BNM Makes Co-Payment Insurance Mandatory; What Does It Mean?

Starting from the 1st of September, Bank Negara Malaysia (BNM) has mandated insurance companies to offer policies with a 5% co-payment or RM500 deductible, to the point where insurers must develop such products if they don’t already exist.

But what exactly is co-payment insurance? And how does any of this affect you? That’s what we’re going to explain in this article.

What is co-payment insurance?

First, let’s answer the most important question; what is co-payment insurance?

A co-payment insurance is just an insurance scheme where the insured (eg: you) and the insurance company pays the cost of the medical bill together.

How does a co-payment insurance policy work

Ali recently went to the hospital for a surgery, and his surgery costs RM15,000.

In a normal insurance policy, Ali’s insurance company will pay his medical bills in full.

But in a co-payment insurance scheme, Ali will have to pay a percentage of his medical bills, which is predetermined.

If Ali’s predetermined percentage to be paid is 5%, this means that Ali will have to pay 5% of RM15000, which is RM750. The rest of the medical bills will be covered by the insurance company.

Are there limits to how much the policyholder has to pay for their share of co-payment medical expenses?

There is usually a limit to how much you will have to pay for your contribution under co-payment coverage as the policyholder.

For example, let’s say Ali underwent a medical procedure that cost RM250,000, and his co-payment insurance requires him to pay 5% of the medical bills. But the co-payment insurance scheme also includes a clause that limits his contribution to be capped at RM1000. This means that Ali will only have to pay RM1000, instead of RM12,500.

Are there circumstances where co-payment shall not apply?

According to BNM, insurers and takaful operators (ITOs) must offer consumers an option to purchase MHIT products with a co-payment feature from September 1, 2024.

However, BNM further clarified that there are additional requirements to be observed by ITOs to safeguard consumer interests.

In order to promote affordability while still ensuring access to urgent medical treatment, co-payments shall not apply in the following circumstances:

• Emergency treatment, including in accident cases
• Outpatient treatment for follow-up treatments arising from critical illnesses such as cancer or kidney dialysis
• Treatment sought at a Government healthcare facility

Why is BNM making co-payment insurance mandatory?

The main purpose is to promote more sustainable and affordable medical and health insurance and takaful (MHIT) products.

There are two reasons to this, which is as follows;

To provide people with a cheaper alternative

The first reason is; a co-payment insurance plan will come with a cheaper premium. This is a measure taken by BNM as one of their steps to overcoming a significant problem in Malaysia; Malaysians not having adequate coverage.

According to a report above by Perbadanan Insurans Deposit Malaysia (PIDM), less than half of Malaysians have life insurance, and only around 54% have health insurance.

With a lower premium, perhaps a significant chunk of these people will get themselves adequate coverage.

To combat medical inflation

Medical inflation is the annual increase of average treatment costs in hospital bills for surgical treatments and non-surgical treatments that are covered under the medical insurance or takaful product.

In case you didn’t know this, Malaysia has a medical inflation problem. This is evidenced by its high medical inflation rate of 12.6 per cent in 2023. It is higher than the global average of 5.6 per cent.

On the consumer side, one of the chief reasons for our high medical inflation rate is due to medical insurance policyholders’ cavalier attitude when dealing with medical costs.

Too many policyholders have a very lackadaisical attitude when looking at their medical costs covered by insurance.  They tend to just accept the bill without looking it over. This also applies to seeking hospitalisation and giving consent for medical procedures which may not be needed. This in turn leads to hospitals overcharging users for any medical procedures.

In fact earlier this year, chief executive of the Life Insurance Association of Malaysia (LIAM), Mark O’Dell stated that he was shocked when he was presented with a RM18,837.55 medical bill for a hernia operation.

The medical inflation problem is also exacerbated by something called the ‘buffet syndrome’, referring to when people try to maximise the value of the insurance premiums paid by using medical services with little need.

Co-payment insurance schemes can help combat against this, as policyholders will be more careful with their medical costs, as they are paying a portion of it as well.

How does co-payment insurance affect you?

So now to the most important question, how does all of this affect you?Well, the simple answer is, it can be good for you, or it’s of little consequence for you. Let me explain.

You are an existing policyholder

If you are an existing policyholder, then you can just continue with your existing policy as usual. The mandate is for insurance companies to provide co-payment insurance. It doesn’t mean that your insurance policy will be automatically converted to be one.  Your medical insurance policy will continue as it is.

You don’t have an insurance policy

In this case, it can be good for you as you now have an option for a cheaper insurance policy. According to BNM, medical insurance policies with a co-payment feature will have cheaper premiums. It can be up to 19%-68% cheaper compared to similar insurance products without co-payment features.

So, you can get medical insurance coverage for yourself, according to your economic status and needs.

But if you don’t want the co-payment insurance policy, no problem. The normal insurance policy without co-payment features will still be offered to you.  You can also compare and find the best insurance coverage that suits your needs with iMoney here.