[Reporter’s Notebook] Discussions on Real-Expense Insurance Reform Stumble from the Start

[Asia Economy Reporter Changhwan Lee] "Have you signed up for indemnity insurance by any chance?"

These days, this is one of the common questions heard from coordinators or doctors when visiting a hospital due to illness. If a patient has indemnity insurance, it becomes easier for the hospital to discuss non-reimbursable treatments. Non-reimbursable treatments help hospital operations and, since patients with indemnity insurance can claim costs from the insurer, there is a mutual alignment of interests.

However, non-reimbursable treatments tend to be expensive to the point that prices are negotiable, and they can induce excessive treatment, causing problems that lead to the insolvency of the entire indemnity insurance market. As the burden on insurers increases due to non-reimbursable treatments, indemnity insurance premiums soar, resulting in the adverse effect of only increasing premiums for those insured who rarely visit hospitals.

According to the Financial Supervisory Service, indemnity insurance has become a distorted structure where the top 10% of medical users receive 57% of the total insurance payouts. The loss ratio reaches 130%, causing annual deficits worth trillions of won and raising questions about the sustainability of indemnity insurance.

In response, financial authorities have begun preparing concrete measures. The Financial Services Commission, along with the Financial Supervisory Service, Ministry of Strategy and Finance, and the Korea Insurance Research Institute, launched the "Policy Consultative Body for Sustainable Indemnity Insurance" last month.

As the national medical expense burden continues to increase, there are concerns about widening medical disparities if indemnity insurance, which complements the public health insurance system, shrinks. The consultative body plans to mainly discuss strengthening management of non-reimbursable treatments to prevent excessive treatment, simplifying claim procedures, and reforming product systems.

The full-scale discussions are scheduled to begin next week, but controversy has already arisen as the Ministry of Health and Welfare and the medical community, which would be key players in indemnity insurance reform, are absent from the start. Although the root cause of indemnity insurance insolvency lies in the insurers' flawed product design, moral hazard by some medical professionals and patients who exploit the system also plays a role.

Ultimately, to devise solutions, all stakeholders need to gather in one place, but with the responsible government departments and the medical community absent, the process has started weakened, critics say.

Initially, the Ministry of Health and Welfare was expected to participate in the consultative body but reportedly decided not to join just before its launch. Strong opposition from the medical community to indemnity insurance reform discussions and the burden of participating in a consultative body involving the insurance industry are said to have influenced this decision.

The financial authorities plan to start discussions without the Ministry of Health and Welfare and continue talks with the ministry and the medical community through various channels later. However, with the most important parties missing, the consultative body cannot avoid criticism of being a half-hearted effort.

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