How Active Pricing Policies Can Help Mitigate Medical Repricing & Rising Insurance Premiums?

The healthcare insurance industry in Malaysia faces systemic challenges, particularly concerning medical repricing. The escalating cost of healthcare services has led to a rise in insurance premiums in Malaysia.

This has consequently made it more challenging for both insured and uninsured individuals to afford the necessary coverage for healthcare access. 

This situation has created invisible barriers to accessing essential medical services, as individuals and families may delay or even forego treatment due to cost concerns— potentially leading to adverse long-term health outcomes.

As insurance premiums continue to increase, innovative solutions are required to reduce the financial strain of rising medical expenses and medical repricing.

What is medical insurance repricing in Malaysia?

Medical repricing is a concept that revolves around the adjustment of prices for healthcare services. It directly impacts the affordability of medical insurance for Malaysians as the rising costs of healthcare services necessitate adjustments in insurance premiums to cover related expenses. 

For context, for those with medical insurance, repricing may lead to higher premiums. This consequently makes it more challenging to afford the insurance needed for healthcare access.

On the flip side, uninsured individuals may face even greater barriers to accessing necessary medical services as the cost of care continues to rise.

Read: Medical Repricing Explained: Key Factors Driving Changes in Cost of Healthcare Service
 

Why is there a need for medical repricing?

Medical repricing is a necessity in the Malaysian health insurance ecosystem for several reasons, such as:

Increase in chronic illnesses and non-communicable diseases

The prevalence of chronic and lifestyle-related illnesses has been on the rise in Malaysia. These non-communicable conditions like diabetes, heart disease, and cancer traditionally require ongoing treatment and management. This places a greater financial burden on the healthcare system.

Increased demand for medical technology

Advancements in medical technology have disrupted the healthcare ecosystem— offering new possibilities for diagnosis and treatment. However, these innovations come with high price tags, driving up the overall cost of medical services.

Growing demand for healthcare services

Malaysians are becoming increasingly aware of the importance of quality healthcare. This has led to a higher demand for private medical services. Thus contributing to the surge in healthcare costs.

Medical inflation

The slow depreciation of the Malaysian currency has increased the cost of imported medical products, equipment, and technologies. This, in turn, has led to medical inflation i.e., higher healthcare expenses for providers and insurers.

This medical inflation has put pressure on insurers to adjust premiums to maintain the financial viability of their plans.

Read: How Insured Consumer Choices & Medical Inflation Drive Medical Repricing & Premiums 

What's driving the increase in healthcare costs?

Overall, three main elements are driving the increase in healthcare costs in Malaysia, namely:

• The increasing prevalence of chronic and lifestyle-related illnesses amongst Malaysia’s ageing populous.

• The growing demand for advanced medical technologies, treatments, and imported equipment often comes with higher price tags.

• The depreciation of the Malaysian ringgit against major currencies which inadvertently raises the cost of imported medical products and equipment. 
  
  
  

How does medical repricing impact policyholders?

Medical repricing impacts policyholders in Malaysia in several ways, for example:

• Rise in insurance premiums: As healthcare expenses continue to escalate, insurers typically adjust premiums to ensure that the level of coverage promised to policyholders can be maintained. This is done whilst managing the financial risks linked to rising healthcare costs.

• Higher commitments: With the revision of insurance charges, more financial resources are needed to cover the higher costs of medical insurance. This may potentially strain policyholders' budgets and financial planning.
  
  
  

What is active pricing?

Active pricing is a pricing methodology within the health insurance sphere that involves the personalised adjustment of premiums in a systematic manner—based on the claims paid out to policyholders by insurers during the previous policy year.

How can active pricing lead to more balanced insurance premiums?

Yes, active pricing aligns premiums more closely with individual risk profiles and claims experience. This tailored approach and dynamism in pricing structure leads to more balanced insurance premiums.

Benefits of active pricing for policyholders

The benefits of active pricing for policyholders include:

• Potential premium reductions via personalised adjustments based on individual claims history.

• Fosters healthy behaviours and responsible healthcare utilisation, promoting better health outcomes amongst policyholders.

• Promotes greater awareness of individual health risks and the impact of lifestyle choices on their insurance costs.

• Fosters fairness and equity in the distribution of healthcare costs within the insurance pool.

 

Read: How active pricing medical insurance could benefit young Malaysians 

Conclusion

Active pricing is posed to play a disruptive role in addressing the current challenges posed by medical repricing within the healthcare insurance industry in Malaysia.

In practice, active pricing promises a more personalised and dynamic approach to setting insurance costs, ensuring that policyholders are charged premiums that align more closely with their actual healthcare utilisation. 

This will appreciably aid in mitigating the impact of rising medical costs on insurance premiums across Malaysia. Thereby providing a fairer and more equitable pricing structure that reflects individual risk profiles and health needs and reduces the financial strain on policyholders.