1. introduction: Structural contradictions and the need for adjustment in the health insurance fee system
korea's national health insurance system is recognized globally as a social security system that covers the entire population, but its charging system, especially the way premiums are calculated for local enrollees, has long suffered from a structural time lag. for employed members, premiums are withheld immediately in proportion to their actual monthly income (monthly remuneration), and the exact amount is determined through year-end settlement in April of the following year. however, for local enrollees (self-employed, freelancers, retirees, etc.), there is a significant gap between the time of income identification and the time of actual income generation.
every November, the KHIC calculates new premiums based on the previous year's imputed income tax return (filed with the National Tax Service in May or June of that year). this leads to the phenomenon that even if a person's income drops dramatically in 2024 or they go out of business and lose their financial ability, their health insurance premiums will be charged from November 2024 to October 2025 based on data from 2023, when their income was higher. this "staggered billing" results in excessive fixed cost burdens for those in financial difficulty, and the "health insurance fee adjustment application system" was introduced to address this issue.
this report analyzes in depth the mechanisms of the health insurance premium adjustment application system, which will be further elaborated and expanded starting in 2025, and the income settlement system, which will be mandatory after the September 2022 reform of the two-tiered levy system. in particular, it comprehensively covers the possibility of adjusting financial income (interest and dividends), which will be newly applicable from 2025, and the strategic responses of retirees, as well as the risk of additional payment (settlement) after applying for adjustment. readers will gain financial insight into how to legally and efficiently manage the quasi-tax-like fixed expenditure of health insurance premiums, beyond simply resolving premium complaints.
2. analyze the mechanism of health insurance premium calculation and the causes of lags
2.1. Deconstructing the elements of local health insurance premiums
local health insurance premiums are calculated based on three pillars: income, property, and automobile. after the reorganization of the second phase of the levy system in 2022, the proportion of the levy on cars was drastically reduced, but income and property (house, land, etc.) are still key variables in determining premiums. the issue here is when the "income" data is reflected.
the National Health Insurance Organization receives income data from the National Tax Service to determine premiums. the process follows this timeline
point in timeeconomic activity of the subscribernational Tax Service/Korea Health Insurance administrative procedureswhen premiums are reflected Year Y (January through December) income generated (labor, business, interest, etc.) - - May of Y+1 comprehensive income tax return file with the IRS - October, Y+1 - national Tax Service → Korea Health Insurance Service data notification - Y+1 November - public corporations: Start charging new premiums November, Y+1 ~ October, Y+2
as you can see from the table above, income earned in year Y is not reflected in health insurance premiums until November of year Y+1, which means there can be a lag of up to a year and 10 months or more. for example, a self-employed person who had a booming business in 2023 and earned a high income, but went out of business in early 2024, would receive a high bill in November 2024 that was based on their high income in 2023, even though they were already out of business. to resolve this structural inconsistency, it is essential that enrollees proactively demonstrate that "my income is different now than it was in the past."
2.2. Major Changes and Rate Freeze in 2025
the year 2025 is a year of both stability and change for the health insurance fee structure. first, in recognition of the financial burden on enrollees, the health insurance premium rate for 2025 was frozen at 7.09%, the same as in 2024. this is the second consecutive year of freezing, which is interpreted as a policy decision to ease the burden on households in the context of high inflation and high interest rates. the long-term care insurance premium rate was also frozen for the first time since 2017, at 0.9182% of income (12.95% of health insurance premiums).
however, the rate freeze does not mean that individuals will pay less. if your income or assets have increased, your payments will naturally increase. A key change is that starting in 2025, the range of income eligible for adjustments will be expanded. previously, changes in business or labor income (closure, layoffs, etc.) were the main reasons for adjustments, but from 2025, changes in financial income, such as interest and dividend income, will also be eligible for adjustment. this is a very important change for those living on asset income in retirement.
3. health insurance premium adjustment application system: a detailed guide to each type
there are two main types of health insurance premium adjustments: "cessation of earning activity" and "decrease in income". each situation requires different supporting documents and procedures, and it's important to understand them to avoid paying unnecessary premiums.
3.1. Businesses: closure and suspension
if a self-employed person goes out of business or takes a leave of absence, this is the most obvious reason for an adjustment, as it represents a complete cessation of earning activity.
required documents: Certificate of closure or certificate of suspension (can be issued by HomeTax or Government24)
procedure: Obtain these documents and submit them in person, by fax, or through the mobile app.
note: Your premium will be adjusted beginning the month following the month in which the closure date falls. however, if your business closes on the first of the month, it may be effective from the current month, so it's important to check the date.
