Health insurers justify their higher premiums , consumers are up in arms while Bank Negara keeps mum
Cover Story
08 The HEALTH | January-February . 2024
expenses . In 2021 , this had increased to RM26.6 billion .”
Marimuthu pointed out that this trend placed severe hardships on individuals and families , particularly those in the low and middle-income groups . Malaysia ’ s relatively low incomes , coupled with a significant increase in the cost of living , exacerbate the negative impact of soaring healthcare costs on consumers .
Health premiums repricing headache
Health insurers justify their higher premiums , consumers are up in arms while Bank Negara keeps mum
BY KHIRTINI K KUMARAN
HEALTH insurance policyholders in the country seem to be the hardest hit when it comes to price increases . While the government ’ s official inflation rate was below three per cent during the last quarter of 2023 , many insurers nevertheless saw it fit to increase their premiums by a hefty 20 per cent or more . And this comes after a similar pricing exercise in 2021 of 20-30 per cent . And mind you , it was at the height of the Covid-19 crises when an economic downturn and loss of thousands of jobs hit Malaysians .
Their justification is that medical inflation has risen , and Malaysia was no exception . Life Insurance Association of Malaysia ( LIAM ) CEO Mark O ’ Dell explained that medical Inflation and premium increases are global issues .
“ This consistent increase over the years has been due to multiple reasons . Medical inflation and the post-pandemic elective surgery uptake are two big asons ," O ' Dell told The HEALTH .
“ However , another primary reason is the pandemic , which spotlighted the need for good healthcare systems and , thus , increased investment in new technologies and medications .
“ This trend of increased investments in healthcare has been observed across the region . And this has led to a growing demand for health
Datuk Dr Marimuthu Nadason insurance coverage to mitigate the financial burden of medical expenses .”
O ’ Dell said that while insurers were very active in trying to contain costs , providers are not actively controlling costs for insured patients . Policy plan designs , which are changing , also do not encourage the patient to be conscious of costs as most plans today pay for nearly 100 per cent of the hospital bill .
Federation of Malaysian Consumers Associations ( FOMCA ) President Datuk Dr Marimuthu Nadason challenged the narrative of insurers attributing the premium hikes to medical inflation and rising private hospital charges .
“ The real problem is the lack of price controls on medicines and medical devices . While doctors ’ fees are regulated , they are often bundled with treatment , medicines , and hospital charges . There is often a lack of transparency in disclosure , and worse still , the prices charged are exorbitant .” He said the considerable rise in insurance premiums is unjustified . The overloaded public healthcare system often pushes consumers towards private healthcare , where prices are unregulated , resulting in exorbitant bills .
“ What is worse , many consumers do not have medical insurance . About 38 per cent of consumers pay their hospital bills by out-of-pocket expenses ( OOP ), considered the riskiest form of payment .
“ But OOP expenses have been increasing . In 2020 , Malaysians spent RM22.6 billion on OOP healthcare
JUSTIFYING PREMIUM REPRICING
Insurers justify repricing , attributing to the need to sustain medical insurance policies . O ’ Dell explained that ongoing medical claims have witnessed a considerable surge , with a notable 28 per cent increase in the third quarter of 2023 compared to the same period in the previous year . This follows a substantial 34 per cent surge observed in 2022 .
“ Higher medical claims are expected to pressure premium increases going forward . Repricing of premiums is a standard feature of medical reimbursement coverage to ensure the sustainability of the medical insurance policy .
“ The medical insurance policy becomes unsustainable when the premiums collected are insufficient to cover the expected claims expenses .”
O ’ Dell also underscored the correlation between age and insurance premiums , highlighting that the likelihood of health issues increases as individuals age . Consequently , premiums for medical insurance rise to accommodate the heightened risk associated with older policyholders .
“ Policyholders are provided options to manage the cost of their insurance premium . These include lowering their premium by converting it to a cost-sharing plan and reviewing or altering their policy benefits to suit their situation .
“ All the options given will only be implemented upon the consent of policyholders . They are informed well in advance on these options and are given ample notice from the implementation date of the new premium .”
According to the Bank Negara Malaysia ( BNM ) 2019 Annual Report , the repricing of medical and health insurance ( MHI ) products is a significant concern affecting 4.5 million policies between 2016 and 2019 .
The consequence of this repricing is an affordability crisis , as more expensive premiums render coverage increasingly unaffordable for a significant portion of the population . The Report outlines the intricate drivers behind MHI claims inflation , pointing to longer life expectancy and improved access to advanced medical care .
Anecdotal evidence highlights a concerning trend of healthcare providers engaging in price differentiation and charging higher fees for insured patients .
This phenomenon is exacerbated by what the report terms the “ buffet syndrome ”, wherein policyholders seek to maximise the value of their premiums without considering associated costs , contributing to the upward spiral of healthcare expenses , the Report revealed .
STRIKING A BALANCE
Generali Insurance Malaysia Berhad CEO and Country Head of Generali Entities in Malaysia Fabrice Benard explained that with Malaysia ’ s medical care costs exceeding the global average , Generali ’ s strategy was to balance comprehensive coverage with controlled premium increases .
Generali periodically reviews its medical plans against current healthcare costs , ensuring coverage remains future-proof . To keep premiums affordable , diverse plans are offered , catering to different needs and budgets .
“ But of course , consumers play a role in this , too . We continuously educate them on