KUALA LUMPUR – Amid public backlash, Malaysia’s central bank on Dec 20 announced interim measures to ease the financial impact from a proposed 40 per cent to 70 per cent hike in medical and health insurance premiums that is set to take place in 2025.
“These interim measures have been introduced to alleviate the immediate financial impact to policyholders and preserve coverage,” said Bank Negara Malaysia (BNM) in a statement.
Among the measures is a plan for the increase in premiums to be spread out over a minimum of three years, keeping it under 10 per cent a year for at least 80 per cent of policyholders.
Policyholders who have recently surrendered their policies due to the expected repricing can request to reinstate their medical plan, it added.
The government, together with insurance providers and private hospitals, will contribute RM60 million (S$18.1 million) to accelerate health reforms.
These include development of a base medical and health insurance product that covers essential needs and facilitate policyholders aged 60 and above to switch to it, once available.
News of the planned hike in premiums come 2025 had sparked widespread outrage, with many expressing concerns over the increasing economic pressure on individuals and businesses already struggling with other rising costs. Local media reports said many cancelled their policies.
According to BNM, Malaysia’s medical cost inflation reached 15 per cent in 2024, above the global average of 10 per cent. This is driven by advancements in medical technology and greater prevalence of non-communicable diseases such as diabetes, it noted.
As a result, claims paid out by insurers have grown faster than the premiums collected.
BNM’s governor, Datuk Seri Abdul Rasheed Ghaffour, acknowledged that broader measures to address higher medical costs are urgently needed.
“We need to address the root causes of rising medical and health insurance and takaful (Islamic insurance) premiums which are driven by higher medical costs and utilisation of medical services,” he said.
He added that BNM is working closely with the Ministry of Finance, Ministry of Health and private hospitals as well as insurers and takaful operators to “work out a long-term sustainable solution to the complex issue”.
On Dec 10, Prime Minister Anwar Ibrahim proposed several measures to address the issues, particularly the escalating price of medicine, suggesting that the government procure cheaper generic types.
The public healthcare system is also under heavy strain, with growing patient numbers and limited resources, leading to longer wait times and pressure on healthcare professionals.
In October, Datuk Seri Anwar announced targeted subsidies for public healthcare in his Budget 2025 speech, noting that Malaysians currently pay only RM1 for outpatient care and RM5 for specialist services at government medical facilities, regardless of income.
Starting in 2025, higher-income earners in the top 15 per cent bracket are set to pay more.
Previously, several government lawmakers called for the central bank to cap insurance premium increases at 10 per cent to protect middle-income groups from becoming priced out of coverage.
Employer groups have warned that the premium spike may compel businesses to scale back on employee benefits, including health insurance.
Malaysian Employers Federation president Syed Hussain Syed Husman said rising premiums are likely to impact the overall cost structure and financial health of businesses.
Businesses, particularly micro, small and medium, will face bigger operating costs, and may have to raise prices of their products and services.
“Rising insurance premiums may compel businesses to reconsider the extent of fringe benefits they offer to employees, particularly health insurance and other similar perks. To mitigate increased costs, some employers may reduce their coverage levels,” he told The Straits Times.
Professor Emeritus Barjoyai Bardai of Universiti Tun Abdul Razak’s Graduate School of Business said spreading the cost of the increase in premiums over several years does not solve the root of the problem.
“The solution is that we need to change the healthcare industry in Malaysia,” he told ST.
He proposed that there should be a middle market range of medical facilities, consisting of clinics offering specialist services but at lower prices than bigger hospitals.
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