Last Update:103/10/30
Visitors:38587
A-Z Index
  1. A
  2. B
  3. C
  4. D
  5. E
  6. F
  7. G
  8. H
  9. I
  10. J
  11. K
  12. L
  13. M
  14. N
  15. O
  16. P
  17. Q
  18. R
  19. S
  20. T
  21. U
  22. V
  23. W
  24. X
  25. Y
  26. Z
::: Home > News
Hot News
Text Size: Print
A Glance on the 2nd Generation of NHI
Publish Date:2013-01-11

1.    How are premiums calculated under Second-Generation NHI?

 

Explanation:

I.                    Government Contribution:

Second-Generation NHI Premium = Regular Premium + Premium Difference

(1) Regular Premium:

1. Where the government acts as the employer, or subsidizes the insured under category 1-3: The regular premium contribution shall be the sum of: Insured payroll-related amount of each insured person × Premium Rate × Contribution Rate × (1+ Number of Dependents)*.

2. Where the insured is under category 4-6 subsidized by the government: The sum of: average premium for insured under category 1-3 × Contribution Rate × Total Number of Insured in the specific category.

(2) Premium Difference:

(Annual Insurance Budget – Statutory Income) × 36% - (Regular Premium)

II.                 Contribution by the Employer (The Group Insurance Applicant):

Second-Generation NHI Premium = Regular Premium + Supplementary Premium

(1)   Regular Premium:

The regular premium shall be the sum of: Insured payroll-related amount of each insured person × Premium Rate × Contribution Rate × (1+ Number of Dependents).

(2)   Supplementary Premium:

(Total payroll expense by the employer- total insured payroll-related amount for the employees) × Supplementary Premium Rate (2%

 

III.               Contribution by the Insured:

Second-Generation NHI Premium = Regular Premium + Supplementary Premium

(1)    Regular Premium:

1.      Insured payroll-related amount × Premium Rate × Contribution Rate × (1+ Number of Dependents).

2.      The maximum number of dependents to be included in the premium calculation shall be three.

(2)    Supplementary Premium:

1.      Supplementary premium = Relevant income amount × supplementary premium rate (2%)

2.      The supplementary premium for the insured and his/her dependents shall be calculated according to the amount of their respective “other incomes”.

*Note: In cases where the government acts as the employer or subsidizes the insured under category 1, item 1-3, the premium shall be calculated based on the “average number of dependents”.

 

2.    Why does Second-Generation NHI levy additional supplementary insurance?

 

Explanation:

I.                    For the insured:

(1)   Reduce the difference in premium contribution among individuals of the same income level:

Under the existing NHI system, premiums are calculated based on regular salary income (normally on a monthly basis). Incomes other than regular salary income are excluded. To achieve better fairness of the premium contribution for its participants, second-generation NHI will, on top of its existing funding basis and insurance premium calculation methodologies, levy a supplementary premium on high bonuses, income from professional  practice, stock dividends, interest income, rental income and part-time income, etc., which are widely accepted by the public as “other incomes” that should be incorporated into the premium calculation basis. It is believed that this approach will help to reduce the difference in premium contribution by participants of the same income level.

(2)   Improve fairness through the “Ability to Pay” principle:

The National Health Insurance Program is a social insurance system. Payment of premium, therefore, shall be determined according to the “Ability to Pay” principle. The levy of supplementary premium will lead to a moderate reduction of the regular premium rate, and possibly reduce the financial burden of salaried workers or single-income families with a large number of dependents. This is an approach which further highlights the NHI spirit of “Ability to Pay”.

2. For Employers (Group Insurance Applicants):

(1) Balance Overall Financial Contributions for the NHI System

Since the inception of the NHI system, a specific percentage of financial contribution has been maintained among the government, employers, and the general public. The government, for example, has shared about 34%-35% of the overall premium expense. In the proposal for the further amendment of second-generation NHI, it is clearly stipulated that the government contribution should be at least 36%, which is significantly higher than the current rate. Also, by levying supplementary premiums from the insured, the percentage contributed by employers will be significantly reduced. As this is against the NHI principle of shared contribution between the government, the employer, and the general public, employers are therefore also expected to share the financial responsibilities for supplementary premium on top of their existing premium contribution, thereby achieving a balance among the government, the employers, and the general public.

 

(2)   Reduce the incentive for employers to underreport salary income by instituting other compensation items in lieu thereof:

Under the current NHI system, premiums are calculated based on the regular salary income (normally on a monthly basis). There is a possibility that employers might attempt to underreport regular salary income by inventing other compensation items, e.g., awards, bonuses, allowances, etc. in order to evade their responsibilities for premium payments.  This is unfair, especially when considering those employers and insured who have declared their payroll-related amounts honestly. Under the second-generation NHI system, therefore, the difference between the total salary expense paid by the employer and the total insured payroll-related amount for the employees shall be incorporated into the premium calculation basis, and a supplementary premium shall be levied. In comparison with the existing policies, which do not require any premium payment against the difference between the salary income and the insured payroll-related amount, the new system requires employers to pay a specific supplementary premium amount against staff expenses other than regular salary income. This approach will help discourage employers from manipulating salary structures and ensure that payroll items and amounts for employees are legitimate and equitable.

