10% Increase in Indemnity Insurance Premiums... "Insufficient to Improve Loss Ratio" (Comprehensive)

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

[Asia Economy Reporter Oh Hyung-gil] As premiums for indemnity health insurance, known as the "second health insurance," are set to rise by about 10% next year, concerns are growing within the insurance industry.

This is because the increase is seen as only a temporary measure to bring down the skyrocketing loss ratio. Although the loss ratio for indemnity insurance has shown some improvement this year, the industry attributes this to the avoidance of hospitals caused by the COVID-19 pandemic.

According to the insurance industry on the 24th, the risk loss ratio for indemnity insurance in 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 the effect of mild patients avoiding 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 also decreased by 11.5% to 1.56 days compared to 1.76 days in the first half of last year.

However, non-reimbursed medical treatments continue to increase steadily. The amount claimed for non-reimbursed treatments under indemnity insurance at clinics 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.

Medical Institution Blind Spots Despite Strengthened Management of Non-Reimbursed Medical Care

Despite efforts to "convert non-reimbursed treatments to reimbursed" under the health insurance coverage expansion, the proportion of non-reimbursed claims in indemnity insurance has not decreased. The share of clinic non-reimbursed claims in total indemnity insurance medical expenses was 48.1% in the first half of this year, up from 47.5% before the implementation of the coverage expansion in 2017.

The insurance industry argues that if this rise in non-reimbursed claims is not curbed, even with premium increases, it will be insufficient to reduce the loss ratio. The government is also strengthening management of non-reimbursed medical care by mandating full surveys of clinic-level non-reimbursed treatments and public disclosure of medical costs starting next year, but some medical institutions remain outside the scope 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, these hospitals sometimes admit patients for extended periods or admit fake patients and then claim insurance as if treatment was provided.

Among insurance fraud cases 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. With recent outbreaks of COVID-19 clusters in long-term care hospitals, it is expected that false hospitalizations will decline, leading to a favorable loss ratio for non-life insurers in the fourth quarter.

An insurance industry official said, "The indiscriminate increase in non-reimbursed treatments by medical institutions combined with the moral hazard of policyholders is the cause of the worsening loss ratio of indemnity insurance," adding, "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.