South Korea’s Insurance System Faces Scrutiny Over Coverage Denials for Severe Illnesses
A growing number of patients in South Korea are facing difficulties receiving insurance payouts for treatments related to severe illnesses, sparking a national debate about fairness and transparency within the country’s insurance system. Recent discussions at the National Assembly highlighted cases where insurance companies have refused to cover legitimate medical expenses, even after treatment has been received, and in some instances, are pursuing legal action to reclaim previously paid funds.
Rising Concerns Over Coverage Disputes
Oh Eun-ah, a cancer patient, shared her experience at a discussion session held at the National Assembly on March 24th, detailing how her insurance company denied coverage for chemotherapy, deeming it not “direct treatment.” Similarly, Tae-dong Kim, a rectal cancer patient, criticized the characterization of his doctor-recommended treatment as excessive. These cases underscore a broader trend of disputes between patients and insurance providers, even prompting scrutiny from the Financial Supervisory Service regarding insurance company loss ratios.
The Core of the Dispute: “Actual Loss” Insurance
Attorney Taehyung Choi, who presented at the National Assembly session, explained that “Actual Loss” insurance, with over 40 million subscribers, is designed to supplement national health insurance by covering non-covered medical expenses and out-of-pocket costs. However, he argued that patients are increasingly threatened by unilateral benefit denials and aggressive lawsuits from insurance companies. A key point of contention lies in the interpretation of policy terms and conditions, with insurers sometimes denying claims based on provisions not explicitly stated in the policy. For example, some cancer insurance policies are denying coverage unless treatment is deemed “direct,” even though this qualification isn’t always present in the actual loss policy.
Insurance Companies Pursue Reimbursements
The situation is further complicated by insurance companies increasingly filing lawsuits demanding the return of previously paid insurance money, alleging “unfair profit.” These lawsuits can involve substantial sums, ranging from 200 to 300 million won, potentially leading to financial ruin for patients. Attorney Choi noted a recent case where a patient who underwent extensive stomach and pancreatic resection faced a 120 million won lawsuit demanding the return of all insurance payments received between 2018, and 2022.
The Role of Medical Advice
Concerns have also been raised regarding the use of “medical advice” – a system where insurance companies seek external medical opinions to determine coverage eligibility. Critics argue this process lacks objectivity and can be used to deny legitimate claims. Attorney Choi emphasized the require for a medical advisory committee free from any financial ties to insurance companies to ensure impartial evaluations.
Industry Response: Fraud as a Key Concern
The insurance industry maintains that the vast majority of claims are paid promptly, with a 98.8% overall payment ratio for actual loss insurance. Approximately 1.3 trillion won was paid to cancer patients alone last year. However, insurers attribute difficulties in relaxing payment standards to a rise in organized insurance fraud. Cases of medical institutions fraudulently inflating bills and colluding with patients to claim unwarranted benefits have been reported, with one instance involving an estimated 7.2 billion won in fraudulent claims.
Strengthening Oversight and Combating Fraud
Industry representatives acknowledge the need for improvements in the review process and are working to expedite benefit payments. They also advocate for stricter criminal penalties for medical institutions involved in insurance fraud, urging health authorities to take the lead in prosecuting such cases. Jeon Hyeon-wook, head of the Insurance Product Dispute Department 2 at the Financial Supervisory Service, stated that efforts are underway to prevent bias in the selection of medical advisory committees and that the implementation rate of medical advice remains below 0.1% of all claims. The Financial Supervisory Service is also strengthening internal control systems by establishing a litigation management committee and involving external consumer protection experts.
The Korean insurance landscape is at a critical juncture, balancing the need to protect patients with severe illnesses against the imperative to combat fraud and maintain the financial stability of the insurance system. Continued dialogue between patients, insurers, and regulatory bodies will be essential to ensure a fair and equitable system for all.