(3)   Ensure the fairness of premium contributions among employers of different industries:

Salary structures may vary by industry. For some industries (e.g., traditional industries), regular salary constitutes the bulk of the salary structure. Some other industries (e.g., the high-tech industries), however, offer high bonuses as a key factor in their salary structure. Those industries which use regular salary as their main form of pay, therefore, are shouldering a heavier share of the costs. The second-generation NHI shall incorporate the difference between the total salary payment and the total insured payroll-related amount into its premium calculation basis so as to achieve a better balance in the financial contribution of the whole insurance system. This approach also demands a fairer and more reasonable premium share from the insurance applicants who offer high bonuses and lower base-salaries to their employees, thereby achieving more fairness in premium contributions among employers of different industries.  

 

3.    In terms of the premium collection methodology, what will be the difference between the existing system and second-generation NHI?

 

Explanation:

1.      In order to reduce impacts on the general public caused by regulatory changes, the existing premium calculation and collection methods shall remain unchanged under the second-generation NHI. In the future, all NHI participants will still share and pay the regular premium in the same way. There will be no changes.

2.      However, in order to improve the fairness in premium contributions, second-generation NHI will levy a supplementary premium on other incomes received by the insured, including high bonuses,  income from professional practice, stock dividends, interest income, rental income, part-time income, etc. For employers, the difference between the total monthly salary paid and the total monthly insured payroll-related amount for the employees shall be incorporated into the premium calculation basis, and a supplementary premium shall be levied.

3.      In the future, the supplementary premium for the insured shall be collected using the “withholding at source” method. In other words, the premium shall be deducted by the paying entity at the time of payment according to the supplementary premium rate, and settled with the insurer accordingly. No further premium settlement is required afterwards and no extra action will need to be taken by the insured.

4.      As for the employer, the supplementary premium shall be calculated by the employer according to the supplementary premium rate, based on the difference between the total monthly salary expense paid and the total monthly insured payroll-related amount for the employees. The supplementary premium shall be paid on a monthly basis along with the regular premium. No additional administrative work will be required in this regard.

 

4.    Will second-generation NHI bring additional premium income? What will the new premium rates be? How many years will this income sustain NHI operations?

 

Explanation:

Second-generation NHI is designed to improve the fairness of premium contributions and achieve a more balanced system of financial control. If there is any surplus premium income after the implementation of the new system, the excessive funds shall either be transferred to the reserve account or reflected in future premium rate adjustments. Also, as the calculation basis for supplementary premium has currently not yet been finalized, we are unable to determine the exact amount of the relevant premium income or the resultant reduction in the regular premium rates. The premium rates for second-generation NHI will be reviewed and approved by the NHI Supervisory Commission in the future based on a closely-linked income and expenditure mechanism. When evaluating the influence of the supplementary premium and the duration of financial support it can provide, we need to take into account all of the above factors. The design philosophy of second-generation NHI is explained below:

1.                  Improve the fairness in the financial contribution of the insured: The spirit of second-generation NHI is to demand a higher premium contribution from people who are more financially capable and a lower premium from those who are less-advantaged. The basis for the premium calculation is built upon the same structure as the first-generation NHI system. In addition, second-generation NHI will levy a supplementary premium on stock dividends, interest income, income from professional practice, lease income, salary income derived from entities other than the insurance applicant, or bonus income in excess of four-month insured payroll-related amount. It is expected that income from the supplementary premium will result in a reduction of the regular premium rate and a slight decrease in the premium expenses for wage-earners without any other income, or for families with a large number of dependents.

2.                  Improve the fairness in premium contribution by employers: The premium contribution by employers is also structured in the same way as the first-generation NHI system, with the exception that a supplementary premium will be levied based on the difference between the total salary expense paid by the employer and the total insured payroll-related amount for the employees. For traditional industries that offer regular salary as the main part of their compensation structure, premium rates and expenses will likely be slightly reduced. The expanded premium calculation basis, nevertheless, will demand a higher premium payment from industries offering non-regular compensation items such as bonuses and other rewards. This approach will lead to a fairer system of premium contribution for business owners.

 

5.    Will the implementation of second-generation NHI result in additional financial burdens for housewives?

For example, for a family of four with a monthly salary income of NT$50,000 from the husband, what will the difference in premium expense be when compared with first-generation NHI? (Assuming that the premium rate for second-generation NHI is 4.91%, and not taking into consideration factors such as stock dividends, interest-derived income, large bonuses, etc.)

 

Explanation:

1.                  On the contrary, the financial burden for housewives is expected to be reduced. Under the first-generation NHI system, housewives normally participate in the program as dependents of their husbands. The objective of the second-generation NHI is to improve the reasonableness and fairness of premium contributions. Given that the total insurance budget is fixed, some participants will no doubt enjoy a reduced premium cost while others will share a larger portion. By levying a supplementary premium, second-generation NHI will lead to a reduction of regular premium rates. We can definitely expect lower premium expenses for families living on a regular salary with an annual bonus of less than four months of the insured amount if they do not have any other income such as interest or stock dividends.

