Emergency Diagnosis of Private Health Insurance
④ How has the '5th Generation Private Health Insurance' changed from the government's promises?

[비즈한국] With a subscription rate of approximately 70% of the entire population, private health insurance is often called the "second national health insurance." However, it suffers from a deformed structure where the top 9% of subscribers receive about 80% of total insurance payouts. Medical abuse driven by private health insurance has already disrupted the market and left irreversible scars on the medical system, such as the avoidance of essential medical care. We examine the history of private health insurance, how it interacts with non-covered services in non-severe fields, and the direction that the upcoming 5th generation should take.

On the 19th, the government announced a reform plan for private health insurance through its "2nd Medical Reform Implementation Plan," aimed at increasing out-of-pocket costs, primarily for non-severe and outpatient care. For outpatient visits by non-severe patients, the private health insurance out-of-pocket rate will be linked to the national health insurance co-payment rate. For example, if a non-emergency patient visits the emergency room of a regional emergency medical center, the national health insurance co-payment rate is 90%; while the patient previously only had to cover 18% through private insurance, they will now have to pay about 81% of the cost. If the medical bill is 100,000 won, the patient will have to pay 81,000 won. However, the out-of-pocket rate for covered inpatient treatment will remain the same as the current system.

The government also allowed subscribers to choose a non-covered special rider for private health insurance by distinguishing between severe conditions and non-covered services. For severe patients, such as those eligible for national health insurance medical expense exemptions, the current level of coverage is maintained, and a new annual out-of-pocket cap will be established to provide additional compensation if excessive costs occur. For non-severe, non-covered services, the current 30% out-of-pocket rate will be increased, the annual coverage limit will be reduced, new limits per inpatient visit will be established, and the outpatient cap (200,000 won) will be changed from "per visit" to "per day." However, the specific figures previously discussed (50% out-of-pocket rate, 10 million won annual limit, 3 million won limit per inpatient stay, etc.) were not included.

In addition, the insurance premium discount and surcharge system based on an individual subscriber's usage of non-severe, non-covered services will continue to be applied. In 4th generation private insurance, premiums for non-covered riders are surcharged (100%, 200%, 300%) based on usage amounts (over 1 million won, 1.5 million won, and 3 million won). The authorities expect that 5th generation private insurance premiums will be reduced by around 30–50% compared to the 4th generation, depending on whether the non-severe, non-covered special rider is selected. Regulations prohibiting medical institutions from advertising that mentions the application of private health insurance will also be further specified.

In this announcement, the current level of coverage for inpatient covered expenses (a 20% out-of-pocket rate for private insurance) was maintained. The government had initially announced during a debate that it would link both inpatient and outpatient out-of-pocket rates to national health insurance rates, but it changed its stance. In a recent press release, the government explained, "In the case of inpatient care, there are many severe cases, so the medical cost burden is high and the risk of abuse is low, thus the out-of-pocket rate is maintained." There is strong criticism regarding the decision to leave coverage for high-cost inpatient claims unchanged. In fact, according to a report by the Korea Insurance Research Institute, looking at the status of private health insurance claims as of 2020, while outpatient visits account for the majority of claims (92.9%), inpatient care accounts for a higher proportion (57.0%) in terms of total claimed amount.

The government's retreat from its expressed willingness to pursue contract buybacks is also being viewed negatively. Until early this year, the government pointed out that it must actively devise countermeasures for early private insurance subscribers (a total of 15.82 million policies, or 44%, including 6.54 million 1st generation policies and 9.28 million early 2nd generation policies) whose existing terms apply until the age of 100 because there is no re-subscription clause, stating, "If these are excluded from reform, fundamental improvement of private insurance is impossible." They stated that they would consider applying re-subscription clauses to early insurance policies through legal amendments if necessary, while minimizing the infringement of subscriber interests after verifying the effects of buybacks. However, in this announcement, they stated that they would introduce contract buybacks only "if the subscriber wishes," based on the presentation of appropriate amounts by financial authorities and the establishment of procedures to protect subscriber rights.

The medical community is vehemently opposing this private health insurance reform plan. The Korean Medical Association (KMA) has mentioned the possibility of filing a constitutional complaint through a statement. The KMA Private Health Insurance Countermeasures Committee stated in a position paper on the 24th, "We strongly oppose the introduction of managed benefits, the inclusion of non-covered medical services in the calculation method for conversion factors, the legislation of the Non-covered Services Management Act, and the reform of private health insurance as stated in the 2nd Medical Reform Implementation Plan," adding, "It failed to consider at all that improper classification of mild and severe patients could lead to situations where even patients in need of treatment cannot receive it, and that the patients' right to appropriate treatment could be seriously undermined."