69 31

2005 169,277 121,209 48,068 72 28

2006 188,106 138,965 49,141 74 26

2007 217,287 163,485 53,802 75 25

2008 249,730 190,297 59,433 76 24

2009 261,661 202,377 59,284 77 23

2010 284,577 220,831 63,746 78 22

2011 329,221 261,416 67,806 79 21

2012 363,900 293,796 70,103 81 19

2013 390,319 318,751 71,568 82 18

2014 415,938 343,865 72,073 83 17

Note: 1. Based on settled amounts

2. Contribution paid by the employee insured and that by the self-employed insured are based on the assessed amount of contribution and the imposed amount of contribution, respectively.

3. National subsidy is excluded, and contribution paid by the employee insured includes voluntarily and continuously insured persons’ contribution and the monthly income-based contribution 4. Based on actual residence on resident registration

Source: NHIS, ｢National Health Insurance Statistical Yearbook｣, Each year

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