2.                  For example, assuming that the premium rate has been lowered down to 4.91% due to the expanded premium calculation basis from the levy of supplementary premium, a family of four with a monthly salaried income of NT$50,000 from the husband and no income from the wife can expect to have their monthly premium expense reduced by NT$160.

Income Status

First-Generation NHI *

Second-Generation NHI **

Monthly salary: NT$50,000.

Additional Bonus: NT$150,000

 

50,600×5.17%×0.3=NT$785 (per person)

785×4 =NT$3,140 (for the whole family)

Supplementary Premium:NT$0

Total premium expense:

50,600×4.91%×0.3=NT$745

(per person)

745×4=NT$2,980 (for the whole

 family)

Premium costs are reduced by NT$40

 (per person) or NT$160 (for the whole family)

 * Note 1: Premium = Insured Payroll-related Amount × Premium Rate × Insurance Contribution Rate

 × (1+ Number of Dependents)

** Note 2: Premium = Insured Payroll-related Amount × Premium Rate × Insurance Contribution Rate

 × (1+ Number of Dependents) + Supplementary Premium Basis × 2%

 (Assumed Premium Rate).

 

6.      Will the implementation of second-generation NHI result in additional financial burdens for retired people?

Explanation:

1.      There is no causal relationship between the changes in premium expense and the personal status of the insured.

In order to expand its premium calculation basis, the second-generation NHI system will levy a supplementary premium on various other incomes, e.g., bonuses exceeding four months of the insured payroll-related amount, as well as part-time salaries, income from professional practice, interest, and rental incomes which exceed the defined threshold. The new system will not lead to any additional financial burdens for NHI participants with relatively lower incomes. On the contrary, the majority of people will in fact benefit from lower premium rates and, consequently, reduced premium expenses.

2.      The amendment will not create additional financial burdens for most retired people.

A supplementary premium shall be charged under second-generation NHI for retired people who are receiving a fixed interest income from a pension fund if the interest income reaches a specific threshold. The premium rate, however, is only 2%. In other words, irrespective of the number of dependents, the total supplementary premium on an interest income of NT$10,000 will only be NT$200. Considering the potential reduction in regular premium rates and premium costs, we do not expect a significant increase in the financial burdens of retired people unless they are receiving other additional income (e.g., part-time salaries, stock dividends, or income from property leased to corporate bodies, etc.)

7. Will the newly-proposed amendment for second-generation NHI create a significant financial burden for single people?

Explanation:

According to the draft amendment for the second-generation NHI proposed by the Executive Yuan, the premium calculation basis is the total income of all members in a taxable household. “Single persons” generally refers to unmarried people without any dependents on their tax returns, and this group will be more likely to bear a larger share of the premium contributions. The latest second-generation NHI amendment proposed by the KMT group, however, abandons the household-based calculation. The newly-proposed approach, on top of the prevailing premium calculation basis, levies a supplementary premium on based on other incomes (e.g., large bonuses, income from professional practice, etc.), a move which is widely agreed upon by the general public. Since the original proposal made by the Executive Yuan has been rejected, concern over “heavier burdens for single people” is no longer a problem. However, single people who are receiving other income—including high-value bonuses, stock dividends, rent-derived income, etc.— will still be subject to the supplementary premium required by second-generation NHI. This fulfills the NHI philosophy of “people with higher incomes should share a greater portion of the premium.”

8. The proposed further amendment for second-generation NHI discards the household-based premium calculation method. Will this create a heavier financial burden on families with a larger number of dependents?

Explanation:

The existing premium calculation mechanism will remain unchanged under the amended proposal for second-generation NHI. A supplementary premium shall be levied on the basis of other incomes (e.g., large bonuses, income from professional practice, stock dividends, rental income, etc.), a move which is widely agreed upon by the general public. In short, the premium cost for families with a relatively greater number of dependents will in principle remain unchanged. It is also likely that income derived from the supplementary premium will lead to lower premium rates and consequently reduce the financial burden for these families. However, if any of the family members are receiving a large amount of other incomes—including bonuses, stock dividends, rental income, and so on—they will have to pay an additional supplementary premium.

9. Will the supplementary premium under second-generation NHI create an additional financial burden on disadvantaged groups?

Explanation:

1.          According to the proposed further amendment for second-generation NHI, members of low-income households, as defined by the Public Assistance Act, shall be exempt from the supplementary premium.

2.          With regard to the withholding of premium, it is also stipulated in the amended proposal for second-generation NHI that no withholding of supplementary premium is required if the amount received each time is below a pre-defined threshold. Therefore, no supplementary premium will be levied on other income of disadvantaged groups if the amount of these earnings is relatively low. Considering the potential reduction in the regular premium rate resulting from the supplementary premium income, some people may even benefit from a lower premium expense rather than an increased financial burden.

