Health Insurance Premium Relief for Renters Under Consideration
Health insurance authorities in South Korea are reportedly considering a reduction in health insurance premiums levied on monthly rent. This move aims to ease the financial burden on local subscribers who are already grappling with property-related insurance costs.
According to sources within the health insurance authorities, a plan is being developed to relax the criteria for imposing property insurance premiums on rent deposits for local subscribers. The current system, based on the Income Tax Act, does not tax “jeonse” deposits (a lump-sum deposit for a lease). However, these deposits are still subject to insurance premiums, a measure designed to ensure equitable distribution of the health insurance burden among all subscribers.
This has led to complaints that this practice is unfair since, while “jeonse” deposits are treated as property, monthly rent is categorized as a cost, not property.
Experts are now suggesting that it might be time to address this. A gradual reduction and eventual elimination of the portion of property used to calculate health insurance premiums is proposed, especially when the government already has access to most income data. The initial step, according to these experts, should be to exclude the monthly rent of local subscribers from the scope of health insurance premiums altogether.
South Korea’s approach to property taxation for health insurance is unique. As a result, critics suggest that Korea should follow other countries with a different health insurance system or decrease property insurance premiums as they are in Japan, a country where this is more prevalent. Only Korea and Japan levy property-based health insurance premiums.
Korea’s system for calculating premiums is twofold. For employees, premiums are calculated based on their income. However, local subscribers, who are typically self-employed or freelancers, are charged premiums based on both their income and property (including monthly rent), using a per-point unit price for calculation.
The rationale behind including property in the calculation for local subscribers is the difference in income structures and identification rates between employees and this group. Self-employed individuals often report their income and expenses directly to the National Tax Service. As a result, it is relatively easier for them to underreport income, thus lowering the income identification rate.
To mitigate this, the health insurance authorities have also used automobiles as a standard for estimating income. The existing dual-system for insurance premiums has undergone multiple revisions, yet its fundamental structure has remained constant, raising concerns about fairness and equity. Premiums are applied to the property of local subscribers independent of their income. Dependents of job subscribers, on the other hand, may receive free rides. The government has attempted to address these issues by basing health insurance premiums more on income.
Reforms have been implemented to address these issues. According to agreements between the ruling and opposition parties in the National Assembly, the first stage of the health insurance premium imposition system had been reorganized in July 2018. Following this, the government has gradually decreased both the property and automobile portions of health insurance premiums for local subscribers. In February 2024, South Korea abolished premiums on cars for local subscribers, expanded the basic deduction when calculating rates on property and eased the burden of property insurance premiums by increasing the basic deduction from 50 million won to 100 million won.
These efforts have yielded results, with property insurance premiums for local subscribers decreasing steadily over the years: from 47.8% in 2020, 47.4% in 2021, 45.9% in 2022, 43.7% in 2023, to 31.5% in 2024. The ongoing adjustments signal a commitment to refining the health insurance system and providing better financial relief to its subscribers.
