Previous Studies

Previous studies on the national health insurance contribution scheme have focused on reform scenarios i.e. policy reforms about how the current contribution scheme is to be changed. However, we aim to focus on the effects of changes in a reform scenario on redistribution and the finance of the health insurance, rather than the scenario itself. However, the effects can differ greatly depending on how a scenario is designed, which leads us to find it necessary to analyze scenarios first. Thus, we begin this chapter by reviewing previous studies on reform plans.

In response to the consolidation of the finance of the National Health Insurance in 2002, Choe Byeong-ho et al. (2001) raise the equity problem in the current contribution scheme and discuss improvement measures with the scope of their study limited to the self-employed insured. They suggest two alternatives. One way (Alternative 1) is to grant points to each factor like gender, age, income, property and automobile and, then, add all the granted points to assess the amount of contribution. And the other way (Alternative 2) is to assess the amount of contribution only based on income, property and automobile for those with a certain level of income or more and based on gender, age, property and automobile, instead of income, for those with less than a certain level of income. In their study, a comparison is made between the two alternatives and the current scheme, and they present the attendant changes in contribution. In a comparison between Alternative 1 and the current scheme, 82.48% of the

households with no income data is expected to pay less while 72.73% of the households with income data is expected to pay more. Also, to take a further look at the households with income data by income level, those with lower income are expected to experience the lowest increase in contribution.

In their research for the NHIS, Lee Yong-gap et al. (2006) suggest an income-centered, equitable contribution scheme plan. While income is selected as the contribution assessment factor, they include capital gain to reflect the payment ability based on property. Therefore, a person who has income (earned income and global income) pays the contribution in proportion to his or her income whereas for a person who has property yet no income, the amount of contribution is assessed in proportion to capital gain. And a person who has no income pays just the basic contribution (4,000~7,900 KRW.) As for minors under 19 years old, the authors claim that they are to be exempt from contribution because they are dependents. As for people who need social protection (seniors aged 65 or older or the disabled, etc.), they argue that a reduction in contribution or exemption should be considered.

In Lee Yong-gap et al. (2006), a transitional model is designed in consideration of the current conditions, and four scenarios are presented as per the rate of contribution and basic contribution. According to their simulation analysis, the contribution burden decreases for the households of the self-employed insured and the burden increases for the households of the employee insured by 17-19%

while the neutrality of the entire finance is maintained.

Their study marks the first to propose a specific idea on basic contribution.

Overall, the proposed alternative is income-centered yet partially considers property in that property-based contribution is imposed on the wealthy with a large amount of property while contribution assessment is based on income.

Of course, there remain concerns about a significant rise in contribution for the employee insured and the public’s acceptance of contribution assessment based on capital gain.

In Shin Young-seok el al. (2007) and Shin Young-seok (2011), a reform plan is divided into short-term and mid- to long-term tracks as part of a measure to secure the finance of the national health insurance. For the short-term, the research points out areas in which improvement can be made quickly under the current contribution scheme; for the mid- to long-term, it argued for an

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income-based, single contribution scheme. As for the short-term plan, the research proposes the strengthening of the criteria for dependent eligibility, the disqualification of a person with annuity or business/lease income of one million KRW or more as a dependent, the reorganization of the scheme of double contribution assessment regarding property and automobile, the abolishment of the 5 million KRW income criterion for the self-employed insured, the introduction of basic contribution, and a shift in assessment base from evaluated income to taxable income. And the mid- to long-term plan argues for an income- centered reorganization by adopting such measures as the change of employment status for those working at a workplace with one or more employees from the self-employed insured to the employee insured, the introduction of basic contribution (for 20% of the whole nation including farmers and fishermen, the low-income vulnerable class and self-employed small business owners) and the expansion of contribution assessment base to include incomes other than earned income.

In their research for the NHIS, Shin Hyeong-jun et al. (2008) present a follow-up study on policy measures to improvement equity in the contribution scheme. Instead of a complete reform, the study focuses on a partial reform to address certain unreasonable elements in the existing system, which includes the abolishment of the 5 million KRW income criterion for the self-employed insured, the introduction of basic contribution, and improvement of the employee insured’ dependent scheme. Shin et al. takes a reserved position about a complete shift toward an income-centered contribution scheme based on their analysis, which shows that the income estimation rate is only about 40% in the case of the self-employed insured (24% in the case of households with the income of 5 million KRW or less.) For this reason, they propose a scenario that abolishes the 5 million KRW income criterion for the self-employed insured (less than 5 million KRW for 84.2% of the self-employed insured and 5 million KRW or more for 15.8% of the self-employed insured), unifies the income grade system, replaces the points assigned according to gender and age in the contribution assessment based on the standard of living with the introduction of basic contribution based on age and assesses the amount of contribution by abolishing the existing redundancies, such as income, automobile and property, in the contribution assessment based on the standard of living. According to

the scenario, the contribution is assessed, instead, by multiplying total points (i.e. basic points + income points + property points + automobile points) by the amount per point.

In this study, Shin et al. conduct a simulation analysis on two models in which points are differently distributed among contribution assessment factors.

Thus, Model 1 is characterized by a high concentration of points in the property factor and Model 2 in the income factor. The result of analysis of Model 1 (a larger share of the property factor) indicates that 24% of the households would see an increase in their insurance contributions while 76% would pay less contribution. In the case of Model 2 (a larger share of the income factor), the result shows that 25% is expected to pay more and 75% to pay less, which indicates no significant difference between the two models.

As for research by Korea Employers Federation (2012), it is pointed out that the establishment of an equitable contribution scheme is a more urgent task rather than the consolidation of the different contribution schemes applied to the employee insured and the self-employed insured. Regarding a change to an income-centered contribution assessment scheme, they also argue there will be much weightier burden on the national treasury due to a loss arising from excluding property and automobile from the contribution assessment base for the self-employed insured as well as an already low rate of income estimation within the group. Still, their research stops short of coming up with a specific reform plan while proposing only the improvement of the unreasonable dependent scheme.

Ryu Geon-sik (2011) introduces 5 brief plans regarding the reform of the contribution scheme. In the first plan, he calls for the strengthening of income estimation measures on the self-employed insured and the reduction of contribution assessed based on housing and automobile. The second and third plans are related to the strengthening of dependent eligibility criteria (the exclusion of siblings and the disqualification of person with a certain amount of property.) The fourth one includes a phased expansion of the contribution assessment base for the employee insured from earned income to non-earned income (starting with annuity income.) And the fifth plan concerns a shift toward an income-centered contribution scheme regardless of employment status in the mid to long term.

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Shin Hyeon-woong (2015) narrows the problems of the current contribution scheme down to three: the inclusion of property and automobile in the contribution assessment on the self-employed; contribution assessment based only on earned income in the case of the employee insured; and lax eligibility criteria on the dependents of the employee insured. In that regard, he suggests limiting the assessment base to income while extending the object of contribution assessment to include non-earned income, and strengthening the dependent eligibility criteria.