10% Increase in Actual Loss Insurance Premiums... "Insufficient to Improve Loss Ratio"

Loss Ratio Decreased Due to COVID-19...
"Need to Address Increasing Non-Covered Medical Treatments"

[Asia Economy Reporter Oh Hyung-gil] The premiums for indemnity health insurance, known as the 'second health insurance,' will rise by about 10% next year, but concerns continue to mount within the insurance industry. They point out that this is merely a temporary measure insufficient to bring down the skyrocketing loss ratio.

Although the loss ratio of indemnity insurance has shown some improvement this year, it is diagnosed as a result of hospital avoidance caused by the COVID-19 pandemic. Recently, with a COVID-19 cluster infection occurring in long-term care hospitals?one of the factors contributing to the increase in indemnity health insurance loss ratios?there are also forecasts that the loss ratio for non-life insurers in the fourth quarter will be favorable.

According to the insurance industry on the 24th, the risk loss ratio for indemnity insurance as of the first half of the year was 131.7%, improving by 6.6 percentage points compared to 138.3% in the second half of last year. It is also 2.6 percentage points lower than the same period last year.

The reason for the lower loss ratio is the decrease in indemnity insurance claims. The average medical expenses claimed per person for indemnity insurance by the top five non-life insurers were 1,379,000 KRW in the first half, down from 1,396,000 KRW in the second half of last year. This is explained as an effect of mild patients avoiding visits to medical institutions due to concerns about COVID-19 infection.

According to the National Health Insurance Service, the average monthly medical expenses per person under health insurance in the first half were 137,316 KRW, a 2.3% decrease from 140,663 KRW in the previous quarter. The average monthly number of inpatient and outpatient days per person was also recorded at 1.56 days, down 11.5% from 1.76 days in the first half of last year.

Medical Institution Blind Spots Despite Strengthened Non-Covered Medical Care Management

However, non-covered medical treatments have been steadily increasing. The amount claimed for non-covered treatments at clinics under indemnity insurance in the first half was 1.153 trillion KRW, a 79.7% surge compared to 641.7 billion KRW in the first half of 2017.

Despite efforts to promote the 'coverage of non-covered services' through strengthening health insurance coverage, the proportion of non-covered claims in indemnity insurance has not decreased. The share of clinic non-covered expenses in total indemnity insurance claims was 48.1% in the first half of this year, up from 47.5% before the implementation of health insurance coverage enhancement in 2017.

The insurance industry argues that if this rise in non-covered expenses is not curbed, even if indemnity insurance premiums increase, it will be insufficient to reduce the loss ratio. The government is also strengthening non-covered medical care management by mandating full surveys of clinic-level non-covered services and public disclosure of medical costs starting next year, but some medical institutions remain in blind spots of management.

In particular, long-term care hospitals have been cited as a factor in the rising loss ratio of indemnity insurance. Due to lax admission criteria, long-term care hospitals sometimes admit patients for extended treatment or admit fake patients and then fabricate claims as if treatment was provided.

Among insurance frauds detected in the first half, false (excessive) disability and false diagnosis fraud amounts were 40.6 billion KRW and 11.4 billion KRW, respectively, increasing by 30.4% and 50.9% compared to the same period last year. However, false hospitalization fraud decreased by about 30.2% to 29.3 billion KRW.

An insurance industry official said, "The indiscriminate increase in non-covered treatments by medical institutions combined with the moral hazard of policyholders is the cause of the worsening loss ratio of indemnity insurance. Although the loss ratio has somewhat improved due to reduced hospital visits caused by COVID-19, fundamental measures are urgently needed."

This content was produced with the assistance of AI translation services.