Consumers are struggling as medical insurance premiums surge, with over 340,000 dropping coverage amid calls for price regulation and stronger public healthcare
MALAYSIAN consumers are increasingly concerned over the recent rise in medical insurance premiums.
Although many insurers notified policyholders that premiums for some medical and health insurance/takaful (Mhit) plans would increase, future repricing is expected to be implemented more gradually, mainly due to rising private healthcare costs. However, the sharp increases have affected many consumers who are already facing stagnant incomes and rising living costs.
Many Malaysians purchased private medical insurance to avoid long waiting times in the public healthcare system and to gain more reliable access to private healthcare. They expected that paying insurance premiums would provide them with affordable and sustainable protection when they needed medical treatment.
However, the increase in premiums has resulted in some consumers discontinuing their policies. It has been reported that between January 2024 and June 2025, more than 340,000 consumers chose to forgo their medical insurance due to substantial premium increases.
The causes of rising medical costs have resulted in different parties pointing fingers at one another. Private hospitals have blamed insurers while insurers have raised concerns over over-treatment and rising hospital charges contributing to higher claims. Ultimately, the greatest impact is felt by consumers.
Medical insurance is a complex product and consumers often depend on agents to recommend suitable plans. Frequently, benefits are emphasised while risks and long-term affordability are less clearly explained. Consumers have little control over premium increases or hospital charges.
The claim of a “buffet syndrome” – where policyholders allegedly over-consume medical services because they are covered by insurance – has been cited as one of the factors contributing to rising healthcare costs. However, this claim requires stronger evidence before consumers are blamed for driving medical inflation.
According to the Health Ministry’s White Paper, factors contributing to rising healthcare costs include the increase in non-communicable diseases, emerging and recurring infectious diseases, an ageing population, mental health challenges, advances in healthcare technology, climate change impacts, and rising healthcare workforce costs.
While these are valid contributors to healthcare inflation, they affect healthcare systems worldwide. Therefore, Malaysia’s higher medical inflation compared with regional and global averages requires further examination.
In 2025, Malaysia’s medical inflation was reported at 15%, compared with an Asia-Pacific average of 11.1% and a global average of 10%. The Competition Commission, the Domestic Trade and Cost of Living Ministry and Health Ministry should investigate why medical inflation in Malaysia is higher than regional and global averages. Even in 2023, Malaysia’s medical inflation rate of 12.6% was significantly above the global average of 5.6%.
According to a report by Bank Negara Malaysia, hospital supplies and service charges make up a significant portion of total medical charges for both non-surgical and surgical treatments. As doctors’ fees are regulated, other private healthcare charges remain less controlled, creating concerns over transparency and affordability.
The report also highlighted differences in charges between insured patients and those paying directly. For example, some surveys found that insured patients using guarantee letters were charged substantially higher amounts for certain treatments compared with patients who paid upfront.
Fomca fully supports the Prime Minister’s proposal to amend the Private Healthcare Facilities and Services Act 1998 (Act 586) to regulate private hospital charges and implement a diagnosis-related group (DRG) payment mechanism.
The DRG system recommends a fixed fee or fee range based on the complexity of a medical procedure, including reasonable charges for scans, hospital supplies, and related services.
Regulated pricing could help reduce private healthcare costs and ease pressure on insurance premiums. While Bank Negara Malaysia has introduced measures including spreading out premium adjustments, temporarily pausing certain repricing exercises and encouraging the development of alternative Mhit products, one of the most significant steps is the introduction of more affordable insurance options.
The base Mhit plan is designed as a more affordable medical protection plan that balances coverage with sustainability. It has a lower annual limit and standardised benefits aimed at covering common hospital admissions.
One major concern regarding the new plans is mandatory co-payment, which requires policyholders to bear part of the medical bill before insurance coverage applies. This measure is intended to discourage unnecessary healthcare utilisation.
However, the “buffet syndrome” argument should be treated cautiously. A report by the Khazanah Research Institute, “Raising Medical Premiums: Can it be Cured?”, noted that there is limited evidence proving widespread abuse of medical insurance in Malaysia.
The greater concern is that co-payment plans, while offering lower premiums, may transfer a greater financial burden to consumers who are already struggling with medical inflation.
There is also a need to move away from the current fee-for-service model towards a value-based healthcare system, where costs are linked to outcomes rather than the number of services provided. The proposed DRG system would support this approach by paying hospitals a fixed amount for a particular treatment instead of encouraging itemised billing.
A properly implemented DRG system could help improve transparency, reduce unnecessary costs, and ensure that patients receive appropriate care.
Another positive aspect of the Mhit plan, according to the Health minister, is that pre-existing conditions may be covered under the new framework. This is important because many consumers who need medical protection most often face difficulties obtaining insurance.
There is also a need for stronger consumer education. Malaysians must understand that the best insurance policy is not necessarily the one with the most benefits but one that remains affordable and sustainable throughout their lives as premiums rise with age and healthcare costs.
Despite the focus on private insurance, medical insurance is not the largest source of healthcare spending in Malaysia. In 2022, medical insurance accounted for 8.3% of total health expenditure while government spending accounted for 42.9%. Out-of-pocket payments by patients accounted for 37.2%, which remains a major concern.
The measures introduced by the government and Bank Negara Malaysia to address medical inflation should be supported. However, Fomca believes the government must also increase investment in public healthcare, upgrade facilities, modernise healthcare delivery through digitalisation and strategic purchasing and support healthcare workers.
A strong and accessible public healthcare system remains essential to ensure that healthcare in Malaysia remains affordable and available to all.
Dr Paul Selva Raj
Deputy President
Fomca