10. For those who live on interest income, will this new policy cause difficulties in life?

Explanation:

Under second-generation NHI, there is a threshold for levying supplementary premiums. In other words, a supplementary premium will only be charged when the interest income has reached a specific limit. Furthermore, the premium rate is only 2%. For an interest income of NT$100, the charge is a mere NT$2. The impact is therefore limited. The purpose of this approach is to achieve better social fairness and justice. This is particularly the case when the supplementary premium is levied against large amounts of interest income. It is also likely that the additional supplementary premium income will lead to a slight reduction of the regular premium rate. While bearing an additional cost for the supplementary premium, these people can also expect a potential reduction in the cost of the regular premium. In effect, premium expenses might be less than before. The influence of this new approach is therefore limited.

11. Part-time income is also incorporated into the premium calculation basis. Is this unfair to those who have to earn an additional income to support themselves?

Explanation:

1. Reducing the difference in premium contribution among individuals of the same income level: To improve the fairness in premium contribution among the insured, the second-generation NHI will, on top of the exiting premium calculation basis, levy a supplementary premium on salary incomes derived from entities other than the group insurance applicant. In other words, individuals who are receiving other income will have to share a bit more of the premium. This will lead to a reduction of the regular premium rate, and, consequently, relieve the financial burden of people who have to live on a single income as well as families with a large number of dependents. On the contrary, it would be unfair and unreasonable for people to pay the same premium simply because they are insured at the same payroll-related amount, regardless of whether they have additional income or not.

2. The threshold mechanism will help to moderate the impact on the hard-working group. The new policy often has two flipsides. To ensure the fairness in premium contributions, the policy may increase the financial load for those who need to earn additional income to support their families. To mitigate negative effects, we have established a threshold for levying[u1]  the supplementary premium. In other words, the supplementary premium will only be levied when an income exceeds a specific limit. To reduce the impact of this new policy on the hard-working group, the Department of Health will establish a fair and reasonable threshold and take into account the views of the general public.

12. Do people who have a professional practice have to pay an additional premium?

Explanation:

For people who are receiving income from a professional practice, the change in premium cost will depend on various factors, such as their NHI participant status, the likelihood of a reduction in the regular premium rate as a result of supplementary premium income, and the extent of reduction, if any. The change in premium expenses, therefore, is not determined by whether the insured is receiving income from professional practice or by the amount of income.

1.      If the insured person falls into category 1, item 5, or category 2: No supplementary premium will be charged if the insured person has already reported the relevant income as the insured payroll-related amount for NHI. In this case, the premium expense will not be higher than the existing amount if the insured person does not have other income which is subject to the supplementary premium payment.

2.      For insured persons other than those specified above: Since the insured payroll-related amount declared by the insured does not relate to the income from professional practice, a supplementary premium will be charged in addition if the insured is receiving income from professional practice from entities other than the group insurance applicant.

3.      In summary, the fluctuation in the premium amount will depend on whether the regular premium rate will be reduced as well as the extent of the reduction.

13. Do you expect that employers will fabricate other income items in the future to underreport salary amounts and evade their responsibilities for premium payments?

Explanation:

1.      The new system will discourage employers from fabricating other income items for salary payment:

Under second-generation NHI, the difference between the total monthly salary expense paid by the employer and the total monthly insured payroll-related amount for the employees shall be incorporated into the premium calculation basis, and a supplementary premium shall be levied. In other words, payments which have not been incorporated into the insured payroll-related amount are now subject to the supplementary premium. In comparison with the existing policies that do not require any premium payment against the difference between the salary income and the insured payroll-related amount, the new policy in fact significantly reduces the motivations for such behavior.

 

2.      Ensure the fairness of premium contribution among employers of different industries:

Under the existing NHI system, premiums are calculated on the basis of regular salary income (normally on a monthly basis). There is the possibility that, to evade their premium payment responsibilities, employers might underreport regular salary income. This is relatively unfair, especially when considering those employers and insured who have honestly declared their insured payroll-related amounts. Under second-generation NHI, therefore, the difference between the total salary expense paid by the employer and the total insured payroll-related amount for employees shall be incorporated into the premium calculation basis. This approach will help to achieve a more balanced premium contribution for the whole insurance system. It also demands a fairer and more reasonable premium share from the group insurance applicants who offer high bonuses and lower base salaries to their employees, thereby improving the fairness in premium contribution among employers of different industries.

14. Will the supplementary premium create a significant financial burden on business owners? Is it possible that they would instead benefit from the reduced premium rate as a result of the additional income from supplementary premiums?

Explanation:

 

1. The newly-proposed further amendment for second-generation NHI will levy a supplementary premium on enterprises in addition to the existing premium. The supplementary premium shall be calculated by multiplying the difference between the total monthly salary expense paid by the employer and the total monthly insured payroll-related amount for the employees by the supplementary premium rate.

2. In the future, a supplementary premium will be levied on both enterprises and insured individuals. The government will also be responsible for at least 36% of the total insurance cost. Due to the sufficient funding secured, it may be possible that the premium rate will be slightly reduced from the existing 5.17%. However, the possibility of this reduction would be contingent on whether or not any immediate and significant increases in the overall NHI cost or any funds allocated as reserves were to occur.

