By Leslie Lim
The Public Accounts Committee’s (PAC) landmark report reinforces a widely held perception that patients are often charged substantially more when using health insurance than when paying out of pocket.
For years, insurers, including the Life Insurance Association of Malaysia (LIAM), have attributed rising premium pressures primarily to increases in clinical claims and greater utilisation of healthcare services.
In this framing, higher medical inflation is largely presented as a consequence of rising treatment volumes and costs.
The PAC’s findings, however, present a more complex picture and highlight structural issues within the private healthcare and insurance ecosystem.
While industry stakeholders have emphasised utilisation-driven cost pressures, the report points to additional factors such as unbundled hospital charges, variations in pricing between insured and cash-paying patients, and broader market structure dynamics. These observations suggest that premium inflation may also be influenced by systemic pricing practices, rather than utilisation alone.
When private hospitals apply significant mark-ups on medicines or itemise charges for routine consumables, insurers often rely on Third-Party Administrators (TPAs) within the claims process.
The PAC noted that TPAs operate as intermediaries between insurers and healthcare providers and are involved in the administration of claims within the private healthcare financing system.
The committee highlighted that no single authority systematically oversees their administrative fees, operational standards or claims management policies.
It identified this governance gap as requiring stronger oversight to improve transparency, accountability and consistency within the system.
Addressing these issues requires clearer regulatory accountability and closer coordination between the relevant authorities. The Health Ministry could consider strengthening oversight of non-professional hospital charges, introducing a licensing framework for TPAs, and exploring bundled payment models to improve pricing transparency and predictability.
At the same time, Bank Negara Malaysia could review practices relating to portfolio management and premium adjustments, strengthen oversight of claims governance and invoice verification, and consider measures to improve the affordability and sustainability of medical insurance for existing policyholders.
For many Malaysians, medical insurance represents long-term financial protection against unexpected healthcare costs.
If premium inflation forces policyholders not to renew their plans, the burden will inevitably shift to a public healthcare system that is already heavily strained.
Government facilities simply cannot afford to absorb a massive influx of patients, including those from higher-income groups, who are forced to drop private coverage.
Maintaining public confidence will require greater transparency, fairer pricing practices, and more effective regulatory coordination.
To secure long-term sustainability, Putrajaya must also speed up the implementation of the proposed national health insurance scheme.
Only by taking unified, structural action can the government ensure that the healthcare financing system remains stable, equitable, and firmly centred on the rakyat’s interest.
Leslie Lim is WE’s contributing opinion writer