The Intentions of the Medical Community and Insurers?... 'Simplification of Actual Expense Claims' After 14 Years [Song Seungseop's Financial Light]

Trying to Claim Silbi: Hospitals, Documents, Even Faxes
Complex Process Leads to 321.1 Billion Won in Unclaimed Amounts
Procedures Simplified from Medical Institutions to Insurers
'Workload Concerns'... Strong Opposition from Medical Community
'Securing Medical Data'... Insurers Smile

A bill simplifying the claims process for indemnity health insurance has passed the National Assembly plenary session for the first time in 14 years. From now on, it will be easier to claim insurance premiums. However, the Korean Medical Association and the Korean Pharmaceutical Association harshly criticized the bill as "devastating." On the other hand, insurance companies, which inevitably face greater losses, support the passage of the bill. What are the hidden intentions of the medical and insurance sectors behind the seemingly simple indemnity claim simplification law?

The amendment to the Insurance Business Act passed by the National Assembly on the 6th aims to make the process of claiming indemnity health insurance easier. Indemnity health insurance is a product that compensates for actual medical expenses incurred when receiving inpatient or outpatient treatment or prescription medication at medical institutions due to illness or injury. It is commonly called 'indemnity insurance' or 'real expense insurance.'

However, even if the conditions are met, the requirements for receiving compensation under indemnity insurance are complicated. First, after completing treatment, one must visit the hospital or pharmacy in person to obtain documents such as medical receipts, detailed statements, and medical certificates. These documents then had to be sent to insurance agents or insurance companies via fax, online, or applications (apps). Having to revisit medical institutions to collect and submit documents was a major inconvenience.

As a result, many people gave up on claiming compensation despite being eligible. Especially among the elderly, the complicated procedures caused greater harm. According to the office of Yoon Chang-hyun, a member of the People Power Party, unclaimed indemnity insurance payments reached 321.1 billion KRW in 2023. This amount has been gradually increasing from 255.9 billion KRW in 2021 and 251.2 billion KRW last year.

On the 6th, the partial amendment bill of the Insurance Business Act was passed at the National Assembly plenary session. [Image source=Yonhap News]

With the passage of the amendment, consumers will no longer need to individually obtain and submit claim documents. They can simply request them at the hospital or pharmacy. Then, the medical institution will send the necessary documents for the insurance claim to the insurance company on behalf of the consumer. This will not involve sending paper documents but will be done electronically. The law will be enforced one year after its promulgation, with a grace period of up to two years for clinics and pharmacies.

Of course, to receive paper documents electronically, new systems must be developed. According to the amendment, insurance companies will bear the obligation to build and operate these systems. Naturally, the costs will also be borne by the insurance companies. However, the system can be outsourced to an agency. Additionally, a joint committee involving the medical and insurance industries will be established to discuss smooth operation plans for the computerization of indemnity insurance claims.

"Legal Improvement"... Passed After 14 Years of Recommendation

On April 11, 2019, Go Yong-jin, a member of the Democratic Party of Korea, along with representatives from seven civic groups including the Korea Financial Consumer Federation and the Citizens' Coalition for Economic Justice, held a press conference at the National Assembly Press Hall urging the immediate implementation of simplified claims for indemnity insurance.
[Image source=Yonhap News]

If this bill is for the convenience of consumers, why wasn't it passed earlier? Did no one know about these issues? In fact, the seemingly simple amendment to the Insurance Business Act took 14 years to pass. The Anti-Corruption and Civil Rights Commission recommended improvements due to consumer inconvenience as early as 2009. Since then, lawmakers have repeatedly proposed bills, but all failed to pass.

This was due to strong opposition from the medical community. On the day the bill passed, the Korean Medical Association, Korean Hospital Association, Korean Dental Association, and Korean Pharmaceutical Association issued a statement saying, "The National Assembly and government forcibly passed the bill according to a script to handle livelihood bills, which is devastating beyond words," and "We cannot help but suspect the ulterior motives of the National Assembly and government, who pushed the bill's deliberation solely for the benefit of insurance companies, and we express endless anger once again."

The medical community argues that the amendment to the Insurance Business Act may conflict with the current Medical Service Act and Pharmaceutical Affairs Act. The amendment requires medical institutions to provide patient information to insurance companies. However, the Medical Service Act and Pharmaceutical Affairs Act prohibit allowing anyone other than the patient to view or receive copies of medical or prescription records. The medical community is preparing a constitutional lawsuit against the amendment after legal review for this reason.

Lee Jeong-geun, the full-time vice president of the Korean Medical Association (KMA), is holding a solo protest in front of the National Assembly on the 12th of last month, opposing the amendment to the Insurance Business Act that includes the simplification of claims for indemnity insurance.
[Image source=Yonhap News]

Some say the real reason for the medical community's opposition is the 'excessive workload.' They argue that the task of exchanging insurance payments should be between consumers and insurance companies, so why should medical institutions handle claim processing? During the bill review, a policy committee expert stated, "It can be perceived as unfair to impose legal obligations related to private insurance contracts, which are not directly related to the core duties of medical institutions." In fact, the associations have demanded the designation of an 'information transmission agency.'

What about the insurance industry? Are they opposing the bill because consumers will claim billions of won in payments? Actually, the insurance industry supports the passage of the bill. First, simplification will reduce unnecessary costs. Insurance companies receive a massive volume of indemnity claim documents every year. They employ contract workers to verify photos or scanned copies of receipts. Although building a computerized network may cause immediate losses, it is seen as beneficial in the long term.

Although not openly stated, there are claims that the insurance industry hopes to 'secure data.' Once the amendment passes, insurance companies will accumulate electronic medical information and treatment data. Having more data means they can create more sophisticated products. They can refuse enrollment to patients estimated to have high disease risks, raise premiums, or deny claims more easily. Although the law prohibits using data for purposes other than business, opponents point out that pseudonymized data creates ambiguous situations.

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