3. While paying additional supplementary premium, business owners may also expect a cost reduction resulting from a reduced regular premium rate. Thus, the overall premium cost for business owners may not increase.

4. Different salary structures among enterprises must be taken into account in order to determine whether or not a company will be paying additional amounts for the supplementary premium or be paying less due to a reduced premium rate. In other words, for companies that offer a regular salary as the main part of their compensation for existing employees, the supplementary premium will be relatively lower. These employers are more likely to benefit from a reduced premium rate. In contrast, companies which hire many part-time workers or offer relatively high bonuses or rewards to employees are more likely to face an increased premium expense, even if the regular premium rate is reduced in future. However, it is believed that this amended policy is more reasonable than the existing system in which premiums paid by employers are only calculated based on the regular salary received by full-time employees.

 

15. Are there maximum or minimum limits for the supplementary premium paid by employers? Will there be any change with regard to the proportion contributed against the total insurance cost by employers?

Explanation:

1. There is no maximum or minimum limit for the supplementary premium paid by employers.

The second-generation NHI supplementary premium paid by employers is calculated based on the difference between the total monthly salary paid by the employer and the total monthly insured payroll-related amount for the employees. Since the difference is calculated on basis of the overall personnel cost, there is no minimum or maximum limit.

2. Currently, we can not yet determine the percentage of the employer’s contribution against the total insurance cost:

Second-generation NHI stipulates that the annual premium contribution from the government shall be no less than 36%. This is higher than the current ratio. The total contribution from employers and the insured, therefore, is assumed to be lower than the existing amount. At this stage, however, given that the calculation basis for the supplementary premium has not yet been finalized and it is difficult to estimate the exact amount of the supplementary premium to be received, we are unable to predict the fluctuation of the contribution ratio between employers and insured individuals. We will have a clearer picture within one or two years after the implementation of second-generation NHI, at which point we can better grasp the actual amount of the supplementary premium income.

 

16. No supplementary premium is paid by the government. Will this reduce the financial burden on the government?

Explanation:

1.          As required by law, the government is responsible for about 35% of the total NHI cost. In other words, of the more than NT$400 billion that NHI costs each year, the government pays for approximately NT$100 billion or more. Based on the further amendment of second-generation NHI, the share by the government shall be raised to 36% of the total insurance cost, which is higher than the existing amount.

2.          While the government is not required to pay the supplementary premium, the supplementary premium received from employers and the insured will lead to an increase in the overall insurance fund. The amount shared by the government, which is calculated based on the minimum percentage of contribution, will thus increase correspondingly. Rather than paying less, the governing will actually bear more of the premium cost.

17. The supplementary premium rate is set at 2% for the first year. Will there be a maximum limit in the future?

Explanation:

一、 According to the present content of the further amendment of second-generation NHI, the supplementary premium rate shall be adjusted at the beginning of the second year based on the growth rate of the prevailing premium rate. The adjusted rate will be announced by the competent authority (the Department of Health, Executive Yuan), on a year-by-year basis. The law stipulates that the maximum prevailing premium rate shall be 6%. It is therefore unnecessary to establish a separate ceiling limit for the supplementary premium rate, which has already been linked to the regular premium rate.

二、 For example, the current premium rate is 5.17%. Following the implementation of second-generation NHI, the premium rate is likely to be slightly reduced as a result of the additional income from the supplementary premium. If the premium rate were to hypothetically decrease to 4.91% during the first year of the new system, then the supplementary premium rate, as required by law, would be 2%. By the second year, under the balanced income and expenditures conditions, the premium rate would be adjusted to 5.2% and the supplementary premium rate would be adjusted accordingly to 2.12% [2%×(5.2%÷4.91%)] Similarly, if the premium rate were lowered to 4.8% for the second year, the supplementary premium rate would be adjusted to 1.96% [2%×(4.8%÷4.91%)].

三、 Thus, when there is a 6% statutory limit for regular premiums, we can arrive at a ceiling limit for the supplementary premium using the following formula: 2%×(6%÷5%)2.44%

18. If the regular premium rate is reduced after implementing second-generation NHI, will this decrease in revenue cancel out the income gained from the supplementary premium and thus further increase the NHI deficit?

Explanation:

1.          According to the content of the further amendment for second-generation NHI, financial shortages occurring before the implementation of the new system shall be made up by the government through the annual budgeting process. In other words, the government shall assume responsibility for the more than NT$50 billion financial gap accumulated over the past few years rather than have it reflected in the regular or supplementary premium rates.

2.          In the future, a supplementary premium will be levied on both business owners and insured individuals. The government will also be responsible for at least 36% of the total insurance cost. It is therefore possible that the premium rate will be slightly reduced from the existing 5.17% because of the sufficient funding secured, subject to that there is no immediate and significant increase in the overall NHI cost or any funds allocated as reserves. The extent of premium reduction, however, will be determined by the amount of the supplementary premium received. A balanced financial system, no doubt, is the fundamental premise.

