Kuala Lumpur, 5 July 2024 — During the Dewan Rakyat Special Chamber session on 1 July, Deputy Finance Minister Lim Hui Ying revealed that Bank Negara Malaysia (BNM) will require insurance and takaful operators (ITOs) to begin providing a co-payment option for their medical products by September 2024. All new medical reimbursement products beginning next year will also integrate this feature. Co-payment involves the policyholder paying a fixed percentage of the total claimable expenses. The Galen Centre for Health & Social Policy expresses concern that this policy could potentially increase hardship among households, expose them to the risk of financial catastrophe, and still fail to address the problem of high healthcare inflation.

“Health insurance is an insurance product which covers whole or in part the medical and surgical expenses of an insured individual which are incurred due to illness, injury or disability. The main reason for taking health insurance is to protect individuals from the high costs of healthcare. It acts as a safety net and a safeguard against catastrophic health expenditures, defined as exceeding 40% of household income. In return, monthly premiums are paid. By introducing a co-payment feature which will eventually replace existing products, insured patients could face large out-of-pocket payments beyond their means in the case of a major illness. Ironically, it could create the very situation which individuals expect to be protected from by having health insurance,” said Azrul Mohd Khalib, Chief Executive of the Galen Centre for Health & Social Policy.

“Household out-of-pocket payments on health expenditures currently approaching 35%, would and will jump.”

“The buffet table syndrome” has been used as one of the main arguments to justify this policy. It describes policyholders with zero co-payment coverage or full riders, who are unwell and sick availing themselves of medical treatments and medication in the belief that they should maximise their insurance policy coverage. This increases the average claims per insured and subsequently leads to higher insurance premiums.”<

“No one wants to get a chronic illness such as kidney failure, cardiovascular disease or cancer just to utilise their insurance coverage. No one chooses to get unwell, seriously ill or incapacitated due to a catastrophic condition. Not all doctors prescribe expensive treatments and not all full rider policyholders submit large claims,” Azrul emphasised. “There are definitely patients who abuse their insurance plans, but does it make sense to take a blanket approach to integrate co-payment to curb the “buffet table syndrome”?

Beginning next year, ITOs are no longer permitted to design new medical reimbursement insurance/takaful products without the minimum co-payment feature. This measure is expected to reduce monthly premiums.

“Will this address the problem of high healthcare inflation? At 12%, healthcare inflation in Malaysia is approximately five to six times higher than the general inflation rate, and is among the highest in the Asia-Pacific region. What is the real cause of this inflation?”

“Malaysia, like many upper middle income countries, is experiencing an increase in the demand for health care due to an increasing proportion of the population who are above the age of 60, more people living with three or more chronic illnesses, and a need for better and improved quality of care. More people are needing inpatient care.”

“The medical bills imposed by providers such as private hospitals continue to not be regulated. As the Member of Parliament for Kota Melaka rightly pointed out, the difference in fees imposed by private hospitals for patients paying out-of-pocket and those utilising an insurance policy, can be 100% more expensive for those with a medical card. Insurers are forced to pay what has been charged. How does this make sense or even tolerated? The vast difference in bills are likely contributing to higher insurance premiums and costs, more than the “buffet table syndrome”. Over-consumption can definitely be cause for blame, but so can over-charging, resulting in patients and policyholders paying rapidly escalating fees and premiums over time. Will co-payment address the problem of overcharging such as for the use of a wheelchair, a pillowcase, or three-ply masks. What are we doing about regulating these charges imposed by private medical facilities?” Azrul asked.

“Ironically, the introduction of co-payments could result in people cancelling their insurance policies, electing to take their chances with the public healthcare system, and actually increasing the demand and load in government clinics and hospitals. This would be a tragedy and reverse the gains made over the past decade in insurance coverage. For the moment, this policy is not retrospectively applicable to those who have existing policies, but this could change.”

“There is also the issue of quantum. Will these co-payments be capped? Will there be a maximum annual co-payment amount for policyholders? Bank Negara’s February 2024 policy document leaves that critical decision to insurers. Will patients be forced to tap into their Employees Provident Fund savings to pay their co-payments if they lack the money? What if they cannot pay? What happens then”

“The Galen Centre agrees with the need for responsible medical and health insurance usage, which would reduce the pressure on premium increases. We have previously and continue to support a co-payment approach to healthcare, specifically within the context of adopting a national health insurance model. Co-payment in healthcare is important as it ensures the sustainability of the healthcare system. However, in this case, there are several questions which need answering:”

“Are full riders the main reason for the increase in premiums over the past five years? What was the percentage of full rider policyholders making claims, compared to those without riders? Did those with full rider plans result in higher bills and more frequent claims, compared to those without?”

“Is the key reason why premiums have increased significantly over the past decade due to patients taking a buffet table syndrome approach or hospitals and doctors increasing their fees significantly resulting in Malaysia having among the highest medical inflation rates in the region? Is it a combination of all these factors?”

“Is Bank Negara’s new policy requirement ultimately going to be of more benefit to insurers and private hospitals, rather than patients and their families?”

Note:

On 29 February 2024, Bank Negara Malaysia (BNM) issued a new Policy Document on Medical and Health Insurance/Takaful (MHIT) business. MHIT refer to  the following insurance or Takaful products: Medical reimbursement, critical illness or disease, long-term care, dental, and hospital income. This document is applicable to all insurance companies and takaful operators (ITOs).

Key points under this update include:

• A requirement for ITOs to have at least one individual medical product with co-payment features, with a minimum co-payment amount of no less than 5% coinsurance and/or MYR 500 deductible per policy or certificate year
• Establishing an industry-wide central medical claims data platform
• Requirements on repricing policies and procedures
• Revised product disclosure sheets
• Requiring a needs-based assessment
• Prohibition on concluding sales through telemarketing

Co-payments will not apply for:

• Emergency treatment, including in accident cases.
• Outpatient treatment for follow-up treatments arising from critical illnesses such as for cancer or kidney dialysis.
• Treatment sought at a Government healthcare facility.