Here’s why Malaysians will have the option to pay partially for hospital bills in exchange for cheaper insurance

KUALA LUMPUR, July 8 — Malaysians will soon have the chance to choose between two types of medical insurance: new cheaper insurance products where you still have to co-pay or pay part of the hospital bills, or existing insurance products where you don’t have to share medical costs but may have to pay higher insurance premiums.

Here’s a quick summary of how you will be impacted and what we know so far, based on insurance industry regulator Bank Negara Malaysia’s (BNM) documents including its February 29, 2024 “Policy Document on Medical and Health Insurance/Takaful Business” and press statements this month:

1. What is happening?

From September 1, 2024, when you buy a medical insurance policy, the insurance company or takaful company must offer you the choice of an insurance policy with a “co-payment” feature. That means it must show you at least one insurance product where both you and the insurance company will share the cost of medical bills in the future.

Also from September 1, 2024, the insurance company must offer a range of other co-payment amounts as options when selling insurance policies, and the range offered should match the different financial needs of customers.

What if insurance companies don’t already have an insurance product with a co-payment feature? They must design one that matches the minimum co-payment amount set by BNM.

What is co-payment? It can either look like a co-insurance (percentage) or deductible (amount) that you have to pay for the medical bill, before the insurance company pays the balance.

2. How much is the minimum you have to co-pay or share for costs?

BNM says the minimum co-payment amount (or the minimum you will have to pay) shall be at least:

i. Five per cent of the total hospital bills you can claim for (after deductibles, if there are any) but subject to a maximum co-payment limit to be set by the insurance company; and/or

ii. RM500 deductible

3. How did BNM decide on 5 per cent or RM500 as the minimum cost-sharing amount?

BNM’s decision is based on existing co-payment products in Malaysia and Malaysians’ income levels; balanced against current economic conditions and the objective for the co-payment requirement. Another factor is the experiences of other countries which have implemented the co-payment requirement.

4. Who decides the maximum co-payment limit?

It will be up to the insurance company to decide the maximum limit that customers must pay, and what the maximum limit is based on.

Screenshot from BNM’s 2023 annual report

5. Do you have to co-pay for everything? What if you can’t afford the co-payment amount?

The co-payment feature will not apply for the following situations:

• Emergency treatment (including in accident cases)
• Outpatient treatment for follow-up treatments due to critical illnesses like cancer or kidney dialysis
• Treatment at a government healthcare facility

(If an insurance company wants to add on situations where customers don’t have to co-pay, it will have to apply to BNM and get BNM’s written approval first.)

BNM said the insurance company shall use its “discretion” to consider any financial hardships or extenuating circumstances that the insurance policy holder is facing, when deciding whether to waive the need for co-payment when the customer is making a claim for medical bills, subject to the insurance company’s “internal governance and procedures”.

In other words, you might have bought a medical insurance policy with co-payment feature, but by the time you have a medical bill, you are facing financial difficulties. In that case, it will be up to the insurance company to decide whether you do not have to “co-pay” or share the costs, when you make the claim for the medical bill.

6. Will the co-payment feature be a standard feature in new insurance products in the future?

Yes.

When insurance companies come up with new plans for medical insurance or new medical insurance products, they must include a co-payment feature. Again, the co-payment amount must not be less than RM500, or less than 5 per cent of total claimable medical expenses.

“For the avoidance of doubt, licensed ITOs are no longer permitted to design new medical reimbursement insurance/takaful products without the minimum co-payment feature. Licensed ITOs shall not offer any add-ons to reduce or fully waive the co-payment portion,” BNM said, referring to insurance and takaful operators by the initials ITOs.

Since the BNM’s policy document takes effect on June 1, 2024, unless otherwise specified, this is already mandatory for new insurance products that insurers come up with in the future.

7. What if you don’t want the co-payment feature?

If you have already bought a medical insurance policy without a co-payment feature, you can continue renewing it, BNM explained on July 6.

Insurance companies can also continue selling existing medical insurance products without a co-payment feature to new customers. Such products will continue to be available for you to buy, unless the insurance company decides to stop selling or decides to withdraw these products from the market.

8. This is the Product Options Table that insurance companies must show you from January 1, 2025 onwards

From January 1, 2025, insurance companies must show you a product disclosure sheet in the form of a maximum 2.5 pages of A4 pages and follow the BNM-specified format for medical insurance products, which includes the sample Product Options Table below:

According to the format specified by BNM, at least one of the options shown to the customer must be an insurance product that has a co-payment feature (especially if the recommended product is not a product with co-payment feature).

The priority that an insurance company may give in the Product Options Table can be the following (in terms of importance): (a) Plans with co-payment features, b) standalone products, c) plans offering similar or lower levels of benefits (e.g. hospital room and board, annual limit), d) plans with similar coverage terms, e) plans with lower annual premiums/ takaful contributions.

9. Why is all this happening and is it good for you?

BNM said medical insurance policies with a co-payment feature will have cheaper premiums, where it can be 19 per cent to 68 per cent cheaper compared to similar insurance products without co-payment features (depending on how much you co-pay).

This gives customers the chance to choose insurance products based on their financial circumstances and needs.

BNM said having a co-payment feature will encourage customers to take a more active role in using healthcare services, and can help promote more responsible use of healthcare.

It said this will also reduce fraudulent medical claims, besides also controlling the inflation in medical cost in Malaysia, and also ensure that medical insurance and takaful remains affordable for Malaysians.

Medical inflation here refers to the annual increase in average treatment costs in hospital bills for surgical treatments and non-surgical treatments that are covered under the medical insurance or takaful product.

10. What causes medical inflation?

Malaysia had a medical cost inflation of 12.6 per cent in 2023, which is higher than the global average of 5.6 per cent.

Back in 2020, BNM in its Annual Report 2019 had already highlighted that higher medical costs may be caused by factors like healthcare providers charging more if a patient has medical insurance (based on anecdotes), and also the “buffet syndrome” (used to refer to when people try to maximise the value of the insurance premiums paid by using medical services with little incentive to consider the costs since it is covered by insurance.)

BNM had said such behaviours would cause medical costs to go up and result in higher insurance premiums, which means medical insurance will become less affordable and some higher risk groups may end up not getting access to medical insurance.

BNM in its 2019 annual report said insurance claims data from 2013 to 2018 showed that hospital supplies and services are the largest component of medical claims costs, and in its 2023 annual report said around two-thirds of hospital bills are taken up by hospital supplies and services. This can be linked to factors such as drug prices, advancements in medical technologies and increase in use of health services after elective medical procedures resumed after the Covid-19 pandemic.

Screenshot of BNM’s 2019 annual report