3.          Whilst the income from the supplementary premium may be partially or fully offset by a reduction in the regular premium rate, any shortage that occurs before the new system goes into effect shall be made up by the government. After implementing the new system, all premium rates will be determined under the premise of a balance between annual income and expenditures. The reduction of the premium rate, therefore, will not cause an increase in the financial deficit.

19. People used to criticize the NHI system for its inability to collect premiums against the income from "underground" economic activities. Will second-generation NHI solve this problem?

Explanation:

In terms of premium contributions, second-generation NHI is more effective than first-generation NHI in reflecting income derived from "underground" economic activities. On top of the existing policies, the new system has incorporated stock dividends, interest, rental income, and other financial sources into the premium calculation basis, against which a supplementary premium will be levied. This approach enables an adequate reflection of the income derived from underground economic activities. Please refer to the explanation below:

1.          By maintaining the existing funding base of first-generation NHI, second-generation NHI defines specific responsibilities for premium contributions:

According to the existing NHI system, premiums are calculated based on regular salary. The insured payroll-related amount should not be lower than the insured salary for labor insurance or the monthly labor pension reserve deposit. However, it is difficult to determine the exact income amount for some insured people. No stable income is received, for example, by the insured in categories 2, 3, and 6. Under the current system, the premiums amount for those insured in categories 2 and 3 are determined by linking the income to an adequate payroll-related amount in the Grading Table, and the premiums for those insured in Category 6 are calculated based on the average premium. These policies are designed to ensure that all NHI participants are sharing specific responsibilities for premium contribution.      

2.          By levying the supplementary premium, second-generation NHI more properly reflects and takes into account income derived from underground economic activities:

With second-generation NHI, a supplementary premium shall be charged from other incomes exceeding a specific amount, including stock dividends, interest, rental income, etc. Large amounts of income derived from underground economic activities, such as bank deposits, stock investments, leasing of houses, etc. shall be subject to the additional supplementary premium. Compared with the existing system, second-generation NHI will ensure that the “Ability to Pay” principle is better met by these people.

20. According to the present further amendment for second-generation NHI, capital gains, incomes from sources abroad, and pension income are not incorporated into the premium calculation basis. What are the reasons for this?

Explanation:

1.          The objective of the present further amendment is to refine the premium policies to ensure their practicability and feasibility; in the meantime adhere to the spirits of second-generation NHI, i.e., expanding the premium basis of the system and improving fairness. On top of the prevailing premium calculation and collection methods, a supplementary premium shall be levied based on other incomes including high bonuses, Income from professional practice, stock dividends, interest income, rental income and part-time income, etc., a move which is widely accepted by the general public.

2.          However, some highly-disputed items such as capital gains, incomes from sources abroad, pension income, etc. are not incorporated into the calculation basis for the supplementary premium. One of the reasons for this decision was that no specific consensus was reached on these items during the discussion process. Also, in view of society’s expectations for a significantly-simplified premium administration system under second-generation NHI, we have tentatively excluded some of the items for which we foresee the possibility of verification problems occurring during financial and tax administration.

3.          Pension reserve deposits, on the other hand, are owned by people retired from public or private sectors after many years of hard work. This money is needed in their later years. Some of this money is salary savings accumulated during their working years. It would therefore be improper to incorporate these funds into the calculation basis for the supplementary premium.

21. Will including stock dividends into the supplementary premium basis affect the stock market ? Will it discourage people from wanting to collect stock dividends?

Explanation:

Income from stock dividends is a part of consolidated personal income and is subject to income tax filings. The current tax rate for consolidated personal income is between 6% and 40%. The collection of personal income tax, however, does not discourage people from earning stock dividends. This proves the fact that the income from stock dividends is far greater than the tax expense. The supplementary premium rate under second-generation NHI, furthermore, is only 2%, which is far less than the income tax rate. Also, by instituting a threshold, stock dividends under a specific amount shall be exempt from premium payments. Compared with the consolidated income tax, the actual influence of this policy should be relatively small and have a limited impact.

22. It has been said that high bonuses will be included in the supplementary premium basis. Does this include Lotto prizes or cash prizes from other lottery tickets?

Explanation:

1.          In terms of bonus income, it was stipulated in the further amendment for second-generation NHI that supplementary premium will only be charged against bonuses received from employers which are in excess of four months' salary income. Lotto prizes or cash prizes against other lottery tickets, therefore, shall not be included in the supplementary premium basis. There is no need to pay supplementary premium for these items.

2.          Prizes from lucky draws or lottery tickets are received on a one-off basis. This is unexpected income and it would be inappropriate to include the income into the supplementary premium basis due to privacy and security issues.

23. Regarding rental income, why is a supplementary premium only charged against the rent received from legal persons? Why haven't you included the rent from individuals?

Explanation:

1.          Legal persons will issue certificates for rental expenses:

To fully reflect their operating costs and reduce tax liabilities, legal persons will naturally issue certificates of rental expenses when filing income tax returns. As for natural persons, rental income may be declared only when the taxpayer adopts the itemized deduction method. Besides, the maximum limit for such deduction is only NT$120,000 per year per household. Since a higher limit for standard deductions is now in place, the incentive for reporting such rental expenses has been reduced.  In practice, therefore, the benefit of levying supplementary premium from natural persons is limited.

