A new real insurance policy (5th generation) that excludes musculoskeletal treatments such as physical therapy, out-of-body treatment, and proliferation, as well as non-reimbursable injections, will be launched at the end of this year. The maximum copayment rate for non-severe non-reimbursable treatments will increase to 50%, and the reimbursement limit will be reduced to 10 million won per year. This is intended to block 'medical shopping,' which has been cited as a cause of deteriorating health insurance finances. Financial authorities expect that when the product is released, premiums will decrease by 30% to 50%.
The Financial Services Commission announced a reform plan for real insurance on the 1st containing these details. The characteristics of the 5th generation, which will be launched at the end of this year, are that the reimbursement limit for non-reimbursable treatments that are not covered by health insurance will be greatly lowered, and the copayment rate will be increased significantly.
Financial authorities have differentiated the reimbursement limits and copayments for non-reimbursable treatments into severe non-reimbursable (Special Clause 1) and non-severe non-reimbursable (Special Clause 2). The current 4th generation policy reimburses non-reimbursable treatments without distinguishing between severe and non-severe up to 50 million won annually and 200,000 won per outpatient visit. The copayment rate is 30%. However, there have been criticisms that excessive treatments have occurred centered around non-severe non-reimbursable, leading to rising premiums and deteriorating health insurance finances.
In response, financial authorities have limited the reimbursement limit for non-severe non-reimbursable treatments in the upcoming 5th generation to 10 million won per year and 3 million won per hospitalization. Especially, the copayment rate has been raised to 50%. Additionally, some non-reimbursable items, such as unregistered new medical technologies and musculoskeletal treatments like physical therapy, out-of-body treatment, and proliferation, as well as non-reimbursable injections, have been made exclusions where no insurance money is paid. In terms of severe non-reimbursable, the difference is that a new copayment limit of 5 million won has been established for hospitalization in advanced and comprehensive hospitals.
Benefits are categorized into hospitalization and outpatient (clinic) with differentiated copayment rates. Financial authorities have determined that hospitalization for benefits has many severe illnesses and high medical expenses, and that there is little concern about abuse. Therefore, just like the current real insurance, the copayment rate has been applied uniformly at 20%. This means that the copayment rate is the same at 20% for both severely ill patients registered for special health insurance and general patients. Financial authorities explained, "For benefits, since it is universal medical expenditure, hospitalization is considered severe to comprehensively recognize the scope of severity and strengthen coverage."
On the other hand, in the case of outpatient visits, the copayment rate for real insurance will be linked to the health insurance copayment system to enhance its policy effectiveness. Patients will incur the higher amount based on the amount according to the health insurance copayment rate and 20% of the total medical expenses (real insurance copayment rate), along with an out-of-pocket cost ranging from 10,000 to 20,000 won when using hospitals or pharmacies.
The 5th generation applicants for re-enrollment include approximately 20 million from the late 2nd generation (after April 2013) and 3rd to 4th generation enrollees. Depending on their enrollment period, existing real insurance contracts will be terminated sequentially from July 2026 to June 2036, and they will need to re-enroll in the 5th generation real insurance. On the other hand, 16 million enrollees from the 1st generation and early 2nd generation (before April 2013) have no re-enrollment conditions in their policy and can extend their contracts up to 100 years if they wish.
To accelerate the transition to the 5th generation, financial authorities plan to implement a re-acquisition system for real insurance. They intend to provide a type of compensation (incentive) if early enrollees from the 1st and 2nd generations re-enroll in the 5th generation. Financial authorities plan to announce specifics, including the size of compensation, after discussions with the insurance industry in the second half of this year.
Also, in the second half of this year, they will select major non-reimbursable items to establish dispute resolution criteria and make various information regarding real insurance premiums, loss ratios, insurance profits and expenses available through the Life and Non-Life Insurance Association.