Keeping cost of medical insurance affordable

I REFER to the StarBiz article “Health insurance needs to be disrupted” (The Star, Jan 4). I agree with the author’s view that there is a need to disrupt the provision of health insurance services (HIS) in Malaysia, but I believe that he only covered the surface of the problem and did not provide any practical solutions.

The malady of HIS in Malaysia is so chronic that the product can no longer be considered as insurance. An insurance arrangement is a scheme where the provider takes a calculated financial risk with a reasonable opportunity for the insurer to make money. In the case of HIS, the downside risk is so obvious and any adjustment in the product price will not arrest the loss. This results in frequent price adjustments to cater to the minimum profit for the insurer and to cover the deficit in the insurance risk fund.

It is not a secret that the root cause of the problem is the weakness of the risk management structure and the uncontrollable and unprofessional conduct of private healthcare providers. I will explain the issues briefly.

From the risk management practice, the policyholders themselves need to play a part to keep the cost of claims low. The most efficient way to do this is to get policyholders to participate in the claims (co-share) by a certain percentage and provide a financial reward for customers who haven’t filed any claims over a certain period.

The second part of risk management practice is for insurers to use their financial power to negotiate with private healthcare providers instead of asking the government to regulate the medical cost. Unfortunately, insurers in Malaysia are not united and do not invest adequately in artificial intelligence (AI) to provide the necessary baseline information to negotiate. As an illustration, perhaps medical providers justify the different costs for treating the same ailment.

The third aspect of risk management is the pooling of risk. The current practice of individual company pool and usage of reinsurers capacity is outdated. There is a need to take a holistic look across the company risk pool.

Insurers’ provision of HIS is motivated by profit from the pooled premium paid by the policyholders. Therefore, to keep costs low, HIS must be provided by not-for-profit companies. Such companies maintain a separate risk fund and take a percentage of the premium as their administration fee. They do not take any surplus from the risk fund and the administration fee is kept low.

Only by taking all the above measures collectively can healthcare costs be kept affordable with minimal increment.

The government’s announcement of the healthcare reform proposal “Sihat Bersama (Healthy Together) 2030” is timely. We look forward to hearing more from the government on the reforms and strategic implementation plans.

I believe the Health Ministry’s company, Protect Health Sdn Bhd (PHSB), would be the right vehicle for implementation. They need to invest in resources and technology especially in the healthcare management systems.

It makes sense that the scheme is applied in stages, beginning with government servants, retirees, foreign workers and within the government-owned medical service providers before expanding to the private employer-employee sector and then the general public.

Private insurers have a role to play in providing a scheme that is niche and way above the mandatory scheme. Private healthcare providers are an important aspect of the national healthcare system, hence they need to act in fairness and with a transparent and clear basis for the pricing of their services.


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