2.          There will be operational difficulties for "Withholding at the Source" if no certificate for rental expense is issued by the natural person: Supplementary premiums are collected based on the principle of "Withholding at Source". There is likelihood that the lessee has withheld a 2% supplementary premium from the lessor but fails to pay the premium to the National Health Insurance Administration. The insurer will be unable to investigate such cases if the tenant has adopted the standard deduction method for income tax return.

3.          Unduly increase the burden of rental costs for natural persons: When a supplementary premium is charged against rental income, the lessor will definitely increase the rent amount to cover their costs. This will no doubt increase the rental costs for the lessee, who are usually the less-advantaged. It is not a desirable result to the policy makers.

4.          People adopting the itemized deduction method for tax returns only account for less than 20% of the total taxpayers:

Currently, more than 80% of income tax payers adopt the standard deduction method for their tax returns. If we levy a supplementary premium against the rental income received by natural persons, we will only be able to verify the declared amount (the amount of the rental income or expense) of those who adopt the itemized deduction method. There is no way to examine the taxpayers who adopt the standard deduction method. The fairness of this policy would be questionable.

5.          The amounts of rental income from natural persons are relatively small. Their contribution to the supplementary premium income is therefore limited:

According to statistics from the 2008 consolidated income tax, it was found that the total rental expense for natural persons was only about NT$6 billion. Rental incomes under a specific threshold, furthermore, are exempted from the supplementary premium payment. The contribution of such supplementary premium income to the whole NHI system, therefore, is quite limited. Considering the above facts, the NHI system will only levy supplementary premiums against the rental income received from legal persons.

24. The supplementary premium is calculated on a single-transaction basis. The maximum amount for each transaction is NT$10 million. If there is more than one transaction, the total amount can be considerable. Will there be a maximum limit for the total amount?

Explanation:

With second-generation NHI, the supplementary premium shall be collected based on the principle of “Withholding at the Source”. To reduce the administrative work for reimbursements or additional payments, no further settlement is required.  Apart from the maximum limit of NT$10 million for a single transaction, there is no maximum limit for the total transaction amount.

25. Will there be any additional insurance benefit for the less advantaged when second-generation NHI is implemented?

Explanation:

1.          The insurance benefit for the less advantaged under the first-generation NHI shall remain unchanged:

(1) Premium Assistance Programs: Under the current regulations, the competent authority offers a partial or full premium subsidy to the economically disadvantaged, including low-income households, senior citizens aged 70 or above from middle or low income households, physically or psychologically disabled people, indigenous people aged above 55 or below 20, and unemployed individuals. Other premium assistance programs offered by the government include charity donation referrals, interest-free hardship loans, and premium installments, etc.

(2) Medical Coverage: The National Health Insurance Administration recently launched the "Worry-Free Medical Services for the Disadvantaged", and has expanded the coverage of "Card-Block Exemption" to include families nearly in poverty, families in special circumstances, and children under 18. Other people who are unable to pay the NHI premium on time may also access to the NHI medical services against the Certificate of Low-Income Families issued by the chief of villages (boroughs) or the medical institutions in case they need emergency medical care for acute or critical diseases. The new approach will enable these people to receive timely medical care in spite of the delayed premium payment. All the premium assistance programs will remain available after implementing second-generation NHI.

2.          Additional benefits provided by second-generation NHI:

Second-generation NHI will enforce stricter controls on the suspension of insurance benefits (NHI Card-Block). It is clearly stipulated in the regulations that the insurer must first verify the situation and provide necessary guidance before suspending the NHI benefits against any insured or group insurance applicants who fail to pay the premium on time. In the future, suspension of NHI benefits will only be enforced against people who can afford but refuse to pay the premium. The new policy will ensure better protection of the disadvantaged.

3.          The current regulations require that, to enroll in the NHI as a dependent, the applicant should be affiliated to the insured who is his/her spouse or the closest linear blood. In case that the applicant suffers from domestic violence from the insured he/she is affiliated to, he/she may alternatively enroll as the dependent of the next of kin. Due to statutory restrictions, however, the applicant shall remain insured with the offender if he/she has no other legitimately qualified people to be insured with. The applicant is not allowed to participate in the NHI system independently as an insured.

4.          In order to protect the rights of the victims of domestic violence, the recently-proposed NHI amendment has incorporated a clause that victims of domestic violence shall not be required to enroll to or withdraw from the NHI system as a dependent of the offender, if it is considered difficult to do so. In the future, victims of domestic violence may enroll to the NHI either as a dependent of other next of kin, or independently as an insured person. They can thereby remove themselves from the threat of their offenders and not have to relying on the latter for NHI-related payments or administrative work.

5.          Victims of domestic violence, furthermore, are mostly economically disadvantaged who are hardly able to afford the NHI premium. An amendment to the National Health Insurance Act has also been proposed this time to safeguard their rights to access to the NHI benefits. It is stipulated in the amended regulation that victims of domestic violence who are unable to pay the premium or overdue penalty in time shall be exempted from suspension of NHI benefits during the period when they are covered by the protection order issued by the court.

