As of the end of September, only 33,577 existing policyholders have switched to the newly launched 5th generation health insurance, which debuted in May. This figure represents about 0.2% of the total contracts held by nine major property insurance companies in South Korea.
According to the insurance industry on October 15, the Korea Insurance Association reported that a total of 367,071 contracts were signed for the 5th generation health insurance since its launch. However, only 33,577 of these were voluntary switches from the previous 1st and 2nd generation plans, accounting for 9.1% of the total new contracts. This is a mere 0.20% when compared to the 16,436,474 contracts held by these insurers as of the end of July.
The reluctance of existing policyholders to switch is largely attributed to concerns over reduced coverage. While the 5th generation health insurance offers lower premiums than the previous generations, it imposes higher out-of-pocket costs for non-critical services and excludes certain treatments from coverage. For frequent medical users, even with lower premiums, the increased personal expenses could outweigh the savings.
Notably, policyholders who joined before March 2013 are not required to switch and can choose to maintain their existing contracts. Unlike the phased transition to the 5th generation for later generations, these early subscribers have the option to keep their current plans, which could significantly impact the overall effectiveness of the health insurance reform.
Starting next month, the Financial Services Commission plans to implement a discount program for 1st and 2nd generation policyholders without re-enrollment requirements. Those who switch to the 5th generation will receive a 50% discount on their premiums for three years.
According to a simulation by the Financial Services Commission, a 60-year-old woman from the 1st generation who previously paid an average monthly premium of 178,489 won would see her monthly premium drop to 21,270 won during the discount period, thanks to the combination of the basic premium difference and the switching discount.
A new optional discount program will also be introduced, allowing existing policyholders to lower their premiums by excluding certain coverages or increasing their out-of-pocket expenses. This provides current subscribers with the choice to either switch to the 5th generation or adjust their existing coverage to maintain their plans.
However, some industry experts caution that simply offering discounts may not significantly increase the number of switches to the 5th generation. The National Assembly's Legislative Research Service recently pointed out in a report that despite offering a 50% discount during the transition to the 4th generation, the results were disappointing.
Additionally, the potential burden after the discount period must be considered. The contract transition discount will end after three years, at which point the original premium rates will apply. There is also the possibility of premium increases upon renewal, meaning subscribers need to weigh not only the immediate savings but also the potential medical expenses resulting from differences in premiums and coverage after the discount ends.
An industry insider stated, “To successfully establish the 5th generation health insurance, it is crucial to encourage voluntary switches among early subscribers. We need measures beyond just premium discounts to effectively motivate these initial policyholders to transition.”
* This article has been translated by AI.
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