35 Million Insured Under Actual Loss Coverage Face Premium Hikes... Remaining Challenges 'Piling Up'

Year-End Controversy Over Indemnity Insurance Settled for Now
Government Strengthens Management of Non-Covered Items
Industry Urges Urgent Shift to 4th Generation

[Asia Economy Reporter Oh Hyung-gil] The issue of insurance rate hikes, which heated up the insurance industry at the end of the year due to news that premiums for indemnity health insurance would increase by an average of 14% starting this year, has been settled for now. Although 35 million indemnity insurance subscribers will bear the burden of premium increases, there are evaluations that this is merely a temporary measure rather than a fundamental solution.

The government needs to promptly strengthen management of non-reimbursable items in line with the enhancement of health insurance coverage, and the insurance industry is being urged to transition existing subscribers to the 4th generation products.

According to the government and industry on the 3rd, the reduction effect on indemnity insurance payouts due to the enhancement of health insurance coverage, known as "Moon Care," which promotes the "coverage of non-reimbursable items," is falling short of expectations.

Research conducted by the National Health Insurance Service and the Korea Insurance Research Institute shows that from November 2019 to December 2020, the government covered items such as female reproductive organ and anterior segment ultrasound, skin suture liquid adhesive, dupilumab (a treatment for allergic diseases), durvalumab (a treatment for urothelial carcinoma), and ocular measurement tests.

For these items, a reduction effect of 210.9 billion KRW in indemnity insurance payouts occurred in 2020, which is only about 1.79% of the total indemnity insurance payouts of 11.8 trillion KRW. This result falls short of the authorities' expectations, who had confidently predicted that insurance companies would see a decrease in indemnity insurance payouts due to the expanded implementation of Moon Care.

The cause lies in medical institutions shifting costs to new non-reimbursable items following the coverage of major items.

For example, in the case of cataracts, when the insurance industry decided through a standard policy revision in 2016 not to cover the cost of multifocal lenses, the price of multifocal lenses decreased, but the cost of measurement tests increased significantly. Also, when measurement test costs were covered in September 2020, the claimed amount for multifocal lenses in contracts before January 2016 surged sharply.

This is why there are demands to investigate and disclose the cost information of non-reimbursable items so that medical institutions cannot arbitrarily set non-reimbursable prices. Jeong Seong-hee, a research fellow at the Korea Insurance Research Institute, pointed out, "We need to enhance the public's right to know and establish guidelines for socially agreeable non-reimbursable prices and usage."

Although premiums have increased, insurance companies are also under severe pressure. This is because it is far from sufficient to lower the loss ratio of indemnity insurance, which is approaching 140%. The Korea Insurance Research Institute predicted that the cumulative loss of indemnity insurance will reach 4 trillion KRW this year.

There is no suitable incentive to encourage existing subscribers to switch to 4th generation products. If they switch to 4th generation indemnity insurance within the next six months, they will receive a 50% discount on premiums, but for a 40-year-old man, this only reduces the monthly premium by about 5,000 KRW.

An industry official said, "Not only is the sustainability of indemnity insurance being threatened, but if premium increases make it difficult to maintain insurance, consumer protection will ultimately become difficult as well," adding, "Innovative system improvements such as a differentiated premium system for contract conversion are necessary."

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