Should You Switch to 5th Generation Health Insurance?

The season for health check-ups has arrived. Many people discover unexpected health issues during routine screenings, while previously overlooked symptoms may lead to treatment. As medical expenses begin to accumulate, individuals often reconsider their health insurance plans. Reviewing old insurance policies reveals terms like '1st generation,' '3rd generation,' and '4th generation.' This raises the question: what generation is your plan, and should you switch to a new product?

Health insurance covers a portion of medical expenses incurred due to illness or injury. It is essential to understand the difference between 'covered' and 'non-covered' services. Covered services are those that fall under the National Health Insurance, while non-covered services require patients to pay more out-of-pocket. Health insurance helps offset these personal expenses and non-covered medical costs.

Health insurance plans are categorized into five generations based on the enrollment period. Generally, newer generations have lower premiums but higher out-of-pocket costs for policyholders. For instance, 1st generation plans, purchased before September 2009, typically have little to no out-of-pocket expenses but come with higher premiums. The 2nd generation, sold from October 2009 to March 2017, introduced a structure where policyholders pay 10-20% of medical costs.

From April 2017 to June 2021, the 3rd generation plans separated coverage for physical therapy, non-covered injections, and MRI/MRA scans into additional riders. The 4th generation, sold from July 2021 to May 5, 2023, further divided all non-covered services into separate riders and introduced a system where policyholders who frequently use non-covered services may see increased premiums the following year.

The 5th generation health insurance, launched on May 6, 2023, distinguishes between 'severe' and 'non-severe' non-covered services. This means that critical illnesses, such as cancer or heart disease, are treated differently than less severe treatments like physical therapy or non-covered injections.

Severe conditions are determined based on whether they qualify for special health insurance benefits. Conditions such as cancer, cerebrovascular and heart diseases, rare and intractable diseases, severe burns, and major trauma are classified as severe, while most others fall under non-severe. For severe non-covered services, the out-of-pocket cost remains at 30%, with a maximum annual out-of-pocket limit of 5 million won for hospital stays at advanced general hospitals. In contrast, non-severe non-covered services have an increased out-of-pocket rate of up to 50%, and the coverage limit has decreased from 50 million won to around 10 million won.

For older individuals or those at higher risk for severe illnesses, the 5th generation may be advantageous due to the cap on out-of-pocket expenses for major treatments. Additionally, those planning for pregnancy and childbirth may find the 5th generation beneficial. Previous plans often excluded maternity-related medical expenses, viewing them as natural occurrences rather than illnesses. However, the 5th generation now includes coverage for these expenses.

Policyholders who rarely visit hospitals but face rising premiums should consider switching to the 5th generation. This plan offers lower premiums—approximately 30% less than the 4th generation—and some 1st and 2nd generation policyholders may reduce their costs to less than half of their current premiums.

Conversely, those who frequently utilize non-severe non-covered treatments, such as physical therapy or non-covered injections, may benefit from maintaining their existing plans. The 5th generation raises the out-of-pocket rate for non-severe non-covered services to 50%, and coverage for treatments like physical therapy and extracorporeal shockwave therapy may be significantly reduced or excluded. For example, if a non-covered outpatient treatment costs 500,000 won, a 4th generation policyholder would receive about 350,000 won after a 30% out-of-pocket expense, while a 5th generation policyholder might not receive any reimbursement depending on the treatment.

If you are considering canceling a 1st or 2nd generation plan due to premium costs, it may be wise to first explore discount options. Starting in November, a 'selective discount rider' will be introduced, allowing policyholders to lower premiums by excluding certain non-covered services or increasing out-of-pocket rates. Additionally, 1st and 2nd generation policyholders who switch to the 5th generation can benefit from a 50% discount on their premiums for three years under the 'contract conversion discount system.'

Ultimately, determining the best generation of health insurance is not straightforward. An industry expert advises, 'It is essential to consider individual hospital usage frequency, types of treatments received, and current premium payments when making a decision.'