Is the premium hike in tandem with what’s happening on the ground? 

SOMETHING is rotten in the medical insurance sector. The immediate suspicion is greed among private healthcare providers and excessive profit on the part of insurance providers. 

But is that really the case? We need some answers, and we need them fast before things really go out of hand. 

It’s a burning issue for an obvious reason. Recent discussions around the big jump in medical insurance premiums is unsettling for the working class and your regular, honest, day-to-day entrepreneur trying hard to make ends meet. Even those with a better standing in life, financially, are feeling queasy. Some see their medical insurance premiums doubling or more. 

The upward pressure on medical spending is a definite nightmare. For the uninsured, the out-of-pocket payment can break the bank account. For the insured, they will be wondering if they can sustain premium payments, more so if presented with a huge spike in premiums at renewal. 

Hence, the seemingly unjustified insurance premium hike has caught the nation’s imagination. 

Even the lawmakers have come around to address the issue. Tomorrow, the Health Parliament Special Select Committee will sit down with some key stakeholders. 

The committee, chaired by Pulai MP Suhaizan Kayat, a lawmaker from Parti Amanah Negara, will hold two separate briefings: One for the industry and another for the regulators. They will meet representatives from the insurance and takaful associations, Bank Negara Malaysia (BNM) and the Ministry of Health (MOH). 

There is so much to look into here. The problems with medical insurance are not new. Various issues have been raised in the past, including uncertainty about future probabilities and upward pressures on medical spending. 

Researchers have talked about the different strategies that can be deployed. They include private funding, public funding plus public production and public funding plus private production. 

Whatever the combination, one question remains: Is the premium hike in tandem with what’s happening on the ground? 

In a statement released in July, the central bank clarified on commentaries related to the implementation of co-payment requirements for medical and health insurance and takaful (MHIT) products. Earlier, the central bank had released a policy document on the MHIT business, flagged as an important component of health financing in Malaysia. 

The 52-page document made the following observations: “A number of significant developments are impacting the MHIT business, such as the rise in non-communica- ble diseases, growth of private healthcare services and escalating medical inflation. These have contributed towards an increase in the utilisation of medical services and magnitude of claims over the years. 

“There has also been increased expectations for licensed insurers and takaful operators (ITOs) carrying on MHIT business to provide more comprehensive and 

inclusive coverage, as well as to account for the latest development in medical technologies and to support preventive care. These developments have placed increased focus on licensed ITOs to continuously innovate to meet consumers’ evolving needs while balancing the need to ensure that the MHIT business remains sustainable in the long term.” 

In its clarification, BNM said that in 2023, Malaysia recorded medical cost inflation of 12.6%, which was significantly higher than the global average of 5.6%. 

So, effective Sept 1, 2024, BNM said ITOs must offer consumers an option to purchase MHIT products with a co-payment feature. 

It noted that consumers who have already purchased MHIT products without a co-payment feature can continue with their existing MHIT products at renewal. ITOs can also continue to offer MHIT products without a co-payment feature to new consumers. 

In a statement on Nov 28, BNM came forward to acknowledge the concerns about the repricing of MHIT products by ITOs which, it said, has impacted policy owners/ takaful participants. It added that it has remained committed to ensuring that the public continues to have access to suitable insurance and takaful products. 

In addressing the impact on consumers, the regulator said that it has required ITOs to review their current repricing strategies for more reasonable implementation of such repricing. 

“This includes managing increases in premiums/contributions over time, taking into account the impact on policy owners/ takaful participants. In addition, ITOs are required to offer viable options for policy owners/takaful participants who are significantly impacted by the higher premiums/ contributions to continue having insurance/takaful coverage. ITOs must also ensure the options provided are meaningful and provide additional measures to support affected policy owners/takaful participants. 

“Over the years, the cost of healthcare has risen significantly due to medical cost inflation and increased utilisation of medical services and procedures. Therefore, comprehensive and coordinated reforms to contain medical cost inflation will be critical to preserve continued access to appropriate MHIT protection,” it said. 

The central bank has got it right about putting into place a complete and workable plan. 

For a start, let us have a task force involving BNM, MOH and other stakeholders to dive deep into the matter. The group can rope in experts and eminent personalities to look into all aspects impacting the sector. 

One key area is the regulation of private hospital charges. A cursory look at the billing leaves much to be desired. 

The charges imposed by private hospitals are far from transparent. Some argue they are almost arbitrary. If they know you are covered by insurance, the charges immediately go up. That is the lived experience of medical insurance policyholders. 

Then there is the health insurance premium against the claim experience. If claims keep increasing, premiums will follow suit. What is the solution? 

As pressure builds up on government healthcare facilities, we need to quickly work out solutions on the medical insurance front. 

• Habhajan Singh is the corporate editor of The Malaysian Reserve.

• This article first appeared in The Malaysian Reserve weekly print edition