Minor car accident, 300 days of treatment: insurer paid out W31.75m

Per-patient traditional Korean medicine costs for minor auto insurance claimants have risen nearly 27% over five years, surpassing conventional medical costs by more than three times. When treatment stretches beyond eight weeks, the gap widens to more than eightfold. Government efforts to tighten hospital room standards have done little to slow the surge.

According to the insurance industry, per-patient traditional medicine costs at Korean medicine hospitals for minor injury claimants — those classified at injury grades 12 through 14 — at the four major non-life insurers, Samsung Fire, Hyundai Marine & Fire Insurance, KB Insurance and DB Insurance, rose 26.5% from 856,000 won ($620) in 2020 to 1.08 million won last year.

Over the same period, costs at conventional hospitals climbed just 5%, from 338,000 won to 355,000 won. That put last year's traditional medicine bill at more than three times the conventional medicine figure.

The longer the treatment, the wider the gap. Patients at Korean medicine hospitals who received treatment for more than eight weeks ran up an average per-patient bill of 2.92 million won — 8.2 times the conventional medicine average. In one case, a man in his 50s who sustained minor injuries in a fender-bender received treatment at a Korean medicine hospital for 300 days and collected 31.75 million won in insurance payouts.

The insurance industry points to two main drivers of inflated costs: "set billing" and the use of premium private rooms. Set billing refers to the practice of performing six or more procedures on a patient in a single visit regardless of symptoms. Outpatient set-billing charges at Korean medicine hospitals surged from 67.5 billion won in 2020 to 253.4 billion won last year, an average annual increase of 30.3%.

The premium room problem has persisted even after regulatory changes. In November 2022, the Ministry of Land, Infrastructure and Transport revised auto insurance medical fee standards to require that hospitalized traffic accident patients use general wards with four or more beds, allowing single- to three-bed rooms only in unavoidable cases where no general ward is available, and only for up to seven days.

Despite the rule change, room charges for single- to three-bed rooms at Korean medicine hospitals for minor injury patients rose an average of 26.1% per year from 2021 through last year, while the same charges at conventional hospitals fell 13.7% over the same period. Last year, premium room charges for minor injury patients at Korean medicine hospitals totaled 27.3 billion won — eight times the 3.5 billion won recorded at conventional hospitals. The industry believes some hospitals operate only single- to three-bed rooms while falsely presenting themselves as having four-bed wards in order to bill at the premium rate.

The leakage of insurance payouts is hitting the bottom line. The combined loss ratio for auto insurance at the four major insurers stood at 84.5% in the first half of this year, well above the 80% breakeven threshold the industry uses as a benchmark. Losses have continued even after the insurers raised premiums for the first time in five years.

A measure designed to address the problem — the so-called "8-week rule" — was included in an amendment to the enforcement decree of the Act on Guarantee of Compensation for Loss from Motor Vehicle Accidents and cleared a vice-ministerial meeting last Thursday. The rule would require minor injury patients seeking treatment beyond eight weeks to obtain verification of the medical necessity and appropriate duration of continued care. The amendment had been delayed for nearly a year after facing opposition from the Korean medicine community following its legislative notice last July. It now awaits Cabinet approval later this week.