MEDIA STATEMENT
Kuala Lumpur, 29 November 2024 — Bank Negara Malaysia (BNM)’s statement of 28 November requiring insurance and takaful operators (ITOs) to review their current repricing strategies for more reasonable increases in medical insurance premiums comes across as disingenuous, cosmetic and late. This response only came about in response to public backlash and numerous reports that people were terminating their policies in the face of double and even triple digit percentage increases of their health insurance premiums.
The Galen Centre for Health and Social Policy calls for two things: the setting up of a parliamentary inquiry to look into the ongoing and immediate issues of health insurance premiums and hospital charges, and an independent statutory commission to regulate the private healthcare sector.
“The horse has already left the stable. It was pointed out in July by the Galen Centre that Bank Negara’s direction on this issue was problematic and likely to cause increased economic and medical hardship, large out-of-pocket payments, patients to delay seeking medical treatment, and people to terminate their insurance policies altogether,” pointed out Azrul Mohd Khalib, Chief Executive of the Galen Centre for Health & Social Policy. “It would also fail to address the problem of high healthcare inflation.”
“Therefore, what is seen today was neither unexpected nor a surprise. Disappointingly, the earlier concerns were not taken seriously by neither BNM, nor the insurance industry and private healthcare providers.”
“The ongoing and upcoming increases in health insurance premiums were also not unexpected. Besides managing rising claims and medical inflation, the current exercise was also intended to nudge or persuade policy holders to switch their medical and health insurance and takaful (MHIT) plans from having zero co-payment coverage or full riders, to plans which have copayment and/or deductibles to share the burden and reduce medical costs. While seemingly plausible on paper and in theoretical models presented by analysts, it is clear that policyholders and customers are not cooperating,”
“Faced with 20% to shockingly more than 200% increases in premiums, many have decided instead to terminate their policies, attributing their decision to a lack of affordability caused by the high premium increases, and to “take a chance with the public healthcare system”. Many of those affected are older, vulnerable and at-risk of financial catastrophe from even a single medical incident. Household out-of-pocket payments on health expenditures, currently around 33%, will jump.”
“The promise of lower health insurance premiums with the adoption of copayment and deductions was also proven to be hollow with policyholders reporting small reductions based on the revised rates, and reduced benefits and coverage. Offering staggered increases in premiums and providing flexible payment plans, will also achieve very little as notices went out months ago and the consequences are now being felt. As health insurance becomes less affordable, more people are likely to become uninsured.”
“It is a mistake to shift the responsibility of reducing medical inflation onto the shoulders of policyholders, patients, their families and communities. That should be the regulator’s role.”
“These health insurance premiums increases do not happen in a vacuum.”
“The medical bills imposed by providers such as private hospitals continue to be unregulated. How will the problems of overcharging be addressed or even recognised? The use of wheelchairs, pillowcases, glucometers, kidney dishes, ECG monitors, whose costs would have already been recovered hundreds of times over, are routinely charged as if they were brand new. There are also reports of non-existent tests, visits by consultants which never happened, and a significant difference of charges between those with a medical card and those without.”
“Insurers are forced to pay what has been charged, often leaving them transferring the consequences of over-consumption and overcharging to consumers, patients and policyholders. What are we doing about regulating these charges imposed by private medical facilities?” Azrul asked.
“A government linked company (GLC) providing private healthcare services recently announced a historic milestone of RM1 billion in quarterly earnings. Though it is great news for the shareholders which include the government, this should be a concerning development.”
“Member of Parliament (Kluang) Wong Shu Qi in an intervention during the Dewan Rakyat session yesterday, complained that BNM and the Ministry of Health seemed to push responsibility to each other over rising health insurance premiums, and private hospital charges. It is clearly apparent that in the case of private healthcare, consumer protection is secondary and no one is in charge. This clearly illustrates the current problem,” said Azrul.
Moving forward, the Galen Centre recommends the following:
- The setting up of a parliamentary inquiry to look into the fees and charges imposed in private healthcare facilities. The inquiry should have the power to summon government and non-government representatives and require them to provide statements, and present evidence and data on this issue. It should be mandated to provide recommendations. The parliamentary inquiry’s hearings and findings should be made publicly accessible.
- The setting up of an independent statutory commission to regulate charges in the private healthcare sector. A regulator, similar in role and powers to the Malaysia Competition Commission (MyCC), is urgently needed and should be established. If the Private Healthcare Facilities and Services Act (PHFSA) 1998, which currently regulates only doctor and procedure fees, cannot be adequately amended for this purpose, new legislation should be introduced to enact a Private Healthcare Commission. The Commission could be mandated to independently review charges and fee increases. If the Commission finds a rate increase to be unjustified, excessive, or unfairly discriminatory, it should be considered unreasonable, and would need to be subjected to review and publicly disclosed. Currently, caps and thresholds on insurance premiums and hospital charges appear to be determined by the industry rather than regulated.
Note:
In a policy document issued on 29 February 2024, BNM required ITOs to begin providing a co-payment option for their medical products by September 2024, believing that this would be a solution to reduce medical inflation, which is currently at 12.9% and among the highest in the Asia-Pacific region. It also believes that this would reduce monthly premiums.
Under the BNM policy which was applicable to all insurance companies and takaful operators (ITOs), ITOs would need to have at least one product with a minimum 5% copayment and/or an RM500 deductible. Any new medical reimbursement insurance/ takaful product designed must come with the minimum 5% copay. All new medical reimbursement products beginning next year would be required to have this feature.
Co-payment involves the policyholder paying a fixed percentage of the total claimable expenses. A deductible is the amount a patient needs to pay for covered health care services before the insurance plan starts to pay. These features are not new to health insurance. Requiring them though is a recent development. Annual co-payments caps were also not introduced by BNM.
Though previously touting co-payments and deductibles as solutions to rising medical inflation, BNM did not mention them in its recent statement.
Based on national health expenditure figures from the Ministry of Health, less than 8% of healthcare expenditure is attributed to health insurance while around 33% is out-of-pocket payments.
The Galen Centre agrees to the need for responsible medical and health insurance usage, which would reduce the pressure on premium increases. If premium increases are necessary, they should be reasonable and justified. 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.
Galen Centre’s previous statement can be found here: https://galencentre.org/