Indemnity Health Insurance Deficit Decreased by 350 Billion Won Last Year... "Impact of Premium Increases"

Concentration on Certain Items Such as Non-covered Injections and Manual Therapy Remains
35.96 Million Indemnity Health Insurance Contracts Last Year... Up 0.5% from Previous Year

Due to factors such as rising insurance premiums, last year’s deficit in indemnity health insurance improved by 350 billion won. However, the concentration of insurance payouts for certain items, such as non-covered injections and manual therapy, remained persistent.

According to the "2024 Indemnity Health Insurance Business Performance (Provisional)" report released by the Financial Supervisory Service on May 12, the indemnity health insurance deficit last year was 1.62 trillion won, a decrease of 350 billion won compared to the previous year’s 1.97 trillion won.

The loss ratio was 99.3%, which is a 4.1 percentage point improvement from the previous year’s 103.4%. By generation, the loss ratios were 97.7% for the first generation, 92.5% for the second generation, 128.5% for the third generation, and 111.9% for the fourth generation. In the industry, a loss ratio exceeding 85% is considered to be below the break-even point.

Last year, indemnity health insurance payouts totaled 15.2 trillion won, an increase of 8.1% compared to the previous year. Of this, covered services (policyholder’s copayment) amounted to 6.3 trillion won, up 41.6% year-on-year, while non-covered services reached 8.9 trillion won, up 58.4%. Non-covered injections (2.8 trillion won) and manual therapy for musculoskeletal disorders (2.6 trillion won), both of which have been criticized for encouraging medical shopping and overtreatment, accounted for 35.8% of total payouts, indicating a significant proportion.

Among all payouts, clinics accounted for the largest share at 32.2%, followed by hospitals (23.3%), general hospitals (17.3%), and tertiary general hospitals (14%). For non-covered services only, the shares were even higher for clinics (37.5%) and hospitals (28.6%).

The annual non-covered payout per indemnity insurance contract differed significantly by generation. The first generation received 400,000 won per contract, which was about two to three times higher than the third generation (182,000 won) and the fourth generation (136,000 won).

As of last year, there were 35.96 million indemnity health insurance contracts, an increase of 0.5% (170,000 contracts) compared to the previous year’s 35.79 million contracts. By generation, the second generation accounted for the largest share with 15.52 million contracts (43.2%), followed by the third generation (8.04 million contracts, 22.3%), the first generation (6.38 million contracts, 17.8%), and the fourth generation (5.25 million contracts, 14.6%).

A Financial Supervisory Service official stated, "Although the performance and loss ratio of indemnity health insurance have improved, this is mainly due to premium increases rather than measures such as preventing insurance payout leakage. There is a growing concentration of insurance payouts for certain items, such as non-covered injections and manual therapy, particularly at clinics and hospitals, so improvements are needed."

Meanwhile, the financial authorities announced a reform plan for indemnity health insurance last month. The main points are to focus non-covered coverage on severe cases and to rationalize the limits, scope, and deductibles for non-severe, non-covered services. The fifth-generation indemnity health insurance, reflecting these reforms, is expected to be launched around the end of this year.