Origins: who built it and why
Korea's National Health Insurance covers a large share of medical costs, but patients still pay a co-pay on covered care and the full price of 'non-covered' services such as many MRIs, manual therapy and some injections. Private insurers filled that gap with indemnity coverage. Non-life insurers had sold accident indemnity riders since the 1960s, and illness indemnity products took hold in the late 1990s; Korea's Financial Services Commission dates the first silson product to 1999 (FSC, 2021). Life insurers were allowed in after a 2003 law change, and in October 2009 both sectors adopted a standardized policy. By the end of 2020 roughly 39 million people held one, which is why Koreans call it a 'second national health insurance.'
Kenneth Arrow (1963) explained why medicine needs insurance at all: illness is unpredictable and expensive. Silson simply lets households pool the risk that the public scheme leaves behind. For the public layer, see Korea's four social insurances.
How reimbursement works
You pay the hospital, then claim your actual spending minus a co-pay share. On a 4th-generation policy you keep 20% of covered co-pays and 30% of non-covered charges (KIRI, 2022). Pay ₩500,000 for an uncovered MRI and you would typically get back ₩350,000. Outpatient visits also carry a minimum deductible per visit, so small bills may return little.
- Claim with the receipt, the itemized bill and, when needed, a diagnosis note.
- Two policies do not pay double; insurers split your actual cost.
- Under Korea's Commercial Act, claims expire after three years.
Generations 1 to 5
Rising loss ratios led regulators to raise co-pays and separate non-covered care several times (FSC, 2021; KIRI, 2022).
| Generation | Sold | Typical co-pay | Key point |
|---|---|---|---|
| 1st | Until Sep 2009 | 0% (non-life) / 20% (life) | Broad cover, steep renewal hikes |
| 2nd (standardized) | Oct 2009–Mar 2017 | 10–20% | Unified across insurers |
| 3rd | Apr 2017–Jun 2021 | 10–20%; 30% for three riders | Manual therapy, injections and MRI split into riders |
| 4th | Jul 2021–May 2026 | 20% covered / 30% non-covered | Premiums rise or fall with non-covered use |
| 5th | From May 2026 | 20% / 30% severe / 50% non-severe | Severe vs non-severe uncovered care |
Exact terms vary by insurer and sign-up date, so check your own policy document.
The economics behind it
Cheaper care means more care: Pauly (1968) framed this moral hazard as a normal price response. The RAND Health Insurance Experiment randomized co-pays and found higher cost sharing clearly lowered use (Manning et al., 1987), the logic behind each generation's higher co-pays. Sicker people are also more eager to buy cover, a form of adverse selection that Rothschild and Stiglitz (1976) showed can destabilize markets under information asymmetry. Yet the Oregon lottery found insurance also cut catastrophic bills and medical debt (Finkelstein et al., 2012), so protection matters as much as cost.
Switching and buying tips
- Older 1st/2nd-generation plans have low co-pays but steep renewals; newer plans are cheaper but you cannot switch back.
- Rarely see a doctor? A newer plan may save money. Chronic condition or frequent uncovered care? Keeping the old plan may be wiser.
- Employer group plus personal silson often means paying twice for the same cover.
- Ask an insurance planner for the generation, co-pay and renewal terms in writing.
Foreign residents enrolled in National Health Insurance can usually buy silson too, subject to underwriting. Long-term care needs fall under long-term care insurance, not silson.
Tip: sort last year's receipts; forgotten clinic bills within three years can still be claimed.
FAQ
- Do two policies pay twice?
- No. Indemnity cover pays only your actual cost, shared between insurers.
- Is switching to the newest generation always better?
- No. It cuts premiums for light users but raises co-pays for frequent patients, and you cannot switch back.
Sources reviewed: 2026-11-02
References
- Arrow, K. J. (1963). Uncertainty and the welfare economics of medical care. The American Economic Review, 53(5), 941–973. The classic on uncertainty in medical care and why insurance exists.
- Pauly, M. V. (1968). The economics of moral hazard: Comment. The American Economic Review, 58(3), 531–537. Explains moral hazard: insured people use more care.
- Manning, W. G., Newhouse, J. P., Duan, N., Keeler, E. B., Leibowitz, A., & Marquis, M. S. (1987). Health insurance and the demand for medical care: Evidence from a randomized experiment. The American Economic Review, 77(3), 251–277. RAND experiment on cost sharing and medical use.
- Rothschild, M., & Stiglitz, J. (1976). Equilibrium in competitive insurance markets: An essay on the economics of imperfect information. The Quarterly Journal of Economics, 90(4), 629–649. Adverse selection in insurance markets.
- Finkelstein, A., Taubman, S., Wright, B., Bernstein, M., Gruber, J., Newhouse, J. P., Allen, H., Baicker, K., & Oregon Health Study Group. (2012). The Oregon health insurance experiment: Evidence from the first year. The Quarterly Journal of Economics, 127(3), 1057–1106. Lottery-based evidence on what insurance changes.
- 금융위원회. (2021, 6월 29일). 7.1일부터 제4세대 실손의료보험이 출시됩니다 [보도자료]. Korea's FSC release on the 4th-generation redesign.
- 보험연구원. (2022). 실손보험 현황과 과제 [KIRI 리포트 주간 동향]. KIRI table of generations, co-pays and renewal cycles.