Lee Chanjin, FSS Governor: "The Indemnity Insurance Issue Is a Typical Policy Failure by Financial Authorities"

Financial Supervisory Service Holds Forum on Improving Indemnity Insurance to Prevent Overtreatment and Disputes
"A New Obligation to Explain Discretionary Non-Reimbursed Treatments Is Needed"

Yonhap News Agency

Lee Chanjin, Governor of the Financial Supervisory Service, pointed out, "The issue of indemnity health insurance is linked to a typical policy failure by the financial authorities."

At a financial consumer protection forum held at the Financial Supervisory Service headquarters in Yeouido, Seoul, on November 18, Governor Lee stated, "It has been just over three months since I joined the Financial Supervisory Service, and the people who have welcomed me the most are the victims of cataract surgery (unpaid indemnity insurance claims). Every day, I am acutely aware of how important the perspective of financial consumer protection is."

This forum was the second event following the financial investment product forum introduced on November 13, aimed at strengthening the consumer protection system and shifting toward consumer-focused financial supervision. During the forum, comprehensive discussions took place, ranging from diagnosing the current status of indemnity insurance disputes to strengthening the linkage between public and private insurance, and improving supervisory measures.

Insurance companies, in accordance with the Supreme Court's ruling, only pay insurance claims for cataract surgery within the outpatient medical expense limit if hospitalization is not required. Patients who underwent surgeries costing tens of millions of won based solely on hospitals' explanations that cataract surgery would be covered by insurance ended up having to pay for the procedures out of pocket.

The indemnity insurance issue is also reflected in the statistics. Last year, 7,264 indemnity insurance dispute cases were filed, accounting for 23.4% of all insurance disputes. Of these, 1,039 cases involved cataract surgery disputes.

The insurance industry considers 2022 a turning point. Insurance companies spent 1 trillion won annually on cataract surgery insurance claims. However, in 2022, the Supreme Court ruled that if medical observation or management by healthcare professionals was not required for more than six hours after cataract surgery, it did not constitute inpatient treatment, and cataract surgery should, in principle, be considered outpatient treatment.

As a result, protests over insurance claim payments have continued. The daily protests held in front of the Financial Supervisory Service are directly related to the payment of indemnity insurance claims for cataract surgery.

Governor Lee said, "The situation is a combination of policy failures by the financial authorities and the short-sighted product design by insurance companies. Since joining the Financial Supervisory Service, I have witnessed daily that many victims come for dispute mediation, and the staff are facing structural difficulties that are hard to resolve."

Earlier, in his opening remarks at the forum, Governor Lee raised the level of criticism, stating, "As the structural issue of 'third-party risk' in indemnity insurance, which fuels the non-reimbursed medical cost bubble through moral hazard and overtreatment, intensifies, the need for comprehensive improvement is being raised." This statement was reportedly stronger than what had been previously announced, indicating that he views the indemnity insurance problem as serious.

Governor Lee said, "We need to actively review how to structurally address the third-party risk, including whether it is possible to establish a new legal obligation for healthcare professionals to explain discretionary non-reimbursed treatments to patients, beyond the current Article 24-2 of the Medical Service Act regarding the duty to explain medical procedures."

In cases of discretionary non-reimbursed treatments such as cataract surgery, these procedures are not covered by indemnity or national health insurance. Patients, believing they are eligible for insurance payouts, receive treatment, but disputes arise when claims are denied. Governor Lee pointed out that healthcare professionals should be legally required to inform patients in advance when a procedure is a discretionary non-reimbursed treatment.

Regarding the improvement of the medical advisory system, Governor Lee said, "The practical difficulty with medical advisory is that, in cases of discretionary non-reimbursed treatments, the attending physician is the party generating income through such treatments, while the third-party medical advisor only judges medical necessity, making it difficult to overturn the attending physician's judgment."

He emphasized, "Discretionary non-reimbursed treatments are not included as statutory benefits because there is no recognized need for coverage within the national health insurance system. Fundamentally, we need to strengthen product design and take a more thorough approach at every stage, including sales."