KUALA LUMPUR: As Malaysia braces for medical insurance premium hikes of up to 70 per cent next year, experts warn of significant challenges for consumers, especially middle-income families, and call for targeted interventions to mitigate the impact.
Khazanah Research Institute (KRI) research associate Ilyana Syafiqa Mukhriz Mudaris attributed the increase to medical inflation driven by multiple factors. This includes aging population, advances in medical technology and systemic inefficiencies.
"Malaysia's ageing population is a key driver. By 2045, we will be an aged society, and much of the additional life expectancy will be spent in poor health, increasing healthcare demands for conditions like cancer and cardiovascular diseases," Ilyana told Business Times.
Ilyana also highlighted technological advancements in healthcare as a double-edged sword, saying that these innovations introduce new costs where previously there were none, such as treatments for conditions like HIV/AIDS or new vaccines for emerging diseases.
She cautioned against oversimplified narratives like the "buffet table syndrome," which alleges excessive healthcare usage by fully insured individuals.
"There is no robust data proving this is widespread in Malaysia. Policymakers must base interventions on evidence, not assumptions.
"Thus, these claims that buffet table syndrome drives medical inflation should be explored carefully instead of implementing blanket policy interventions that do not necessarily target over-consumption," she said.
Calls for Regulatory and Systemic Reforms
To address rising premiums, Ilyana suggested measures such as enhancing transparency in premium adjustments and reforming the fee-for-service (FFS) payment model to a value-based approach.
She cited Australia's requirement for insurers to justify premium hikes and proposed similar transparency mechanisms for Malaysia.
"Switching to a value-based payment model, such as diagnosis-related group (DRG) systems, can help curb overcharging and unnecessary procedures, aligning costs with patient outcomes," she said.
UniKL Business School senior lecturer Dr Khairul Shahida Shabi echoed the need for intervention, urging Bank Negara Malaysia to cap premium rate increases and enforce transparent pricing.
"Bank Negara could play a crucial role in ensuring fairness by mandating transparency in claims ratios and limiting excessive premium hikes," she said.
Impact on Middle-Income Families
The anticipated premium hikes are expected to disproportionately impact Malaysia's middle-income (M40) households, who rely heavily on private medical insurance but often fall outside social safety nets.
"If we are looking at income groups, only 13.3 per cent of B40 households owned private health insurance compared to 32.1 per cent of the M40 and 49.9 per cent of the T20 in 2019," Ilyana said.
"In the same year, for those without health insurance, 49.7 per cent of B40 households cited unaffordability as a reason for not owning private health insurance compared to 26 per cent of the M40 and 12 per cent of the T20.
"So I would say this rise in medical insurance premiums would impact the M40 more severely since they are more reliant on private insurance than the B40," she added.
Ilyana said the M40 households would also be considered a "missing middle" population that would not receive monetary aid or qualify for social security nets but also may not qualify for tax cuts.
"While public healthcare remains the primary safety net for many, the M40 group risks falling into the 'missing middle,' unable to afford rising private insurance costs and excluded from public assistance," she said.
Khairul Shahida said the rising costs might force some policyholders to terminate their coverage, potentially widening healthcare accessibility gaps.
"Many families may have to forgo necessary treatments, leading to higher out-of-pocket expenses and greater financial strain," she warned.
Strengthening Public Healthcare
Both experts emphasised the importance of strengthening Malaysia's public healthcare system as a buffer against inequities.
Recommendations included increased funding for facility upgrades, modernising care delivery models, and leveraging digital technologies to optimise efficiency.
"In past KRI publications, we have shown that the preference for public healthcare facilities follows a clear income gradient for outpatient care but for inpatient care there is an increasing preference for public healthcare services even among the top household income groups," said Ilyana.
Thus, she said in order to ensure the gap in access to healthcare services is not widened, Malaysia should focus on strengthening what has been considered one of the nation's most fundamental assets.
"This includes allocating more funds to upgrade and enhance existing facilities, modernising our care delivery models through mechanisms such as strategic purchasing and digitalisation as well as ensuring the wellbeing of our healthcare workforce," added Ilyana.
Yesterday, Bank Negara Malaysia directed insurers and takaful operators (ITOs) to reassess their repricing strategies for medical and health insurance and takaful products to ensure a more reasonable implementation.
This was in response to calls for the central bank to look into the matter.