A patient consults a doctor in a private hospital.
The diagnosis of the patient’s condition is made following history-taking, physical examination and investigations.
The doctor recommends that the patient undergoes a procedure on an ambulatory or daycare basis, i.e. the patient will be discharged on the same day after undergoing the procedure.
The patient agrees and then proceeds to hospital administration whose staff contacts the health insurance company for confirmation of the patient’s coverage and guarantee of reimbursement.
The insurance company informs the hospital that reimbursement will only be made if the patient is admitted for an overnight stay after the procedure.
The hospital receives the insurance company’s guarantee letter with this condition attached.
The doctor accedes to the patient’s request to be admitted for an overnight stay when informed about the insurance company’s condition for reimbursement.
At discharge the next day, the patient is informed by the hospital that the guarantee letter, issued the previous day, has been withdrawn by the insurance company because of non-disclosure by the patient when signing up for the policy.
The hospital requests the patient to pay the hospital bill themself (i.e. out-of-pocket).
This leaves the patient with much angst, disappointment, and even anger, especially as the bill would have been less if they had been admitted for daycare, rather than overnight.
This scenario – which is not uncommon in private hospitals – is a reflection of the level of Malaysia’s health insurance literacy.
Knowing health insurance
Health insurance literacy (HIL) refers to a person’s knowledge, ability and confidence to find and understand health insurance information; choose and purchase a policy suited to their financial and health circumstances; and use the insurance policy once purchased.
The HIL level of individuals has significant implications with regard to the number of insured individuals and the types of insurance plans acquired.
It also impacts on the effective utilisation of healthcare services, including primary care and preventive services.
HIL is critical to making appropriate decisions regarding healthcare.
Individuals with higher HIL are more likely to participate in preventive care, adhere to prescribed treatments and manage non-communicable diseases (NCDs) effectively.
Those with lower HIL may delay or forego care leading to delayed treatment, worse health outcomes and higher costs.
A 2024 survey titled “Insure or Unsure: Sun Life Insurance Literacy Survey” conducted by insurance company Sun Life Malaysia, found that only 23% of 1,107 Malaysian respondents were knowledgeable about insurance and takaful products.
Twenty-two percent of the respondents indicated low to no insurance knowledge, while 55% were uncertain about their insu-rance knowledge and dependent upon others for assistance.
Female respondents were 1.7 times more likely than men to have poor knowledge.
It also found that 32% had no insurance protection, of which, 92% had monthly incomes of less than RM5,000.
The other key findings were:
- Respondents with moderate to high understanding of insurance and takaful products and terms were likely to own at least one life insurance policy/takaful contract.
Conversely, those with a low or no understanding of insurance were more likely not to own any life insurance policy/takaful contract.
- Forty-two percent of those who did not have a life insurance or takaful plan stated it was because of affordability.
- Most insurance policy holders or takaful contract holders still depended a lot on their agents to supply them with information about products both before and after a purchase.
Agents who were insightful and helpful were also the leading factor behind most policy-purchasing decisions.
Factors affecting HIL
The World Health Organization’s (WHO) HIL framework is a “systematic approach to measuring and improving individuals’ knowledge, ability and confidence in understanding and using health insurance information.
“It is based on the Paez et al conceptual model, which includes four domains: health insurance knowledge, information seeking, document literacy and cognitive skills, with self-efficacy as an underlying domain.
“This framework is particularly useful for understanding and addressing the barriers to health insurance literacy, such as complex medical jargon and the need for educational campaigns to improve understanding and decision-making skills”.
The interacting domains of HIL are:
- Health insurance knowledge – includes insurance terms and concepts; types of healthcare services; and beneficiary rights
- Information seeking – includes information sources and their credulity, as well as questions for insurance companies
- Document literacy – includes understanding terminologies in insurance forms and documents; use of schedules in policy; and questions for insurance companies.
- Cognitive skills – includes assessment of personal needs and risks; application of insurance benefits to personal situation; projection of likely utilisation; calculation of out-of-pocket payments; assessment of value of the policy; and questions for insurance companies.
Important to know
The understanding of certain fundamental insurance terms is critical.
They include:
- Premium – the amount to pay the insurance company on a regular basis (e.g. monthly or annually) for coverage.
- Deductible – the amount paid for healthcare expenses before insurance kicks in.
Premium and deductible amounts are often opposite to one other.
A plan with a higher premium will often have a lower deductible, while a plan with a lower premium will often have a higher deductible.
- Copayment – a flat fee for healthcare services that the individual has to pay before the insurance coverage begins.
- Coinsurance – the amount the individual has to pay for healthcare services after they have paid the full deductible.
This amount is usually a percentage of the remaining bill (after the deductible has been paid).
The insurance plan covers the rest of the bill.
This columnist was advised to undertake the following measures when considering a health insurance policy:
- Estimate next year’s private healthcare expenses.
Start with this year’s expenditures, i.e. how much was spent?
- Understand the deductible.
How much was the deductible this year? Was it met?
If the deductible was higher, did you have sufficient cash reserves to meet it?
- Assess the annual insurance cost.
This is the amount paid in premiums regardless of how much the policy was used.
- Consider coinsurance, which is the portion paid for healthcare services once the policy’s deductible is met.
Knowing this percentage is important for budgeting and comparing policies.
The alternatives are obvious, i.e. the public healthcare sector or paying out of pocket.
Where responsibility falls
Health insurance policies are purchased on the basis of information provided to individuals and/or companies.
The legal standard for the provision of information in healthcare – decided by the Federal Court – is the Rogers v Whitaker standard, i.e. patients have the right to be informed of material risks involved in a proposed medical treatment or procedure.
The risk is material if:
- A reasonable person in the patient’s position, if warned of the risk, would be likely to attach significance to it, or
- If the doctor is, or should be, reasonably aware that the particular patient, when warned of the risk, would be likely to attach significance to it.
The question is whether the Rogers v Whitaker standard applies to the purchase of health insurance policies in Malaysia.
A test case may provide the answer.
The question of who is responsible for improving HIL is moot.
While individuals are responsible for their healthcare, it does not detract from the fact that Bank Negara and insurance companies have big roles to play.
Insurance companies have to comply with Bank Negara’s requirements.
Bank Negara can do more for the public by requiring full disclosure of health insurance policies to purchasers.
This would include, among others, policies that are in plain language understandable to the man on the street with minimal legalese; specific information of what is covered and what is not; clearer definitions of non-disclosure; and rapid resolution of disputes.
On the other hand, individuals have to remember that there are few insurance policies that cover every illness, and that those that do have high premiums.
They have to improve their HIL by ensuring they know what is covered and what is not; understand insurance jargon; disclose pre-existing condition(s); utilise their coverage prudently; and most importantly, ensure a healthy lifestyle.
In summary, everyone has to remember that low HIL can lead to missed preventive care, delayed treatment and higher out-of-pocket expenses.
Conversely, higher HIL can make cost-effective choices, avoid unnecessary healthcare bills and maximise their insurance coverage.
Employers benefit when employees understand their policies as it improves engagement with the potential to reduce healthcare costs.
Dr Milton Lum is a past president of the Federation of Private Medical Practitioners Associations and the Malaysian Medical Association. For more information, email starhealth@thestar.com.my. The views expressed do not represent that of organisations that the writer is associated with. The information provided is for educational and communication purposes only, and it should not be construed as personal medical advice. Information published in this article is not intended to replace, supplant or augment a consultation with a health professional regarding the reader’s own medical care. The Star disclaims all responsibility for any losses, damage to property or personal injury suffered directly or indirectly from reliance on such information.
