South Korea’s National Health Insurance System: An Overview

Moonwon Hwang, MD

South Korea provides its citizens with a National Health Insurance (NHI) system established under the National Health Insurance Act. The legislation began in 1977, and by 1989, the entire population was enrolled in the NHI system. The Ministry of Health and Welfare supervises the operation of the NHI program through making and implementing policies. As a nonprofit institution, the National Health Insurance Service is a single insurer that provides health insurance to all citizens living in Korea. The Health Insurance Review & Assessment Service (HIRA) evaluates the medical service fee, quality of healthcare, and adequacy of medical service.

South Korea’s NHI differs significantly from private health insurance in several key aspects:

1) Universal Coverage: The National Health Insurance Act enforces the government’s constitutional duty to enhance social security and public health. The system covers employees, public officials, educators, and regional residents, ensuring universal coverage. As of 2023, 51.5 million individuals are insured under the NHI, with an additional 1.5 million covered by the Medical Aid program for low-income citizens.

2) Compulsory Insurance: Enrollment in the NHI is mandatory once legal requirements are met, regardless of individual preference. Insured individuals must pay premiums, with enforcement measures for non-payment.

3) Income Redistribution Function: Unlike private insurance, where premiums depend on coverage details and risk levels, NHI premiums are based on income, ensuring affordability. Benefits are equally distributed, performing an income redistribution function that reduces the economic burden during illness by pooling resources and providing uniform benefits.

4) Designated Medical Institutions: All healthcare facilities in South Korea must treat NHI-covered patients. Medical institutions cannot opt out of the NHI framework, ensuring comprehensive access to healthcare services.

Employees contribute to the NHI by paying a premium, calculated by multiplying their monthly salary by the premium rate (7.09% in 2023). Employers and employees each pay 50% of this premium. For the self-employed, premiums are determined based on income, property, and vehicle ownership. For example, the author, with an average monthly salary of 10,000 USD, shares the monthly NHI premium of approximately 769 USD with the employer.

When determining the scope of health benefits, the Ministry of Health and Welfare excludes treatments for conditions that do not interfere with daily activities. These exclusions are referred to as non-covered services. Generally, covered services are those eligible for health insurance benefits. In contrast, non-covered services include cosmetic surgery, vision correction surgeries (LASIK, LASEK), dental prosthetics (gold crowns), manual therapy, and general medical certificates. Additionally, some services like ultrasound exams, MRI diagnostics, and assisted reproductive technologies are considered non-covered based on specific criteria. New medical technologies are often initially classified as non-covered until their efficacy and cost-effectiveness are evaluated, potentially resulting in varying costs across medical institutions.

In the NHI system, the cost of medical services is relatively low compared to other countries. For instance, the cost of hospital services in South Korea is 57 units compared to 100 units in the Organisation for Economic Co-operation and Development (OECD) countries on average and 130 units in the United States [1]. A concrete example is the initial consultation fee at primary care clinics in South Korea, which is approximately 13.08 USD as of 2024.

South Korea adopted the NHI system in 1977. At the time of its implementation, the national finances were poor, and the income levels of the population were very low. Therefore, to apply health insurance to the entire population, a system of “low insurance premiums, low fees, and low benefits” had to be adopted. This type of insurance system inevitably led doctors to see many patients through short consultations and relatively focused on income from non-covered services.

Under the NHI system, patients are less conscious of healthcare costs, potentially leading to overutilization of services. To curb excessive usage, a co-payment system is implemented. Patients pay 20% for inpatient care and varying rates for outpatient care depending on the type of hospital: 30% at clinics, 40% at hospitals, 50% at general hospitals, and 60% at tertiary hospitals. However, there are caps on out-of-pocket expenses to prevent excessive financial burden. Severe diseases like cancer have significantly reduced co-payment rates, and Medical Aid recipients pay only 0-10%.

To illustrate, a patient who underwent a liver transplant and was hospitalized for 26 days incurred a total medical cost of approximately 77,157 USD. The patient’s out-of-pocket expense was approximately 14,252 USD, including partial coverage for insured services (approximately 4,943 USD), full payment for non-covered services (approximately 2,995 USD), and non-covered items (approximately 6,314 USD). The NHI covered the remaining cost. Major non-covered and full-payment items included PET/ultrasound exams, non-covered treatment materials, drug costs, and private room fees.

Through this NHI system, South Korea has established a high-quality healthcare structure with easy access to physicians and very low insurance premiums. In 2020, South Koreans had the highest number of outpatient visits per capita among OECD countries, with an average of 14.7 visits annually, compared to approximately 3.2 visits per person per year in the United States [2]. Health outcomes are also favorable, as evidenced by a low avoidable mortality rate (99 per 100,000 people in South Korea compared to 238 per 100,000 in the USA) [3].

However, the NHI system currently faces challenges regarding financial sustainability and coverage. Changes in population structure due to aging and low birth rates increase the financial burden, and healthcare costs continue to rise. In 2022, national healthcare expenditures accounted for 9.7% of GDP, up from 6.0% in 2012. Continued cooperation between the government and healthcare providers is essential to maintain a sustainable health insurance system. +

Moonwon Hwang, MD, is an Assistant Professor of Ophthalmology at Inje University College of Medicine and Busan Paik Hospital.