Approximately 230,000 self-employed business owners are paying health insurance premiums based on their highest-paid employees’ salaries, even when their own incomes are lower. (Image courtesy of Yonhap)
SEOUL, Sept. 30 (Korea Bizwire) – A recent analysis of South Korea’s health insurance system has revealed a significant disparity affecting many self-employed individuals.
According to data from the National Health Insurance Service, approximately 230,000 self-employed business owners are paying health insurance premiums based on their highest-paid employees’ salaries, even when their own incomes are lower.
Democratic Party lawmaker Huh Seong-moo presented these findings on September 29, drawing from figures released by the National Health Insurance Service.
The data shows that out of 971,000 individual businesses subject to year-end tax adjustments in 2022, 212,000 establishments had their health insurance premiums calculated based on their highest-paid employee’s compensation.
This policy affected 227,000 self-employed individuals who reported lower incomes than their employees.
The financial implications of this policy are notable. Collectively, these self-employed business owners paid 222.29 billion won in health insurance premiums, which is 1.8 times higher than the 124.3 billion won they would have paid based on their reported incomes.
On average, each affected individual paid an additional 431,000 won annually.
This situation arises from a provision in the National Health Insurance Act’s enforcement decree.
When a business owner’s monthly compensation is lower than that of their employees, the premium is calculated based on the highest-paid employee’s salary.
The rationale behind this rule is complex, but its effects on small business owners are becoming increasingly apparent.
The issue has not gone unnoticed by policymakers. In late 2022, the regulation was partially amended to address extreme cases.
Self-employed individuals with no business income or operating at a loss are now only required to pay the “average premium” of their employees.
However, for those with any positive income, the “highest compensation” rule still applies, leaving many self-employed individuals with higher premiums than they might expect based on their income.
M. H. Lee (mhlee@koreabizwire.com)
