(C) KBS

SEOUL – South Korean policyholders are facing a significant financial burden as private health insurance premiums are set to increase by an average of 7.8% starting next year. The General Insurance Association of Korea (GIAK) announced on December 23 that the hike is an inevitable response to the widening cumulative deficits caused by excessive non-reimbursable medical treatments and fraudulent claims.

Differentiated Hikes Across Generations
The premium adjustments vary significantly across the four "generations" of insurance products. The third-generation (16% increase) and fourth-generation (20% increase) products will see the steepest rises, reflecting their higher loss ratios. In contrast, the first and second generations will see more modest increases of 3% and 5%, respectively. Industry experts note that individual rates will fluctuate based on the insurer's specific loss ratio, the policyholder’s age, and the renewal cycle—which ranges from one year for newer products to up to five years for older ones.

The Crisis of the Loss Ratio
The insurance sector is currently grappling with a loss ratio averaging 120% as of the third quarter of 2024. A loss ratio exceeding 100% signifies that insurers are paying out more in claims than they collect in premiums, leading to a structural deficit. Data from the nation’s top five non-life insurers—Samsung, DB, Hyundai, KB, and Meritz—show that total payouts reached 8.48 trillion won from January to September, a 13.1% year-on-year increase.

Orthopedics and Non-Reimbursable Leakage
A primary driver of this surge is the orthopedic sector, which accounted for the largest share of payouts at 1.89 trillion won. Notably, non-reimbursable items—such as manual therapy and extracorporeal shock wave therapy—constitute 70.4% of orthopedic claims, far exceeding the industry average of 57.1%. Furthermore, authorities have observed a spike in fraudulent activity involving popular weight-loss injectables like Wegovy and Mounjaro, where cosmetic treatments are being disguised as medically necessary procedures to claim insurance benefits.

Regulatory Countermeasures and the 5th Generation
To stem the financial bleeding, financial authorities are pushing for a structural overhaul. A key proposal involves reclassifying three major non-reimbursable treatments, including manual therapy, as "managed benefit items" under the National Health Insurance system. By integrating these into the state-regulated framework, the government hopes to curb indiscriminate utilization through stricter medical necessity reviews.

Looking ahead, the government plans to introduce the "fifth-generation" (5G) insurance model. This new product is expected to differentiate coverage between "critical" and "non-critical" non-reimbursable items, raising the self-payment ratio for non-critical treatments to as high as 50%. While these measures aim to stabilize the ecosystem, the immediate burden on consumers remains a point of contention in the ongoing debate over medical cost sustainability.