3.2. Freelancers: harassment and reduced income
freelancers (gig workers) tend to have short-term contracts and irregular income. it's not uncommon for them to get a surprise when their income from past projects is reflected in their health insurance premiums.
key Document: Contract Termination Certificate
difficult toobtain: Freelancers often find it difficult to obtain a termination certificate because the company they worked for in the past has gone out of business or cannot be contacted. in this case, you need to request a 'fact check' from the National Health Insurance Service or actively prove that your income activity has ended, such as through bank deposits.
re-employment/re-opening: If a freelancer is re-employed or reopens a business in the same industry, the NIC will compare the previous year's income to the current average income in the industry and charge the lower amount to protect the member. 5 This is to avoid overburdening the business owner who is trying to start up again.
3.3. Workers: Switching to a local subscriber after retirement
if you leave your job and become a local subscriber, your premium will be calculated based on your total income in the previous year, rather than your income (remuneration) when you were an employed subscriber. if you submit a retirement certificate to prove that you are not currently earning income, you can exclude the premium charge for the earned income portion.
take advantage ofthe voluntary continuation program: If you find that your local premiums are much higher than they were when you were working, you can apply for a "voluntary continuation" program to pay the same premium as an employed member for up to 36 months. this is a separate option from applying for an adjustment and should be explored.
3.4. New for 2025: Financial Income (Interest and Dividends) Adjustment
the most notable change for 2025 is the adjustment for financial income. due to the recent craze for investing in high-interest savings products and dividend stocks, the number of cases where financial income exceeds KRW 10 million (for health insurance premiums) or KRW 20 million (for dependents) per year has increased dramatically.
case analysis: Retiree A received a temporary financial income of KRW 30 million in 2023 due to the redemption of an ELS product at maturity. as a result, he was disqualified as a dependent and converted to a local subscriber in November 2024, and was charged a monthly health insurance fee of KRW 200,000. however, in 2024, the financial income was reduced to KRW 5 million due to the decline in deposit rates.
adjustment mechanism: Previously, there was no immediate adjustment procedure for changes in financial income, but from 2025, if you prove a decrease in financial income at the current time through proof of the amount of income from the National Tax Service, it will be possible to reduce premiums or restore dependent status. 1 This means an expansion of income categories and will become an essential system for retirees who are managing their old age funds as well as wealthy people.
4. income settlement: a price of adjustment or a reasonable settlement?
introduced in September 2022, the Income Settlement System has completely changed the paradigm of applying for health insurance premium adjustments. in the past, you could apply for an adjustment to reduce your premium and that was it, but now, a process called "post-settlement" is mandatory. if you don't understand this, you may get hit with a "health insurance premium bomb" if you apply blindly.
4.1. Concept and background of the income settlement system
the income settlement system is a concept similar to the year-end settlement for employed subscribers. "You say your income has decreased, so we will reduce it (adjustment). however, if the actual income is confirmed by the National Tax Service later, we will recalculate and settle the difference."
why: In the past, there have been abusive cases of people claiming a decrease in income, applying for an adjustment, and receiving a premium reduction, only to have their income increase again and not be recognized. to prevent this and promote equity among members, the KSC introduced a post-verification process.
4.2. Settlement process and calculation method
application for adjustment (current year): member applies for adjustment claiming a decrease in income due to business closure, layoff, etc. premium is immediately reduced.
income verification (May/June of the following year): the subscriber files a comprehensive income tax return with the IRS.
post-settlement (November of the following year): organization verifies finalized income with the IRS.
actual income < adjusted income: Further reduction or retention (may result in a refund).
actual income > income applied in the adjustment: premiums that were reduced must be paid back (additional collection).
in one case, a customer received a refund of KRW 354,640 in premiums paid in 2023 because his income was found to be zero. in contrast warns of the risk of having to make additional payments due to higher than expected income.
4.3. Risks of the Settlement System and Cancellation Strategy (90-day Golden Time)
what if you applied for the adjustment in January, expecting to earn less in 2025, but you received a large unexpected profit in the second half of the year? If you leave it as it is, you will be charged a large settlement premium in November 2026.
this is where the "cancel adjustment" option comes in. you have 90 daysfrom the date you apply for an adjustment to cancel your application. by canceling, you'll continue to pay your premiums as usual and avoid the settlement bomb later. however, you can't cancel after the settlement premium has already been charged, and you can't selectively cancel one or the other because income adjustment and settlement work as a "set".
therefore, it's prudent for self-employed individuals and freelancers to monitor their revenue closely and consider canceling within 90 days if they see signs of a spike in income, or only apply if it's clear that their income will decrease in the first place (such as going out of business).
