Medical insurance, in some of the context, also known as hospitalisation insurance or health insurance is a vital risk management tool that should never be looked down on.
This type of insurance covers any conditions that resulted to procedures and operations in a medical centre, which excludes other chronic or critical illnesses. If you keep yourself healthy by not having any claims, you may be awarded with other perks such as:
Medical screening, technological and voucher offerings
Cash rewards
No-claim discounts
Many more
Bear in mind that the medical insurance cost will rise every 5 years even if the medical cost does not rise. Usually, this increase will only happen when your age number ends with 5s or 0s. The rise of medical insurance cost is based on medical risk calculation by actuaries in the insurance companies, with an expectation of a higher tendency of an older-aged people to file a claim than a younger ones. If you are not persuaded by these words, flip through your insurance document or policy and have a look in the cost of insurance for medical riders.
Do note that drastic increase is also projected in the medical insurance cost during your 45th birthday. (Yes, a golden number that only medical insurance actuaries understand) A simple reason for this drastic hike is the heightened claim immediately after this age.
Medical insurance crisis (which it really is in Malaysia) comes into the spotlight since a few years ago when Covid-19 strikes the nation. Everyone started to realise that medical cost increase is imminent, which drives up the uptake of medical insurance.
Insurance companies have been regulated heavily - they CANNOT increase the cost of insurance without prior notice nor reasons, other than the projections given before the commencement of insurance. The increase has to be approved by the regulator, the Central Bank of Malaysia, before they can increase the amount. This means the regulator has been notified on increased cost of medical and claims by the insurance companies when articles about medical insurance were articulated.
However, people are not ready for a continuous one. A drastic increase in 5 years is not something the public is expecting. Therefore, a search of reasons are a must to solve this crisis that affects the whole nation.
1. Medical advancement
As our technology becomes more and more advanced, so does the medical devices. Thanks to medical advancements, illnesses which are classified as "critical" or "chronic" are now curable.
As a take-back, medical advancements have a cost. Costs that involves are
Device-buying cost
Import and delivery cost
Customs clearing cost
Calibration cost
Training for the medical device officer to operate
Professional fees
As more fees are listed, even the simple diagnosis becomes increasingly expensive.
Government absorbs most of the costs, charging at a minimal fee to government hospital patients. This is not the case for private hospitals.
Private hospitals end up charging higher when they use advanced technologies on diagnosis and operations on patients' treatment. Since some of the patients had transferred or shared the medical risk to the insurance companies, patients tend to claim more from the insurance companies.
Under insurance claim pool concept, insurance companies have to maintain a specific amount of fund in the risk fund (the fund that honours claim) as required by regulators, the insurance companies can choose to
contribute the shortfall of the claim
ask the policyholder to pay up the difference
Insurance companies are profit-concerned organisations. Do not expect that they are deciding on the earlier.
2. Government hospitals occupations
While government hospitals give proper support to the nation at an affordable cost, a long queue shoos away people who had insurance coverage to receive medical treatment in government hospitals. After fighting the pandemic, the government hospitals which are currently packed with people and plagued with a lot of other issues such as hospital staff remunerations, are not ready for the post-pandemic rise of patients.
On the other hand, private hospitals mushroom during these few years as people are more concerned on their health. While government hospitals cannot support the patients, they are the complementary support of the Malaysian medical system. Private hospitals, unlike government hospitals, rely on income and donations instead of government funding for the operation of their hospitals. These hospitals have every reason to charge a suitable amount for the cost on the patients.
Private hospitals are required to pay a lot of costs to support the operation of the hospitals. As incomes rely on diagnosis and treatment of the patients, to ensure profits by the private hospitals, they need to charge relevant amount of cost to pay them. Needless to say, patients bill will increase too when inflation kicks in.
3. Insurance supply and demand
Insurance products are just ordinary products, the difference is that there is no tangible asset.
When there are people subscribing to the products, the ability for the fund to accumulate increases, thus reducing the claim ratio of the fund - maintaining the cost everyone is paying for the guaranteed benefits.
When people stop subscribing to the products, the ability for the fund to accumulate reduces. When less people contribute to the fund with the similar amount of claim issued, the claim ratio of the fund increases. This makes the fund of the product unsustainable and fail to meet regulator's requirement on fund management.
Without choices, the insurance companies will ask anyone who are still contributing to the fund to pay more for the same guaranteed coverage as less people are in the fund now.
4. Medical inflation
Do you know? Medical inflation hits more than 10% per annum every year in Malaysia. (Source)
This means if you are paying RM1 for medical today, you will need to pay RM1.10 for medical next year.
Medical supplies, equipment and technology available in Malaysia are mostly imported, making all these items vulnerable to price hikes whenever there is a market fluctuation such as
war which makes these supplies cut or reduced
foreign exchange fluctuations - especially weakened local currencies
foreign economic data - if the products are produced in a high-inflation country, buying cost drives up too
political sanctions - tariff imposed or export limitations by government
As these factors cannot be controlled (neither by the local government nor the private hospital management), the cost will immediately impact towards patient's bill.
Insurance companies pay patients' bills whenever contract terms imposed. If these costs are high, they have to accept too.
5. Lack of control by government and insurance companies
Macroeconomically, there are pros more than cons of not imposing price control.
The price is dominated by the market
Market encourages fair competitions (cheaper gets better sales)
Market will not observe oversupply or under-demand which may cause huge losses to the industry
Based on these facts, the private medical industry has been dominated largely by the market. Why the mess?
Private medical services becomes specific in terms of services provided, which you cannot make a comparison between apple and apple. This sounds well as it seems to be a type of hospital branding, but it turns out bad too.
Private hospitals tend to offer different rates for different methods of payment. (Source) This means if the bill goes directly to the insurance company, the patient may not know how much it is, causing insurance companies to have higher claims issuance. Adverse selection may happen on this occasion as patients will have "buffet symptom" on medical services.
To make the matter worse, insurance companies, on the other hand, did not view the terms in the contract properly. You may have read through your medical rider or policy wording by now, with most of the section mentioned "As charged, subject to reasonable and customary charges." None of us may have asked the insurance company on this term as they are issuing the claims, as they are replying the patients with just two simple replies, either YES or NO. Then, what is so terrible about insurance companies making the medical insurance cost high?
Insurance companies, especially who are in the medical claims department, have every right to ask, question or even condemn the medical cost that is charged by the hospital to the insurance companies, on behalf of the patient as mentioned in the contract relationship under the Principles of Insurance. The patients has no authority to ask this as they have transferred or shared part of their risk to the insurance companies. As a matter fact, insurance companies are partly to be blamed for this issue.
The blame goes to the government too. The right of obtaining medical service is an essential element in the society. While the government encourages people not to rely on government medical service, the government should have kept their eyes on the medical industry and performed necessary actions towards any creative service offered by the hospital to the patients. By prohibiting different pricing regimes and proper health governance, this crisis would not have happened.
Of course, we cannot control all of the factors from happening. What can we do now?
Risk can happen any time, which may not be necessarily be on medical scenario only.
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Do you know that retirement can be a risk if you do not plan properly?
Do you know that a disability on a person can bring huge impacts to the family?
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