Fact-Checking the ‘Abolition of the Property Grading System’ for Self-Employed Health Insurance and the Current Calculation Structure

An explanation has been circulating that health insurance premiums for self-employed insured persons are “shifting to a flat-rate system after abolishing the property grade system for the first time in 50 years.” However, under current laws and regulations, this wording confuses the 2024 reform with the structure used to calculate property-based premiums.

The key changes actually implemented were the expansion of the basic property deduction and the abolition of automobile premiums. Property-based premiums are still calculated by converting the property amount remaining after the deduction into points based on brackets.

Fact Check at a Glance

Was the Property Grade System Actually Abolished?

No. At least under the current calculation structure of the Enforcement Decree of the National Health Insurance Act, it is difficult to describe the change as a “complete abolition of the property grade system.”

The monthly premiums for self-employed insured persons broadly consist of the following elements:

1. Premiums assessed on income
2. Premiums assessed on property
3. Provisions concerning minimum premiums that may apply to households with very low income
4. Separate long-term care insurance premiums calculated based on health insurance premiums

Property-based premiums are based on factors such as the property tax assessment base for land, buildings, and housing, as well as the assessed value of rental housing deposits and monthly rent. After applying the statutory basic deduction, the remaining amount is matched to a bracket in the property premium assessment point table, and the premium is calculated by multiplying the applicable points by the amount per point.

Therefore, the structure does not directly apply a single premium rate to the entire property value. The explanation that the system “shifted to a flat-rate system after abolishing the grade system” may confuse the 2022 shift to a flat-rate income assessment system with the property assessment system.

Why the Example That KRW 200 Million and KRW 2 Billion Fall into the Same Grade Is Inaccurate

Property is not divided into only a few broad grades. The table attached to the Enforcement Decree divides the property amount after deductions into multiple brackets and assigns points to each. An example suggesting that two people whose property differs tenfold will always receive the same property points is an exaggerated explanation that does not reflect the current point table.

However, under a bracket-based point system, different property amounts within the same bracket may receive the same points. It is therefore true that discussions continue regarding discontinuities at bracket thresholds and the fairness of property assessments.

What Actually Changed in 2024

KRW 100 Million Basic Property Deduction

Beginning with premiums for February 2024, the basic deduction for property-based premiums for self-employed insured persons was increased from KRW 50 million to KRW 100 million. Here, “KRW 100 million” is not an amount automatically deducted from the sale price of a home. It is deducted from the statutory property amount, such as the property tax assessment base, used to calculate health insurance premiums.

For example, even for homes with the same market value, the health insurance premium calculation may differ depending on the property tax assessment base, ownership share, and whether other property is owned. If no property amount remains after the deduction, no property-based premium may be assessed, but this does not automatically eliminate income-based premiums or minimum premiums.

Abolition of Automobile Premiums

Beginning with premiums for February 2024, health insurance premiums assessed on self-employed insured persons for owning an automobile were abolished. This reform did not merely ease some automobile-related assessment criteria; it eliminated the automobile premium category itself.

Even after automobile premiums were eliminated, premiums based on income from business, employment, pensions, interest, dividends, and other sources, as well as property, are calculated separately.

What Changed and What Did Not

How Property-Based Premiums for Self-Employed Insured Persons Are Calculated

Conceptually, property-based premiums are calculated in the following order:

1. Identify the property subject to premium assessment.
2. Calculate statutory base amounts, including the property tax assessment base and the assessed value of rental deposits and monthly rent.
3. Apply the KRW 100 million basic deduction to the household’s property amount.
4. Find the property premium assessment points corresponding to the amount after the deduction.
5. Multiply the property points by the amount per point for the applicable year.
6. Add the income-based premium and apply relevant provisions, including upper and lower limits.
7. Add the separate long-term care insurance premium to calculate the actual billed amount.

Because premium rates and the amount per point may change by year, standards from the same year must be used when comparing past billed amounts.