5. action Manual for the 2025 Health Insurance Rate Adjustment
5.1. Required Documents and How to Complete
the key to applying for an adjustment is evidence that is satisfactory to the Corporation. all documents must be issued within one month of the application date to be valid.
categoryrequired Documentsissuerremarks common income Settlement Agreement korea Health Insurance Corporation website/branch office
required 10
common copy of identification card - required for fax/in-person submission businesses proof of closure/discontinuance iRS Hometax, Government24 - workers retirement certificate, career certificate former employers - freelancer proof of hire contractor business stamp required other source of Income iRS HomeTax for verification of reduced income
the Income Reduction Agreementis a legal statement that you make when you apply for an adjustment that you "agree to have your premiums adjusted (additional charges or refunds) based on your future verified income." if this document is missing, your application will be rejected. the form can be downloaded from the "Documents" section of the KHIC website.
5.2. Application channels and methods
in person: this is the most reliable way to apply. you can visit the nearest KHIC office and talk to a representative before submitting your application to reduce the chance of rejection due to lack of documents.
submit via facsimile (FAX): if you can't make it to an office, find the fax number for your local office and send your documents via fax. an important tip is to call the office 10 minutes after sending the fax to confirm receipt. missed faxes often result in rejections.
mobile app/website: You can apply through the "The Health Insurance" app or the "Complaint Here" menu on the website. you can take a photo of your documents and upload them, so it's easy, but you need to check the status of your application from time to time.
5.3. Golden Time to Apply: Aim for the First of the Month
health insurance premiums are charged based on eligibility on the first of the month. so if you apply on February 2 and your application is processed on February 2, your premium for February will likely not be reduced and will start in March. on the other hand, if you apply and are processed on February 1, you'll be eligible for a reduction starting in February. therefore, it's best to file as early in the month as possible, but no later than mid-month, to save a full month's premium.
6. in-Depth Analysis: Adjustment Strategies for Different Types of Income and Dependent Issues
6.1. The cascading effect of financial income and dependent disqualification
the inclusion of financial income in the 2025 reconciliation expansion isn't just about reducing premiums, it's about maintaining dependent status. if your annual financial income (interest + dividends) exceeds 20 million won, you will be disqualified as a dependent and converted to a local subscriber. a problem that may arise at this time is the disqualification of married couples.
if one member of a couple loses their status as a dependent because they do not meet the income requirements (such as exceeding 20 million won per year), the spouse who does not earn any income will also lose their status as a dependent and become a local subscriber. this is because the health insurance system considers a married couple as an economic community.
therefore, for retirees who invest in dividend stocks, a key strategy to reduce health insurance premiums is to spread out the timing of dividend payments or utilize tax-free products (such as ISAs) to keep financial income below 20 million won per year. if you fall off the welfare rolls due to temporary income and then your income drops again, you should immediately file a dependent recapture claim to take advantage of the enhanced reconciliation regime from 2025.
6.2. Pension income and health insurance after retirement
only 50% of income from public pensions (national pension, public employee pension, etc.) is counted as income subject to the health insurance fee, but private pensions (pension savings, etc.) are not yet subject to the fee. however, if your pension income exceeds 20 million won per year, you will be disqualified as a dependent. to avoid the health insurance premium bomb in retirement, it is necessary to manage the annual amount of pension income by adjusting the amount on a monthly basis or delaying the timing of the payment.
7. conclusion and Recommendations: Shift to Active Managers
while the health insurance premium adjustment application system in 2025 provides a wider range of opportunities for enrollees, it also increases the responsibility of "earning it". it's time to take a more strategic approach by accurately predicting your income streams, rather than taking a "just apply and see" approach.
key takeaways and recommendations from the report:
understand the time lag: your current bill is a bill for past glory (or hardship). if your current situation is difficult, file for an adjustment immediately to "bring it current.
calculate settlement risk: if you expect a V-shaped rebound in income, hold off on filing for an adjustment or cancel within 90 days of filing to avoid a settlement bomb.
be meticulous with your paperwork: Get into the habit of getting and keeping certificates of good standing, business closure certificates, etc. as soon as you have them. over time, they may become impossible to obtain.
manageyour financial income: If your interest and dividend income is on the borderline of 20 million won, adjust your portfolio so that it is not subject to the health insurance fee.
utilize the system: take advantage of the frozen 2025 rates and expanded eligibility to avoid unnecessary spending and ensure your household finances are healthy.
health insurance premiums are not just a tax, they are an investment in lifelong health and an expense that needs to be managed. smart enrollees who understand the system and take advantage of it at the right time will minimize financial risk in the age of centenarians.