Malaysia’s Public Accounts Committee (PAC) held 19 sittings, heard from 21 witnesses, and produced a 1,999-page report on rising medical insurance premiums and private hospital charges.
The conclusion is one that ordinary people have understood for years. Neither the insurers nor the hospital providers have shown sincere willingness beyond lip service to control costs. They ride on each other in seeking greater profitability.
Insurance Industry’s Defence Doesn’t Hold Up
Life Insurance Association Malaysia (Liam) CEO Mark O’Dell told the PAC that medical inflation averaged 16.1 percent annually between 2021 and 2023, a figure he called “scary.” He argued that 92.96 percent of every premium ringgit collected goes toward paying claims.
This figure is presented as proof that insurers are not profiteering. However, it failed to illustrate insurers’ own pre-tax profit margins for medical and health products. This should have been presented for consumers to evaluate and appreciate.
The assurance industry running double-digit profit margins (from all products) while claiming to be “loss-making for three consecutive years” on its medical portfolios is not an industry in crisis. It is an industry that has chosen not to use its considerable financial and analytical leverage to challenge the hospital charges it ultimately passes on to policyholders.
This is the heart of the problem. Insurers possess exactly the data, scale, and actuarial sophistication needed to push back against opaque hospital billing. They have chosen instead to pass costs through to premiums and frame the result as an unavoidable market outcome.
Their approach focuses on public education campaigns aimed at helping consumers understand how health insurance works. There has been no proven data that this strategy works. It does nothing to address the rising cost problem, particularly given that the industry holds the tools to negotiate hospital pricing and has declined to use them.
Telling consumers to understand their policies better does not change the fact that medicine and medical supply markups inside private hospitals have reached as high as 300 percent, a figure the PAC report itself documented as a primary driver of medical inflation, far outweighing doctors’ fees, which have been regulated since 2013. What meaningful action has been taken by the assurance industry?
The introduction of a deductible and co-payment structure shifts a portion of the risk and cost onto policyholders, and while it improves the assurance industry’s health product margins, it remains only as a temporary band-aid solution that has no impact on private hospital charges.
Limited government action partly reflects its own conflicted position, the state earns substantial tax revenue and dividends from companies straddling both the insurance and private hospital divide, creating a structural disincentive to impose the very cost controls that would reduce those companies’ profitability.
Diagnosis-related groups (DRG) implementation will not by itself contain hospital charges; it standardises billing categories and improves billing processes, but without enforced reimbursement caps or profit margin limits, hospitals retain discretion to price within those categories as they see fit.
The Case For Regulated Profit Margins
If neither side of this (medical and insurance) industry will discipline its own pricing, the obvious remedy is one the PAC report gestures toward but does not go far enough in recommending: a government-mandated profit margin ceiling for both private hospitals and insurance and takaful operators.
The PAC has recommended amending the Private Healthcare Facilities and Services Act 1998 to extend regulation beyond doctors’ fees into the non-professional charges, medicines, laboratory tests, and equipment usage, which actually drive the bulk of cost escalation. It has also urged Bank Negara Malaysia to push insurers toward smaller, incremental annual repricing rather than the 40 to 70 percent premium shocks policyholders faced in 2024.
These are sound but incremental measures. A defined profit margin cap, applied transparently to both private hospitals and insurers, would address the root cause rather than the symptom. The PAC report’s own reference point is instructive: non-profit institutions such as Tung Shin Hospital in Kuala Lumpur demonstrate that quality private health care can be delivered without a profit motive distorting pricing.
If a not-for-profit model can operate sustainably, a regulated profit ceiling on for-profit operators is not an unreasonable imposition; it is simply Malaysia drawing a line for an industry that has thus far drawn its own line, and drawn it generously in its own favour.
A Symbiotic Relationship Built On The Patient’s Bill
What the PAC report makes unmistakably clear is that insurers and private hospitals are not adversaries in this dynamic; they are, functionally, partners sharing the same revenue stream. Hospitals mark up supplies and equipment usage; insurers pass the resulting claims cost on as premium increases; both report healthy profit margins while the policyholder absorbs the difference.
Galen Centre CEO Azrul Mohd Khalib captured this precisely in response to the PAC report, describing a consumer caught between escalating hospital bills and increasingly unaffordable insurance and takaful premiums, forced into a dilemma between healthcare cost and financial catastrophe.
He noted that no single regulatory body currently holds the mandate to ensure transparency, fair treatment, and consumer protection across this private health care space. Bank Negara regulates insurers, the Health Ministry regulates facilities (but not charges), and third-party administrators (TPAs) acting as medical intermediaries sit in a regulatory blind spot that neither institution fully covers.
This fragmentation is not accidental from the industry’s perspective; it is precisely as a result of the absence of unified oversight that has allowed both sides to point fingers at each other while profit margins remain comfortable on both sides of the transaction.
Until Malaysia closes that regulatory gap with enforceable cost and margin controls, policyholders will continue paying for a cost-shifting cycle that two profitable industries have shown no interest in breaking on their own.
Both health care services and assurance are fundamentally socially driven activities, and extracting excessive profit from them would be morally indefensible.
Conclusion And Way Forward
Malaysia’s cost-shifting cycle will not correct itself. Industry goodwill has not worked. Assurers public education has not worked. Incremental regulation and changes alone will not be enough. Two structural reforms deserve serious consideration.
The first is converting medical insurance and takaful toward a not-for-profit cooperative model, where contributions fund genuine risk-pooling rather than shareholder returns. The second is accelerating a national health insurance scheme, pooling resources across employers and employees to guarantee universal access regardless of income.
Both proposals attack the root cause rather than its symptoms. Until policymakers confront that root cause directly, Malaysians policyholders will keep paying for a system that two profitable industries have every incentive to preserve and ride on each other’s interests.
Dr Mohamed Rafick Khan 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 and remains active as an independent international assurance industry consultant.
- This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.
