By Dr Mohamed Rafick Khan Abdul Rahman
THE ongoing public statements made by the Association of Private Hospitals of Malaysia (APHM) regarding the relationship between insurers and private hospitals may be garnering media attention, but they fail to address the root of the issue.
Despite repeated calls for these matters to be handled privately, APHM continues to voice its concerns publicly, creating unnecessary noise that the general public largely dismisses. The issue at hand, however, is not for public consumption.
Dr Mohamed Rafick Khan, in the article shared by the Life Insurance Association of Malaysia, said: “The relationship between private hospitals and insurers should be one of mutual benefit, not a parasitic arrangement.”
A Symbiotic Relationship Needs a Solution, Not a Blame Game
APHM’s suggestion to form a joint working committee with insurers to review billing structures and ensure fair pricing is a step in the right direction.
However, it is crucial that this initiative focuses on the underlying issue—the excessive hospital charges that are pushing insurers to raise premiums.
While reviewing billing structures is certainly an academic exercise, it doesn’t solve the current problem; it’s the inflated charges that need addressing.
The push to retain cashless medical products under the guise of patient care, which APHM has publicly advocated, is nothing more than a ploy to protect its financial interests.
APHM's rejection of insurers' proposals to freeze hospital costs for three years and to allow the Health Ministry to regulate pharmaceutical pricing during a period of premium caps speaks volumes about its priorities.
The proposal to keep premiums low while allowing unchecked hospital charges is simply unsustainable and shows little concern for policyholders.
The Need for Public Education on Premium Pricing
While APHM continues to make headlines, primarily focused on protecting its cash flow and profit margins, it is high time that insurers took action to safeguard the interests of their policyholders. The public is growing increasingly concerned about rising health premiums, yet they remain largely in the dark as to why these premiums are soaring.
Insurers must take it upon themselves to educate the public on how premiums are calculated and where their money goes.
A significant portion of premiums goes toward paying claims, distribution costs, and maintaining statutory reserves. Insurers should be transparent about how much of the premium collected ends up as profits for the company.
A clearer understanding of the financial mechanics behind premiums will allow the public to appreciate the financial burden imposed by private hospitals' charges.
Affordable, Scalable, and Customised Health Assurance Products
In addition to public education, insurers must focus on providing policyholders with access to more affordable health assurance products. There are two key strategies that can be employed to achieve this. First, insurers can explore direct distribution channels, bypassing agents to reduce costs. Technology allows for more efficient customer education, eliminating the need for expensive intermediaries.
Direct distribution would reduce the cost of premiums and allow insurers to offer cheaper products without compromising coverage.
Second, insurers could revisit the concept of reimbursement-based products. These products offer dual advantages: policyholders would be responsible for managing hospital expenses, thereby giving them more control over their healthcare costs.
When coupled with the Bank Negara Malaysia’s co-payment directive, policyholders would be incentivised to question excessive charges. This approach puts the onus on both insurers and policyholders to manage costs responsibly.
A third strategy worth revisiting is the consortium model that insurers employed in the early 2000s. By collaborating and offering national health assurance products, insurers can consolidate claims data and determine true industry costs.
This would allow insurers to distribute the financial burden across the industry, making health insurance more affordable for policyholders.
A Shift Away from Price-Based Competition
The introduction of industry-wide health assurance products would shift the focus of competition from pricing to service quality.
By spreading the cost burden more evenly across the industry, insurers would be able to offer cheaper products without the need for continual price wars. However, the success of such initiatives is contingent on private hospitals’ willingness to moderate their charges.
If hospitals continue to set their prices without regulation, any benefits from these initiatives would be short-lived.
Protecting Policyholders from Premium Inflation
To protect policyholders from the increasingly unaffordable premiums, it is essential to reintroduce reimbursement-based health products. Policyholders must take an active role in questioning hospital charges, as these are directly linked to the rising costs of premiums.
Furthermore, insurers must create products that offer tailored benefits based on factors such as age, gender, pre-existing conditions, and risk exposure. For example, a young person with employer coverage does not need a high sum of coverage. High annual and lifetime limits drive up premiums, contributing to “medical inflation.”
Insurers must take a collective approach to reform, prioritising the needs of policyholders while disregarding APHM’s public statements.
In summary, insurers need to take decisive action to address the root causes of rising premiums and ensure that policyholders are protected.
A structured public education programme explaining how premiums are priced, alongside the development of affordable, customised products, is essential for a healthier and more sustainable health insurance market.
Dr. Mohamed Rafick, Reassurer and Assurance Industry Consultant, is a trained physician with 12 years of experience in military medical services and over 22 years of experience in the assurance industry. He retired as the CEO of a multinational reinsurance company in 2019. Currently, he remains active as an independent international assurance industry consultant. – March 24, 2025
