The problem of affluent self-employed people free riding on the national health insurance system is well known. To avoid paying contributions commensurate with their large personal wealth, these people manage to put their names on company payrolls and register themselves as employees, whose contributions are computed solely based on their monthly wages.
To curb these practices, the National Health Insurance Corp. has begun to levy extra contributions on employees with income other than their monthly salaries.
A recent report from the Korea Development Institute shows that the free rider problem is not limited to wealthy self-employed people but is also serious among low-income people.
According to the report, some 5 million wage earners have registered themselves either as self-employed people or dependents to reduce their insurance contributions or pay no contribution at all.
As the contribution of a person in self-employment is computed based on his assets, such as property and vehicle, as well as his income, an employee with little property can lower his premium by posing as a self-employed person.
The report estimates that some 2.9 million wage earners have concealed their employment status to register themselves as self-employed people.
Another 2.1 million paid workers have disguised themselves as dependents of the employees insured to be completely exempt from premium payment.
The combined figure of 5 million amounts to 38 percent of the 13 million employees registered with the national health insurance scheme. This large pool of free riders puts a strain on the balance sheets of the NHIC.
The report notes that the NHIC would be able to convert many of these people into employees and have them pay full contributions ― if it is allowed to access data compiled by the National Tax Service.
The NTS has accumulated data that would help the NHIC find out the employment status of people who claim to be self-employed or dependents. The tax office needs to share its data with the NHIC.
It would be even better if the NTS collects health insurance premiums for the NHIC. In January last year, the NHIC was designated as the collector of the contributions to the nation’s four social security programs ― the national health insurance, national pension, industrial accident compensation insurance and unemployment insurance.
But the NHIC does not have the manpower to tackle the free rider problem. This can be illustrated by the fact that it does not even have income data for 56 percent of the 7.9 million self-employed people and their families.
