South Korea’s Healthcare Costs: A Growing Divide in Insurance Discounts
A recent controversy is brewing in South Korea over the “4th generation real cost medical insurance” system, specifically its non-covered medical expense premium differentiation. New data reveals significant disparities in discount rates offered by different insurance companies, with some offering up to five times more savings than others.
The Discount Discrepancy: A Closer Look
According to a report compiled by Democratic Party lawmaker Kim Nam-geun, based on data submitted by the Life Insurance Association of Korea and the General Insurance Association of Korea, the discount rates applied to Grade 1 subscribers (those with no non-covered medical expenses) vary considerably among the nine property and casualty insurance companies.
Hungkuk Fire & Marine Insurance offered the highest discount rate at an average of 11%, translating to an annual savings of 16,000 won (approximately $12 USD) per subscriber. In stark contrast, NH Nonghyup Property & Casualty Insurance provided a mere 4.1% discount, resulting in annual savings of only 2,800 won (approximately $2.15 USD).
Other companies fell in between: Hanwha General Insurance (9.8%, 13,242 won), Lotte General Insurance (9.5%, 11,391 won), Hyundai Marine & Fire Insurance (8.1%, 8,508 won), Samsung Fire & Marine Insurance (7.9%, 8,083 won), Meritz Fire & Marine Insurance (7.1%, 8,053 won), DB Insurance (7%, 6,839 won), and KB Insurance (6.6%, 7,073 won).
How the System Works & Why the Differences?
The system operates by providing discounts to Grade 1 subscribers using surcharges collected from those in Grades 3-5, who utilize non-covered medical services more frequently. The larger the proportion of subscribers in the higher-cost grades, the greater the discount available for Grade 1 members. Hungkuk Fire & Marine Insurance, for example, has 71.2% of its subscribers in Grade 1, while only 2.6% are in the surcharge grades (3-5). NH Nonghyup, conversely, has a higher Grade 1 proportion (78.5%), but a lower percentage in the surcharge grades (1.4%), resulting in a smaller pool of funds for discounts.
While insurance companies state this system aids in loss ratio management, critics argue it creates an unfair advantage for those with minimal non-covered medical expenses.
The Problem of Transparency & Future Implications
A key concern is the lack of transparency. Information regarding these varying discount rates isn’t readily available to consumers, making it difficult for those with low non-covered medical usage to identify the most advantageous insurance provider.
The situation is further complicated by differences between property and casualty insurance companies and life insurance companies. Life insurers offered lower discounts (4.5-8.2%) with annual savings ranging from 3,600 to 8,300 won, due to a smaller base of subscribers and a higher proportion in the surcharge grades.
With the planned introduction of a similar premium differentiation system in the 5th generation real cost medical insurance expected in the first half of 2026, calls are growing for a comprehensive review and improvement of the current system. Lawmaker Kim Nam-geun urges the disclosure of grade and company-specific discount rates to ensure fairness and informed consumer choice.
FAQ
Q: What is the ‘4th generation real cost medical insurance’?
A: It’s a South Korean health insurance system that adjusts premiums based on the amount of non-covered medical expenses a subscriber incurs.
Q: How are subscribers graded?
A: Subscribers are categorized into five grades (1-5) based on their non-covered medical expense usage, with Grade 1 receiving discounts and Grades 3-5 facing surcharges.
Q: Why are discount rates different between insurance companies?
A: The discount rates vary based on the proportion of subscribers in each grade, particularly the number in the surcharge grades (3-5) who contribute to the discount pool.
Q: What is being done to address the issue?
A: Lawmakers are calling for greater transparency in discount rate disclosures and a review of the system before the introduction of the 5th generation insurance.
Did you know? The difference in annual savings between the highest and lowest discount rates can be over 13,000 won (approximately $10 USD).
Pro Tip: When choosing a health insurance provider in South Korea, carefully compare the discount rates offered for Grade 1 subscribers to maximize your savings if you have minimal non-covered medical expenses.
Have questions about South Korean healthcare or insurance? Share your thoughts in the comments below!
