KUALA LUMPUR: The insurance industry is poised to enter a new phase of major reforms under government-led Reset initiatives, including the introduction of the medical and health insurance/takaful (MHIT) plan and diagnostic-related group (DRG) pricing to address rising medical costs.
Life Insurance Association of Malaysia chief executive officer Mark O’Dell said industry players support the MHIT initiative, which is scheduled to come into force in January 2027.
“The industry is very supportive because it promises to be more affordable and sustainable, which will help at least two major population groups.
“First, we hope it will bring more middle-class people into the private health insurance ecosystem, as well as provide those experiencing affordability or sustainability issues with an option that is adequate yet more affordable,” he told Bernama.
Reset initiatives (Regulatory Enhancement for Sustainable and Efficient Takaful/Insurance), a government-led programme involving Bank Negara Malaysia, the Finance Ministry, the Health Ministry and other stakeholders, aimed to modernise and strengthen the insurance and takaful framework.
Commenting on whether the base MHIT plan’s annual limit of RM100,000 or RM150,000 is sufficient, O’Dell said industry data showed the average claim currently stands at about RM12,000, suggesting the limit would cover the majority of cases.
The base MHIT plan is designed to remain affordable while providing meaningful coverage by setting annual limits that cover common and high-volume treatments in private hospitals, he said.
More complex and costly treatments that exceed these limits are expected to continue being handled by the public healthcare system, as MHIT complements rather than replaces public healthcare, according to O’Dell.
On current claims trends, he said respiratory illnesses and gastrointestinal conditions remained among the highest in claim volume, noting that these are common medical conditions expected to be covered in 99% of treatment cases.
O’Dell characterised DRG, another major reform from the Health Ministry, as a “complex packaged pricing” mechanism that will alter the dynamics between payers and healthcare providers.
He explained that under the framework, hospitals would agree to a fixed payment covering the full course of treatment, rather than billing separately for each service, effectively requiring providers to manage costs more efficiently rather than passing them on under the existing fee-for-service model.
“This is well underway, but it will take time to implement because it is quite complex, so it will be introduced gradually.
“Hopefully next year we might see 20% to 30% of procedures under DRG, and the proportion will increase year by year,” he said.
