[K-Insurance Trapped by Regulations - Part 2] Cataracts, the 'Top Surgery'... Why Did It Become the Main Cause of Insurance Fraud?

Increasing Non-Covered Items for 'Tricky' Billing
Only 10% of Fraud Cases Detected Are Caught
Urgent Need to Strengthen Crackdown... Public-Private Information Exchange Also Needed

[Asia Economy Reporter Oh Hyung-gil] Park Soon-ok (58, pseudonym), who recently experienced blurred vision, visited A Eye Clinic in Gangnam, Seoul, known for cataract surgery. Thinking it was just presbyopia due to age, Park was shocked to be diagnosed with the need for cataract surgery (lens implantation). The attending physician mentioned that with the recent introduction of multifocal intraocular lenses, it is important to choose a specialized hospital and asked Park if she had enrolled in indemnity health insurance.

The physician recommended surgery, explaining that by conducting tests twice?once on the first day of hospitalization and once on the second day?they could claim medical fees amounting to 2.7 million won. After undergoing surgery, Park and the physician issued a false medical certificate indicating surgery on one eye each over two days to claim insurance money, but they were eventually caught for insurance fraud.

Despite the government and industry declaring an annual war on insurance fraud, this intelligent crime is becoming increasingly sophisticated and cunning. Recently, there has been a sharp rise in cases of false hospitalization or excessive diagnosis and treatment used as a basis to claim insurance money. Representative cases include cataracts and over-treatment of physical therapy. There is an urgent call for institutional measures to thoroughly investigate and strongly punish corrupt practices in illegal medical institutions and excessive or unnecessary treatments using indemnity insurance non-covered benefits.

Cataract Indemnity Insurance Claims Triple in Three Years

◆Clever Tactics: Increasing Non-Covered Costs Amid Cataract Coverage Expansion=As consumer burden for cataract surgery increased, the government converted some cataract surgery-related tests to health insurance-covered items starting this month. However, some hospitals and clinics are responding by raising non-covered costs, becoming a major cause of worsening indemnity insurance loss ratios.

Cataracts are an ophthalmic condition where objects appear blurred as if seen through fog. It is known that 70% of people aged 60 and over, and 90% of those aged 70 and over, exhibit cataract symptoms.

Cataracts rank first in South Korea in terms of patient numbers and surgery cases. Among 1.58 million patients undergoing 33 major surgeries in 2018, about 400,000 underwent cataract surgery, ranking first in patient numbers (25.4%), and among 1.87 million surgeries, about 590,000 were cataract surgeries, also ranking first (31.6%).

Notably, indemnity insurance claims for cataracts soared from 18 billion won in 2017 to 52.3 billion won last year, nearly tripling in the past three years.

This trend is particularly pronounced domestically. The annual average increase rate of cataract surgeries per one million population was 5.4% from 2014 to 2017, significantly higher than Germany (1.9%), Australia (2.2%), and France (3.3%).

The insurance industry points out frequent cases where presbyopia vision improvement surgeries are disguised as cataract surgeries covered by indemnity insurance. Since the 2016 revision of indemnity insurance terms, costs for multifocal intraocular lenses have been excluded from indemnity insurance coverage.

In response, some hospitals have drastically reduced multifocal intraocular lens costs while increasing non-covered test fees to claim more. After eye ultrasound and biometry tests were converted from non-covered to covered items this month, many hospitals have been raising treatment material costs (non-covered lens fees) in rapid succession.

For example, B Eye Clinic charged 2 million won for ocular and orbital ultrasound and biometry tests and 2.8 million won for multifocal lens costs during surgery in June. After the government's announcement on test fee coverage, they lowered test fees to 500,000 won but raised multifocal lens costs to 4.3 million won.

"Legislation Needed to Harsher Penalize Insurance and Medical Workers Involved in Fraud"

◆Only 10% of Insurance Fraud Cases Result in Arrests=To prevent such fraudulent acts in the medical field, calls are growing to strengthen crackdowns on non-covered items and impose harsher penalties. However, financial authorities have taken a passive stance. This is why there are demands to amend the 'Special Act on Insurance Fraud Prevention' to enhance the effectiveness of investigations and prevention.

The amount detected in insurance fraud reached 880.9 billion won last year, setting new records annually. Considering the upward trend, it is estimated to approach 1 trillion won this year. Among detected fraud types last year, the largest was 'false or excessive hospitalization, diagnosis, and disability,' amounting to 193.1 billion won. Fabrication of accident details (185.5 billion won) and intentional accidents (110.1 billion won) also exceeded 100 billion won.

Even when insurance companies or financial authorities detect insurance fraud, prosecutions are rare. Many detected cases do not lead to criminal charges.

According to the Korea Insurance Research Institute, while 92,538 people were detected for insurance fraud by the Financial Supervisory Service last year, only 9,759 were arrested by the police. Experts and industry insiders point out the need for a comprehensive system to manage everything from fraud detection to investigation, prosecution, trial, and recovery of insurance money in confirmed guilty cases.

Although the Special Act on Insurance Fraud Prevention allows for imprisonment up to 10 years or fines up to 50 million won upon detection, most cases result only in fines. Insurance companies unanimously call for legal amendments to impose harsher penalties?up to 10 years imprisonment or fines up to 100 million won?if insurance or medical industry workers are involved in insurance fraud.

Additionally, there is a need to allow information exchange with related agencies such as the National Health Insurance Service regarding illegal administrative hospitals or non-covered items that induce excessive treatment.

Hwang Hyun-ah, a research fellow at the Korea Insurance Research Institute, advised, "We should introduce the right to request data provision from the National Health Insurance Service and devise ways to enhance the usability of insurance-related information held by the Credit Information Agency."