South Korea Grapples with Real Cost Insurance Coverage Disputes

As approximately 40 million South Koreans rely on real cost medical insurance, concerns are mounting over its effectiveness as a ‘second health insurance’ due to growing conflicts regarding coverage scope and payment standards. Patients with serious illnesses, such as cancer, have increasingly reported denials or reductions in insurance payouts during treatment, raising questions about the system’s original intent and operational methods.

National Assembly Discussion on Improving the System

On March 24, 2026, a discussion session titled ‘Problems of the actual cost insurance system and exploring ways to improve it’ was co-hosted by Representatives Kim Seon-min and Shin Jang-sik of the Chokuk Innovation Party, alongside the Korea Cancer Patients’ Rights Council, in the 5th conference room of the National Assembly Hall. The debate brought together patients, medical professionals, the insurance industry, and government officials to address actual loss insurance coverage standards, dispute resolution, and potential system improvements.

Patients voiced difficulties, citing instances where insurance companies refused to cover hospitalization for managing chemotherapy side effects, deeming it ‘not direct treatment,’ or denied payment for essential immunological and adjuvant treatments following cancer recurrence, labeling them ‘unnecessary.’ Some patients faced financial hardship and legal battles over disputed payments.

Proposed System Improvements

Attorney Taehyung Choi of Taehyung Choi Law Firm presented four key system improvements to resolve disputes. He emphasized the need for clear guidelines for interpreting policy terms to prevent arbitrary requirements, such as the ‘direct treatment’ clause, and advocated for basing hospitalization necessity on the attending physician’s medical judgment rather than insurance company standards.

Choi also proposed forming an independent medical advisory committee, free from conflicts of interest with insurance companies, and establishing sanctions for biased advice. He suggested a mandatory pre-mediation process before insurance companies initiate lawsuits to reduce unnecessary litigation. Finally, he called for increased transparency through regular disclosure of insurance company payment refusal rates and the implementation of a regular supervisory system to identify and address abnormalities.

Concerns from the Korean Medical Association

Lee Tae-yeon, Vice President of the Korean Medical Association, expressed concerns that the actual cost insurance structure could distort patient access to treatment and impact the medical field. He specifically highlighted issues with management benefits and hospitalization criteria.

Vice Chairman Lee cautioned that the management benefit system, intended to control non-benefit treatments, could inadvertently reduce insurance company liability for payments. He noted that non-benefit treatments are often used alongside standard treatments, particularly in cancer care, and expressed concern that bundling these with management benefits could limit patient options. He also criticized the requirement for hospitalization to qualify for coverage, arguing it hinders medical advancements and potentially induces unnecessary hospital stays.

Insurance Industry Response

Lee Hyeong-geol, Manager of the Long-Term Insurance Department at the Non-Life Insurance Association, underscored the role of actual loss insurance as a practical safety net for patients with serious illnesses. As of 2025, seven non-life insurance companies had paid approximately 2.63 million claims related to cancer patients, totaling around 1.3 trillion won, with a payment rate exceeding 96% for cancer hospitalization treatment requiring intensive care.

However, Lee pointed to insurance fraud and overtreatment as challenges hindering the relaxation of insurance review standards. He cited instances of medical institutions inducing unnecessary hospitalizations to inflate treatment costs and fraudulent claims for ineffective treatments, resulting in an estimated loss of 2 trillion won annually. He strongly supported the formation of an independent medical advisory body by the government to improve objectivity and prevent consumer harm.

Government Oversight and Future Directions

Jeon Hyun-wook, Team Leader of Insurance Product Dispute Department 2 of the Financial Supervisory Service, outlined ongoing efforts to improve the system, including managing medical advice and litigation issues. He highlighted the Medical Advisory Management Committee’s role in ensuring unbiased advice and accountability. He also noted that medical advice accounts for less than 0.1% of total claims and does not directly lead to payment denials, with a significant portion resulting in full or partial payment.

Regarding concerns about decreasing coverage for subsequent generations, Team Leader Jeon explained that the initial 100% coverage structure led to sharply rising premiums due to overuse. The current annual insurance payment increase rate is approximately 10%, and maintaining the system’s sustainability requires reasonable use and standards through collaboration between the medical community, insurance industry, and consumers.

Seong Ji-eun, Secretary-General of the Ministry of Health and Welfare, explained the purpose of the management benefit system and its aim to address price discrepancies and information asymmetry in non-reimbursed treatments. She assured that treatment standards would be adjusted to reflect real-world conditions and patient concerns, and that out-of-pocket coverage would be maintained for those with actual loss insurance.