Fifth-Generation Indemnity Health Insurance Launch Imminent: "Stricter Non-Covered Service Management and Premium Rate Normalization Needed"

Korea Insurance Research Institute Holds Seminar on "Policy Tasks for the Coexistence of Public and Private Health Insurance" on the 8th
"Government Needs to Establish New Governance for Non-Covered Services Management"
"Side Effects of New Medical Technologies and Advanced Regenerative Medicine Intensifying... Legal and Institutional Improvements Needed"

Experts have suggested that, for a sustainable indemnity health insurance system, stricter management of non-covered services, integration of information between public and private insurance, and normalization of premium rates are necessary. While the fifth-generation indemnity health insurance, set to be launched early next year, is expected to help reduce unnecessary medical expenses, there are predictions that increasing out-of-pocket payments will not necessarily lead to a decrease in medical demand.

The Korea Insurance Research Institute made these remarks on the 8th during a seminar on "Policy Tasks for the Coexistence of Public and Private Health Insurance." At the seminar, Professor Jin-Hyun Kim of Seoul National University presented on "Improvement Measures for the Management System of Non-Covered Medical Expenses," while Kyungsun Kim, Research Fellow at the Korea Insurance Research Institute, discussed "Coexistence Strategies for Public and Private Insurance Following the Introduction of Fifth-Generation Indemnity Health Insurance."

Professor Jin-Hyun Kim of Seoul National University is speaking at the seminar on "Policy Tasks for the Coexistence of Public and Private Health Insurance" held by the Korea Insurance Research Institute on the 8th. Photo by Korea Insurance Research Institute

Non-covered services under the national health insurance have long been a blind spot in management, contributing to the increasing burden of medical expenses for the public. Unlike covered services, non-covered services allow medical institutions to freely set both items and prices. As a result, the same medical procedure can vary greatly in price depending on the institution. According to a survey on non-covered prices conducted last year by the Citizens' Coalition for Economic Justice, manual therapy showed the largest price disparity among hospitals, with a difference of up to 62.5 times. Extracorporeal shock wave therapy (22.5 times) and percutaneous epidural neuroplasty (19 times) also exhibited significant price gaps.

Since 2010, South Korea has implemented a notification system for non-covered medical expenses to manage these services, but it has proven largely ineffective. The lack of a unified notification policy makes it difficult for users to access information, and the lists are not standardized. Professor Kim noted, "Although there have been some improvements to the notification system for non-covered services, it remains difficult for users to access information, and the scope and items disclosed are limited, making it hard to expect any price control effect on new non-covered items." He further diagnosed, "Inadequate management of non-covered services is intensifying various social issues, such as financial leakage in both public and private insurance, distortion of the medical system due to the outflow of essential medical personnel, and an increased burden of medical expenses on the public."

Professor Kim advised that the government needs to establish a governance system for the management of non-covered services. He said, "A Non-Covered Services Management Committee, jointly supervised by the Ministry of Health and Welfare and the Financial Services Commission, should be established and operated," adding, "It is also necessary to build an information exchange and mutual verification system between financial and health authorities."

He also emphasized the need for a major overhaul of the early-entry medical technology assessment system, which is a primary cause of excessive non-covered treatments. Professor Kim stated, "The definitions and scope of early-entry medical technologies and advanced regenerative medicine treatments should be clarified," and recommended, "A system for periodic re-evaluation should be introduced, and a legal mechanism for eliminating non-covered services should be established."

Kyungsun Kim, Research Fellow at the Korea Insurance Research Institute, is speaking at the seminar on "Policy Tasks for the Coexistence of Public and Private Health Insurance" held by the Korea Insurance Research Institute on the 8th. Korea Insurance Research Institute

Indemnity health insurance, often referred to as the "second health insurance," has combined with a weak management system for non-covered services to create issues such as medical shopping and overtreatment, resulting in a vicious cycle that drives up premiums for responsible policyholders. The government plans to introduce the fifth-generation indemnity health insurance in January next year, which will differentiate coverage by classifying non-covered services as either severe or non-severe.

Research Fellow Kim expects that the fifth-generation indemnity health insurance will increase consumers' price sensitivity toward non-severe non-covered services and change overall medical utilization patterns, thereby reducing unnecessary medical expenses. However, he expressed concern that if physicians recommend unnecessary services or additional treatments, patients' motivation to reduce medical costs could weaken, partially offsetting the intended effect of reducing actual medical usage. The anticipated cost-saving effect may be limited, as the higher out-of-pocket rates designed to curb demand may not sufficiently translate into reduced medical utilization.

Research Fellow Kim also pointed out the need for institutional improvements to address potential side effects arising from the expansion of the market, following the revision in February of the Act on the Safety and Support of Advanced Regenerative Medicine and Advanced Biopharmaceuticals. He explained, "Advanced regenerative medicine treatments are generally expensive, and there are significant price variations even among similar existing non-covered procedures, which could lead to increased insurance claims and financial burdens for indemnity health insurance." He also raised concerns that "the lack of strict definitions for intractable diseases among the eligible recipients of advanced regenerative medicine treatments could allow for broad commercial interpretation and application, or even abuse for cosmetic purposes." Since advanced regenerative medicine treatments are covered not only by previous generations of indemnity health insurance but also by the non-covered special rider in the fifth generation, there is a need to specify the scope of eligible recipients to prevent moral hazard.

Research Fellow Kim argued that, in order to improve the soundness of both public and private health insurance, not only should management of non-covered services be strengthened, but also information integration and rationalization of premium rates are necessary. He stated, "Amendments to the National Health Insurance Act and the Insurance Business Act are needed to establish a basis for information exchange between the authorities and affiliated organizations responsible for health insurance and indemnity health insurance." He continued, "Beyond sporadic cooperation among government departments, there should be a permanent cooperative body involving both healthcare and insurance authorities to refine coordination and oversight functions." He added, "To normalize indemnity health insurance premium rates, it is necessary to consider the appropriateness of the current premium adjustment limit (25%). If premiums for the first to fourth generations of indemnity health insurance are normalized, the transition to the fifth generation will be further promoted through price differences."

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