26. What operating procedures are in place for NHI card-block under first-generation and second-generation NHI?

Explanation:

1.          First-Generation NHI:

(1) Prior to November 2010: In spite of the various premium assistance programs, there are still around 600,000 people suspended from using NHI benefits due to failures in premium payment. Apart from economic difficulties, people refuse to pay the NHI premium due to various reasons, for example, the insured considered himself/herself to be extremely healthy, he/she has already purchased other commercial insurance policies, or he/she is living abroad, though holding R.O.C. citizenship.

(2) After November 2010 (the Worry-Free Medical Service for the Disadvantaged): The NHIA has expanded the coverage of “Card-Block Exemption" to include near-poor families, families in special circumstances, and children aged under 18, and will release the blocked NHI cards for approximately 370,000 disadvantaged people with overdue premium payments. The number of people still suspended from the NHI benefit has been reduced to approximately 200,000.

2.          A more prudent approach shall be adopted after implementing second-generation NHI:

It is clearly stipulated in the regulations that the insurer must first verify the situation and provide necessary guidance before suspending the NHI benefits of any insured or group insurance applicants who fail to pay a premium on time. Suspension of NHI benefits shall only be enforced against people who can afford to pay the premium but refuse to do so. The new policy will ensure better protection of the disadvantaged. The number of people suspended from NHI benefits shall also be further reduced.

27. What will be the real benefits of drug price adjustments? Will it effectively solve the problem of the so-called "Black Hole of Drug Prices"?

Explanation:

1.      To reduce differences in drug prices, the National Health Insurance Administration has been actively engaged in drug price adjustments since the inception of the NHI system according to the "Reference List for Drugs of National Health Insurance" and the "Guidelines Governing the Price Adjustments for Pharmaceutical Products under the National Health Insurance System". Since 1996, the National Health Insurance Administration has made six adjustments on the prices of pharmaceutical products, leading to a reduction of drug expenses of more than NT$40 billion. The difference in drug prices has been significantly reduced. The latest drug price adjustment was made in October 2009. Since the drug price survey will be conducted on a bi-annual basis, the seventh drug price adjustment is scheduled to take place in 2011.

2.      Drug price differences are inevitable in a market economy. By conducting drug price surveys and adjustments, the insurer endeavors to appropriately control the price of pharmaceutical products and avoid unreasonable price difference. It is definitely impossible to completely eliminate the drug price difference when we are operating in a competitive market.

3. Savings resulted from the drug price reduction will be used to elevate the quality of medical care, e.g., expediting the inclusion of new drugs into the benefit system and raising the benefit amount for items which are relatively under-paid. These will all be helpful to effectively improve the medical coverage to all citizens. 

28. Will you fully disclose various information about the medical institutions, such as the status of insured beds, medical care quality and record of violations, and so forth? What will be the actual disclosure requirements?

Explanation:

1.          According to the further amendment of second-generation NHI, the following NHI-related information should be disclosed:

(1) Information on major NHI-related meetings — The Department of Health, NHI Supervisory Commission or the National Health Insurance Administration are responsible for publicizing the meeting agenda and meeting minutes seven days before and ten days after the meeting, respectively.

(2) Status of insured beds — Contracted hospitals are responsible for announcing the status of insured beds on a daily basis.

(3) Percentage of insured wards — The insurer is responsible for announcing the percentage of insured wards in each contracted hospital on a monthly basis.

(4) Financial Reports — The contracted medical care institutions are responsible for publicizing their financial reports on an annual basis.

(5) Other NHI-related information on the quality of medical care — The insurer and the contracted medical care institutions are responsible for publicizing such information on a monthly, quarterly, or yearly basis, depending on the nature of the information, respectively.

(6) Information about significant violations by the contracted medical care institutions — The insurer shall announce such information on a timely basis, including the names of the institution and the responsible medical-care staff/the offender, and the facts of the violation.

2.          The National Health Insurance Administration currently has already published various information relating to the NHI system, the quality of medical services, and meetings of relevant committees on its official website. Information relating to insured beds is also announced at conspicuous places in each hospital for public review. Proactive information disclosure is already carried out under the existing NHI system.

3.          With second-generation NHI, important meeting information will also be fully disclosed to ensure the transparency of the relevant decision-making process. The purpose is to encourage citizen participation in the NHI business. Information relating to the insured beds and medical care quality are also disclosed. The purpose is to provide useful NHI information for medical choices.By disclosing information about the quality of medical care quality and the content of significant violations, we aim to encourage competition among contracted medical care institutions and improve the quality of medical care.

4.          In the future, the NHI Supervisory Commission, the insurer, and all contracted medical care institutions will be required to disclose relevant NHI information. Through the utilization of various communication channels, they will provide friendly explanations and convenient access so that people can easily comprehend the information.For example, information about the insured beds will be announced at conspicuous places in hospitals (i.e., at the check-in desks or nursing stations). Any violation of regulations by medical institutions will be announced over the internet and a user-friendly search system will be set up to find relevant information.

 


Previous Page