On April 1, 2025, the Financial Supervisory Service (FSS) unveiled a significant reform plan for indemnity insurance, aimed at addressing concerns over excessive medical treatments and rising insurance premiums. The new measures will lead to increased co-payment rates and reduced compensation limits for non-severe disease treatments, marking a substantial shift in how indemnity insurance operates in South Korea.
The reform plan stipulates that the co-payment rate for non-severe disease treatments will rise from the current 30%—based on the 4th generation insurance products—to 50% for both inpatient and outpatient care. This change is expected to alleviate some of the financial strain on the health system caused by over-utilization of non-essential medical services.
In a further effort to rein in costs, the annual compensation limit for indemnity insurance will be drastically reduced from 50 million won (approximately $38,000) to just 10 million won (about $7,600). Additionally, the compensation per visit will be adjusted downwards from 200,000 won to a daily limit of 200,000 won, which effectively caps the amount that can be claimed per day.
Notably, certain treatments, including manipulative therapies and non-covered injections, will no longer be eligible for indemnity insurance coverage. This exclusion is part of a broader strategy to focus the insurance on essential health services and severe medical conditions. The FSS has identified non-severe disease treatments as a primary factor contributing to systemic abuse of the healthcare system and subsequent increases in insurance premiums.
If the health authorities classify a treatment as a managed emergency, it may still be covered by indemnity insurance, albeit with a significantly higher co-payment rate of up to 95% for outpatient care. This provision is designed to ensure that critical cases still receive the necessary financial support, while discouraging the misuse of insurance for less critical treatments.
For severe conditions such as cancer, cerebrovascular diseases, heart diseases, rare intractable diseases, and severe burns or trauma, the current coverage will remain unchanged. This retention of coverage for critical illnesses aims to provide peace of mind for patients facing significant health challenges.
Furthermore, the FSS has announced that hospitalization for emergency treatments will continue to have a co-payment rate of 20%, consistent with the existing regulations, while outpatient care will see a minimum co-payment rate of 20%. This differentiation is intended to reflect the varying costs and needs associated with different types of medical care.
In a notable change, expenses related to obstetric and childbirth care, which had previously been excluded from indemnity insurance coverage, will now be included. This addition acknowledges the importance of maternal health and seeks to provide financial support for families during this critical time.
The FSS plans to launch a 5th generation indemnity insurance product that reflects these reforms by the end of April 2025. However, the introduction of special products for non-severe diseases is expected to be determined after the first half of 2026. This timeline indicates a cautious approach to rolling out new insurance options in light of the recent changes.
For early subscribers to the 1st and 2nd generation policies, who are not bound by renewal obligations, there is no requirement to switch to the new 5th generation indemnity insurance. This flexibility is designed to protect consumers who may be hesitant to change their coverage amidst the ongoing reforms.
Moreover, a contract re-subscription plan will be implemented to terminate existing contracts in a manner that prevents insurance companies from pressuring policyholders to cancel their contracts due to concerns about the potential for abuse of early indemnity insurance products. This measure aims to ensure a fair transition to the new system.
The FSS has emphasized that these reforms are essential for creating a more sustainable health insurance system that prioritizes essential care while controlling costs. As part of this effort, the agency is committed to actively supporting necessary health services and ensuring that the insurance system is not exploited for non-essential treatments.
With these changes, the FSS hopes to strike a balance between providing necessary health coverage and preventing the over-utilization of services that can lead to increased insurance costs for everyone. The ongoing evolution of indemnity insurance in South Korea represents a significant step toward a more efficient and focused healthcare system.
