High medical costs explained

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  • Wednesday, 12 Feb 2020

THE letter “Hike in cost of medical insurance” (The Star, Feb 6) is referred.

The General Insurance Association of Malaysia (better known by its Bahasa Malaysia acronym PIAM) would like to provide a deeper insight into the issue of escalating medical costs.

Medical insurance premiums are tabulated using the best available data and experience with regard to the expected frequency and severity of potential hospitalisation. These insurance premiums are formulated based on a variety of hypotheses, including the probability of a yearly medical inflation. The pricing is then reviewed periodically.

In the event that the actual claim volume differs from the hypotheses, insurers will then consider revising the premiums charged.

Insurance companies may reasonably price an inflation rate of six to eight percent to cover medical inflation. However, with Malaysia having experienced one of the highest medical inflation rates in the Asean region in recent years, the expected increase in medical claims for 2019 was 13%. As a result, insurance companies have had to revise their premiums upwards.

While consumers are facing the challenge of rising medical costs, insurance companies are finding it equally difficult to offer products that are beneficial to them and yet are still affordable.

If the growth of medical cost inflation continues to go up, it will eventually affect consumers’ affordability and accessibility to medical insurance protection.

This would lead to increasing numbers of people seeking treatment in public hospitals, adding to the already heavily subsidised public healthcare bill and causing much strain on the government’s coffers.

A joint industry task force has been set up to better understand and address medical inflation. The critical issue for insurers and consumers is price transparency so that the latter can make informed choices on the cost of treatment.

PIAM welcomes the Health Ministry’s move on December 2019 to mandate the disclosure of consultation fees up front, and we believe that this should be extended to charges of common medical procedures in all private hospitals.

In this regard, private hospitals in Malaysia should publish their actual average costs similar to what is currently being practised in some countries.

At the same time, we hope the Health Ministry will expedite the establishment of benchmark prices for drugs and pharmaceutical

supplies. These are essential items to patients and should be made affordable to the public.

Consumers can also play a role. While one can take precautionary measures to be healthy, one may not be able to avoid illness. When consumers are contemplating hospitalisation, they may not have a choice but to proceed with a needed procedure. Most consumers would rather rely on their medical policy than pay out of their own pockets.

PIAM urges policyholders to be wise consumers. It is important to understand the necessity of all recommended procedures and tests. For non-emergency admission or elective surgery, it is advisable to compare expected costs between hospitals.

It pays to remember that even in the case where the insured’s hospital bill will be covered in full by the insurance company, the cost of each treatment will count towards their yearly and lifetime limits. In the end, lower claims will result in lower premiums for all policy holders.

There is no single solution to the perennial issue of escalating medical cost inflation. It requires the concerted efforts of all stakeholders including regulators, doctors, hospitals, insurers and consumers to manage it carefully for the benefit of all parties. PIAM would like to thank the writer for highlighting this important issue which impacts all consumers.

MARK LIM , Chief Executive Officer General Insurance Association of Malaysia

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