Market Value and the Tax Assessment Base Are Different

A home with a market value of KRW 300 million is not entered as KRW 300 million directly into the health insurance premium calculation. Property-based premiums are based on the property tax assessment base and other amounts prescribed by law, so the following figures must be distinguished:

• Actual sale price or market value
• Officially assessed value
• Property tax assessment base under the Local Tax Act
• Property amount reflected in the health insurance premium calculation
• Property amount after applying the basic deduction

When reviewing a billed amount, judging that the premium is incorrect based only on market value may lead to errors.

Income Reporting Lag and the Adjustment and Reconciliation System

Income data confirmed by the National Tax Service and other agencies is used to calculate income-based premiums for self-employed insured persons. Because income goes through reporting and confirmation procedures, current monthly income is not automatically reflected in premiums in real time.

If retirement, business suspension, business closure, or an income reduction occurs, an insured person may apply to the National Health Insurance Service for a premium adjustment by meeting certain requirements and submitting supporting documentation. Once finalized income is subsequently confirmed, the premiums for the adjusted period may be recalculated, resulting in either an additional payment or a refund of the difference.

What to Know Before Applying for an Adjustment

• Submitting an application alone does not guarantee a premium reduction.
• The income covered and application requirements may differ depending on the cause and timing.
• If finalized income is higher than the income estimated at the time of adjustment, additional premiums may be assessed later.
• If finalized income is lower, a refund may be issued during reconciliation.
• Documentation proving the reason, such as a certificate of retirement, certificate of business closure, or certificate of income amount, may be required.

Therefore, rather than saying that “the income reporting lag has disappeared,” it is more accurate to understand that a mechanism is available to adjust for changes in income before it is finalized and later reconcile premiums based on the actual finalized income.

Will My Health Insurance Premium Decrease?

With the expansion of the basic property deduction and the abolition of automobile premiums, households that previously paid these components may see their premiums decrease if all other conditions remain the same. However, the total billed amount will not necessarily decrease in the following situations:

If the billed amount changes, compare not only the total but also the income and property components on the bill, as well as the long-term care insurance premium, to identify the cause.

Check Estimated Premiums With the Official Calculator

The National Health Insurance Service’s official premium calculator is a reference tool that estimates premiums for self-employed insured persons based on the income and property entered. The actual assessed amount may differ depending on the taxation data held by the Service, household composition, adjustment history, and applicable year.

It is advisable to prepare the following information before using the calculator:

• Annual income from business, employment, pensions, interest, dividends, and other sources
• Property tax assessment bases for land, buildings, housing, and other property
• Rental housing deposits and monthly rent
• Income and property assessment details shown on the current bill

What to Check When the Bill Differs From Expectations

1. Check whether the insured status and household composition are correct.
2. Check which year’s income data was used as the basis for the premium.
3. Verify that the tax assessment base, rather than the property’s market value, was accurately reflected.
4. Check whether the KRW 100 million basic property deduction was applied.
5. Check that no automobile premium category remains.
6. If there is a reason for reduced income, such as business closure, business suspension, or retirement, ask whether an adjustment application is available.
7. If an error is suspected, contact the National Health Insurance Service with the bill and supporting documentation and request verification.

Key Takeaways

Reforms to reduce the property-based premium burden on self-employed insured persons have indeed been implemented, but it is inaccurate to describe them as the “complete abolition of the property grade system and the introduction of a flat-rate system.” The key features of the current structure are as follows:

• The basic property deduction was increased to KRW 100 million beginning with premiums for February 2024.
• Automobile premiums for self-employed insured persons were abolished.
• Property-based premiums continue to use a structure that converts the amount after deductions into points by bracket.
• A current reduction in income does not automatically result in an immediate premium reduction.
• If income has decreased, both the application requirements for the adjustment and reconciliation system and the possibility of subsequent reconciliation should be checked.

Even if further reforms to property-based premiums are announced, the government’s policy direction, advance legislative notice, amendment of laws and regulations, and actual effective date must be distinguished from one another. It is safest to determine whether a change directly affects premiums based on whether the National Health Insurance Act and its Enforcement Decree have taken effect.