Bank Negara Malaysia has announced interim measures to assist policyholders whom it said experienced premium revisions of their medical and health insurance/takaful (MHIT) products.
These interim measures have been introduced to alleviate the immediate financial impact to policyholders however BNM said broader measures to address the rising medical cost will be needed.
The Central Bank noted on the rising of cost of healthcare in Malaysia with medical cost inflation reaching 15% in 2024 – well above the global and Asia Pacific average of 10%. This rise BNM noted was driven by factors such as advancements in
medical technology and the increasing prevalence of non-communicable diseases, which have led to greater demand for healthcare services. As a result, BNM said the claims paid out by insurers and takaful operators (ITOs) have grown faster than the premiums collected. While ITOs maintain reserves to cover unexpected increases in medical claims paid, this cannot be sustained if the cost of claims continues to increase beyond reasonable estimates. Hence, periodic adjustments to MHIT premiums are necessary to ensure that policyholders’ claims can continue to be met.
To help manage the impact of MHIT premium adjustments, BNM has instructed ITOs to spread out the changes in premiums arising from medical claims inflation over a minimum of three years for all policyholders affected by the repricing. This measure it added will remain in place until the end of 2026. With this measure, at least 80% of policyholders are expected to experience
yearly premium adjustments due to medical claims inflation of less than 10%.
For policyholders aged 60 years old and above who are covered under the minimum plan within the MHIT product that they purchased, ITOs will temporarily pause premium adjustments due to medical claims inflation for one year from their policy anniversary.
The interim measures above are not applicable to premium increases that may apply when a policyholder moves to a higher age band. This will be managed separately by the ITOs.
Policyholders who have surrendered or whose MHIT policies have lapsed in 2024 due to the repricing can reach out to their ITOs to request for a reinstatement of their policies based on the adjusted premium under this measure without additional underwriting requirements.
All ITOs will provide appropriate alternative MHIT products at the same or lower premiums for policyholders who do not wish to continue their existing MHIT plans that have been repriced. ITOs that do not currently offer appropriate alternative products must make these products available to policyholders by the end of 2025. Switching to the alternative MHIT products will not require any additional underwriting or involve any switching cost. This, together with other reforms to contain medical cost
inflation, will serve to avoid significant future premium adjustments.
BNM said communications on these measures by ITOs to individual policyholders will take place progressively. Policyholders can also contact their respective ITOs from 15 January 2025.
The Government, together with ITOs and private hospitals, will also contribute RM60 million to accelerate health reforms. This includes the implementation of Diagnosis-Related Group payment model and publication of costs of common medical procedures for greater transparency. In addition, part of the fund will also be used to facilitate the development of a base MHIT product that covers essential healthcare needs and facilitate policyholders aged 60 years old and above to switch to the new base product, once available.
Looking ahead, BNM and all stakeholders including MOH, private hospitals and ITOs said they are committed to continue strengthening the collaborative efforts in containing medical cost inflation effectively. These efforts include greater transparency in drugs prices, advancement of digitalisation to enable sharing of electronic medical records that would reduce the need for repeated tests for patients, and strategic purchasing by both public and private sectors to reduce cost. Progress
on these measures will be monitored to ensure the intended outcomes of reducing medical cost inflation are achieved. This will be important to transition to more sustainable provision of MHIT products going forward.
