Preferential Fees Applied to Care Institutions with Sales Over 3 Billion Won
"Card Companies' Profitability Declines... Controversy Over Fairness Among Industries"
Legislation is being promoted to apply preferential credit card fee rates to affiliated hospitals and clinics. The purpose is to enhance public health care in response to rapid aging. However, there are concerns that applying lower fee rates to medium and large medical companies with annual sales exceeding 3 billion won could significantly reduce the profitability of the card industry.
On the 18th, according to financial circles and the National Assembly, Lee Su-jin, a member of the Democratic Party of Korea, has introduced a representative amendment to the Specialized Credit Finance Business Act that mandates the application of statutory preferential fee rates to credit card merchants classified as care institutions under the National Health Insurance Act. The National Health Insurance Act defines care institutions as medical institutions, pharmacies, rare and essential medicine centers, public health centers, and others.
The preferential fee rate system was introduced to alleviate the excessive fee burden on small and medium-sized credit card merchants with annual sales of 3 billion won or less, who lack bargaining power. These merchants receive fee rates ranging from 0.5% to 1.5% depending on their sales bracket. In the first half of this year, there were a total of 3,027,000 merchants eligible for the preferential fee rate, accounting for about 95.8% of all merchants.
The card fee rate for the medical sector is 2.23%, close to the industry's highest level (2.3%). It is explained that the medical industry requires preferential fee rates because its business conditions have worsened due to low reimbursement policies and strengthened coverage of non-reimbursable sectors, and because it is a representative sector with public interest. The current Specialized Credit Finance Business Act and supervisory regulations allow card companies to reduce fees voluntarily for merchants providing goods and services essential to public life and with public interest.
Lee Su-jin previously proposed a bill with the same content last year. She said, "Unfortunately, in the 21st National Assembly, there was no detailed review or deliberation on the bill," adding, "As we are on the verge of entering a super-aged society (where the elderly population aged 65 and over accounts for more than 20% of the total population), I hope care institutions can be relieved from management pressure caused by card fees and strengthen their public functions." She also mentioned, "It is necessary to consider applying preferential fee rates additionally to areas such as childbirth, childcare, and disabilities."
However, the credit card industry is reportedly bewildered by the reintroduction of the bill. A card industry official said, "Preferential fees are not simply low fees. Since they are fees below cost, expanding the scope of application could severely deteriorate the profitability of card companies," adding, "The industry's opinion that preferential fee rates should not be applied differently by industry was already included in last year's bill review report."
According to the review report on the amendment to the Specialized Credit Finance Business Act written by Ko Sang-geun, former senior expert of the Political Affairs Committee, in June last year, the Korea Credit Finance Association stated that as of 2022, about 92.1% (89,914 out of 97,594) of all care institution merchants were receiving preferential fee rates. It also expressed concerns about fairness issues with other industries that provide goods and services with public interest but do not receive preferential fee rate benefits.
At that time, the Financial Services Commission submitted an opinion that some non-reimbursable items in care institution medical fees could not be regarded as public services. Among medical fees paid by credit card, only the patient's out-of-pocket expenses are applicable, and non-reimbursable items account for about 44% of the total out-of-pocket expenses. Non-reimbursable items include cosmetic dental treatments such as orthodontics.
A financial authority official said, "The criteria for judging public interest are not clear. If preferential fee rates are applied to the medical sector, demands from other sectors such as universities will also intensify," adding, "If fee rates are lowered, the cost will ultimately be passed on to card members or other merchants, so it must be reviewed from multiple perspectives."
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