[Inside Chodong] Actual Expense Insurance Reform Needed, but Policyholders Must Be Protected

With the establishment of the nationwide medical insurance system (now the National Health Insurance system) in the 1980s, our citizens gained easy and affordable access to medical services. Although the medical industry developed rapidly through low-cost, high-volume treatment, expensive 'non-reimbursable' items not covered by health insurance also proliferated. This led to the emergence of '실손보험 (actual expense insurance),' which further encouraged medical consumption. Since actual expense insurance covers non-reimbursable treatments, medical consumers had no reason to refuse them. Thanks to insurance companies aggressively marketing it as an essential insurance everyone must have, about 40 million out of the 50 million population in Korea subscribed to it. This is why actual expense insurance is called the 'second health insurance.'

The problem is that from the outset, actual expense insurance did not have a rational role-sharing arrangement with health insurance, increasing the medical expenses burden on the public. Cases of hospitals providing excessive treatments and patients abusing actual expense insurance have repeatedly become issues, ranging from manual therapy and extracorporeal shock wave therapy to vitamin and nutritional injections, multifocal lens implantation for cataract patients, and skin beauty procedures at Korean medicine hospitals.

Actual expense insurance has also eroded the finances of the National Health Insurance, which is funded by taxpayers. As 'mixed treatments' combining reimbursable treatments covered by health insurance and non-reimbursable items covered by actual expense insurance increased, health insurance expenditures also rose significantly. Thanks to actual expense insurance, a structure has solidified where dermatology, ophthalmology, orthopedics, and other departments easily earn money through expensive minor treatments, causing doctors to flock to profitable specialties while neglecting essential ones. Hospitals create new medical services targeting actual expense insurance patients, and insurance subscribers, mindful of rising premiums, continue to participate in excessive medical care, perpetuating a vicious cycle.

Ultimately, the government has initiated reforms targeting actual expense insurance, which encourages excessive treatment and undermines essential medical care. The 'Second Medical Reform Implementation Plan,' to be announced around the end of this year, promises to drastically revise unnecessary non-reimbursable items and increase patient co-payments to curb moral hazard among actual expense insurance subscribers. In the medical market, where information asymmetry exists, patients have no choice but to accept non-reimbursable treatments as recommended by hospitals (doctors). In fact, a system to control such situations should have been in place since the introduction of actual expense insurance. Although there may be considerable opposition from the medical community, the government must establish measures to manage the list and prices of non-reimbursable items.

However, one aspect must not be overlooked. Patients already undergoing treatment for illnesses among actual expense insurance subscribers must not be denied the coverage originally promised. Since patients with pre-existing conditions find it difficult to enroll in new insurance plans, most continue with the existing first- and second-generation actual expense insurance despite significantly increased premiums. It is inappropriate for insurance companies to subtly induce 'contract transfers' that they cannot responsibly cover. Even for minor illnesses, patients who require treatment or are undergoing appropriate treatment as judged by doctors should not face insurance claim denials based on medical advisory results. Such situations must be handled transparently and reasonably. Although actual expense insurance is private insurance, it is unacceptable to pass insurance companies' losses onto consumers or waste unnecessary taxes to cover those costs at this stage.