Government Embarks on Major Surgery... Reform Plan to Be Announced After Public Hearings This Month [Real Loss Insurance Money Leaks]⑤

Core of Non-Covered Service Standardization and Price Control
Restriction on Insurance Claims for Mixed Coverage of Covered and Non-Covered Services
Government to Separately Manage High-Expenditure Non-Covered Services Like Manual Therapy

The reason why indemnity insurance has become a complex issue is not only due to personal factors such as moral hazard among some hospitals and patients, but also because of the unique information asymmetry in the medical field and the structural vulnerabilities of indemnity insurance itself. The government, which has announced major surgeries on indemnity insurance, is currently focusing its reform efforts on 'non-covered service management' and 'indemnity insurance system improvement' rather than punishing individual misconduct.

The insurance industry argued that to resolve issues surrounding indemnity insurance, clinical guidelines for non-covered services should be established and phased price regulations introduced. They emphasized the need to develop standard clinical practice guidelines regarding methods and procedures for medical acts by disease, so that doctors can refer to them when providing non-covered services. Regarding price regulation, they suggested creating bodies such as the Non-Covered Service Policy Review Committee to set standards and appropriate fees for non-covered services.

Covered medical services are controlled by health authorities in terms of treatment targets, volume, and fees. However, non-covered services lack established standards for price, frequency, and quantity. Medical institutions can generate as much revenue as they want through non-covered services. Although a non-covered service reporting system has been in place since September last year, there is still insufficient data to establish standards. The non-covered service reporting system requires medical institutions to report details of non-covered services.

Currently, for cataract surgery using the same multifocal lens, Clinic A in Gyeongnam charges 300,000 KRW, while Clinic B in Incheon charges 9,000,000 KRW. For physical therapy, Clinic C in Seoul charges 100,000 KRW, whereas Clinic D charges 600,000 KRW. An insurance industry official said, "The problem is that once a new medical technology is recognized, hospitals can arbitrarily set the frequency and price of non-covered services," adding, "Standards for non-covered services must be established and prices controlled."

Regarding indemnity insurance reform, it was suggested that coverage amounts and limits for non-covered services with high insurance claim proportions, such as physical therapy, extracorporeal shock wave therapy, and injections, should be reduced. They also recommended increasing the patient co-payment rates for both covered and non-covered services to prevent excessive treatment.

Shortening the rate adjustment cycle is another key reform proposal favored by the insurance industry. Currently, the initial rate adjustment cycle for new indemnity insurance products is five years. They argue it should be shortened to three years to better respond to the rapidly changing medical environment. Kim Kyung-sun, a research fellow at the Korea Insurance Research Institute, explained, "Indemnity insurance products have similar coverage and subscriber groups, and maintain sufficient numbers of subscribers to ensure statistical adequacy and stability within a short period," adding, "Based on certain conditions, allowing rate adjustments within five years for new indemnity insurance products should be considered."

The government has also recognized the seriousness of issues related to non-covered services and indemnity insurance and is preparing system improvements. The government currently views resolving information asymmetry as the core of non-covered service improvement. They plan to build a national medical expense management system using data obtained from the non-covered service reporting system and surveys. They intend to develop key indicators related to non-covered medical expenses and create an integrated portal to provide comprehensive information on non-covered services at a glance. Professor Lee Ju-yeol of Namseoul University’s Department of Health Administration advised, "It is necessary to expand the scope of the non-covered service reporting system, which currently reports only one month of treatment data, to require submission of quarterly or full non-covered electronic data," and suggested, "A plan to disclose non-covered service items and standard prices of each medical institution at the entrance of all medical institutions via QR codes is also needed."

Standardization of non-covered services, which vary widely in names, treatment standards, and prices, will also be pursued. Standard codes and names will be assigned to indiscriminately used non-covered services such as 'Baekok Injection' and 'Cinderella Injection.' Treatment standards will be developed as standard clinical guidelines for major non-covered items through voluntary regulation by medical associations. For prices, a 'non-covered reference price system' based on market prices or covered service fees will be introduced through consultations with the medical community for non-covered services with large price disparities. Additionally, plans are underway to strengthen management of non-severe excessive non-covered services and establish a management system for the cosmetic market.

Regarding indemnity insurance system reform, strengthening the health insurance co-payment function of the next-generation (5th generation) indemnity insurance is being seriously considered. Amendments to the Health Insurance Act and Insurance Business Act are also being reviewed to introduce a prior consultation system between the Ministry of Health and Welfare and the Financial Services Commission when deciding important matters related to health and indemnity insurance systems. Measures to rationalize the coverage scope of non-covered services to prevent medical overuse and reduce indemnity insurance premiums are also underway.

Discussions are ongoing to restrict insurance claims for 'mixed treatment,' where covered services under health insurance and fully patient-borne non-covered services are combined. The government is also seriously considering separate management of non-covered items with high medical expenses, such as physical therapy. Professor Lee stated, "Given the continuous emergence of new medical technologies and drugs, a blanket ban on mixed treatment should be approached cautiously," and recommended, "It is necessary to develop limited recognition criteria based on disease characteristics."

The Presidential Commission on Medical Reform, the Ministry of Health and Welfare, and the Financial Services Commission plan to announce the second phase of medical reform implementation measures around the end of this month after further discussions and a public hearing scheduled for mid-month.