Insolvency medical insurance, called the second health insurance, has not escaped from the chronic d..

Insolvency medical insurance, called the second health insurance, has not escaped from the chronic deficit structure due to the indiscriminate expansion of non-benefit items. Even the fourth-generation loss insurance, which was ambitiously introduced to prevent excessive treatment, had a loss ratio of more than 140%.

Kim Kyung-sun, a researcher at the Insurance Industry Research Institute, pointed out that as of the third quarter of this year, the risk loss ratio of all real-life insurance (1st to 4th generation) reached 119.3% at a seminar on “policy tasks for co-prosperity of public and private health insurance” held by the Korea Insurance Research Institute on the 8th.

The loss ratio of 119.3% means that the insurance company received 100 won in insurance premiums from the subscriber and paid 119.3 won as insurance money. The combined ratio, including business expenses, was 110.6%, and the structure of the deficit accumulated as it was sold became fixed.

In particular, the deterioration of the loss ratio of 3rd to 4th generation loss insurance, which improved the deficit structure by adjusting the self-payment, is remarkable. In the third quarter of this year, the loss ratio of the third-generation loss recorded 137.9% and the fourth-generation loss recorded a whopping 147.9%. This is a 18.2 percentage point increase compared to the same period last year.

Despite adopting a structure that surcharges insurance premiums according to the amount of non-benefit use, the fourth generation is believed to have fallen out of control due to the rise in both the salary and non-benefit loss ratio.

The key cause of eating away at the finances of real loss insurance is by far ‘non-payment’. Last year, out of the total 12.9 trillion won in loss insurance paid by non-life insurers, the payment of the top 10 non-benefit items reached 3.9 trillion won. In other words, 30.1% of the total insurance money was withdrawn from only 10 items.

Physiotherapy accounts for an overwhelming proportion of these. Insurance payments of about 2.3 trillion won (18%) were paid as a set of three physical treatments, including manual therapy, extracorporeal shock wave, and proliferation therapy. In particular, one manual treatment accounted for about 11% of the total loss insurance money, and was pointed out as the main culprit for the deterioration of the loss ratio.

The spread of ‘new non-benefit’ under the pretext of medical technology development is also fierce. Insurance payments related to new medical technologies, such as knee stem cell injection and prostate ligation, surged 40.7% and 29.1%, respectively, compared to the previous year.

The problem is that these non-pay items do not have price controls. In fact, non-benefit medical expenses for each medical institution are high, centering on hospitals and clinics. The proportion of optional benefits with ambiguous treatment purposes is also steadily increasing from 42.8% in 2017 to 51% in 2023.

Accordingly, the financial and health authorities plan to significantly strengthen the management of non-benefit in the 5th generation loss insurance to be introduced next year. The key to the 5th generation loss is to increase the self-payment rate of non-payment treatment to 50% (currently 30%) and reduce the annual coverage limit to 10 million won due to concerns over over-treatment.

Furthermore, researcher Kim suggested, “We need to control prices and medical standards by converting non-pay items with frequent oversupply into ‘management benefits’ of health insurance.” This means that the collapse of real loss insurance can be prevented only by regulating the price cap or the number of treatments in the public domain, not leaving non-benefits to market autonomy alone.

He also stressed that information exchange between health insurance and loss insurance should be strengthened to prevent false claims and double receipt. According to the Board of Audit and Inspection, the refund of the health insurance out-of-pocket upper limit and loss insurance, which were paid double between 2019 and 2022, amounted to 858 billion won. Blocking double payments has the effect of lowering annual loss insurance premiums by 223.2 billion won.

Meanwhile, Lee Han-joo, chairman of the Economic, Humanities and Social Research Institute, said in a congratulatory speech, “The increase in medical expenses is difficult to control due to excessive medical care caused by moral hazard. We need to coolly check the function and role of public insurance and complement each other to increase public trust.”

Ahn Cheol-kyung, president of the Korea Insurance Institute, also said in a welcoming speech, “Loss insurance is an important factor in the real life of the people, and sophisticated design and social consensus are essential to be sustainable.”