The base MHIT plan is designed to be the lowest denominator product — a standalone medical protection plan that balances medical coverage with affordability. The plan caps the annual policy limit at RM100,000 ($32,288), with standardised benefits that cover the costs associated with common complex admissions in private hospitals.
The table below shows a simple comparison between the base MHIT plan and a typical MHIT policy in the market today. The premium for the base MHIT plan is much lower because of its lower claim limit and benefits. Remember our “Airline model” framework for the insurance industry (“High cost of private healthcare — who is (ir)responsible and how to mitigate?” [The Edge, March 3, 2025]), where there is a basic package (economy class) for the masses and premium packages (business and first class) for those who can afford to pay more? Well, this is the economy class plan (see Flashback).
As we wrote previously, not everyone needs an “all-in” unlimited claims policy that must necessarily come at higher premiums. Based on statistics, 99% of medical claims are below RM55,225 with the median claim being only RM5,695. In other words, RM100,000 is more than sufficient to cover most instances, save for the 1% cases of highly complex and costly treatments that can be managed within the public healthcare system. Its design as a standalone MHIT product rather than the typical investment-linked medical riders makes it less risky, more transparent and simpler for consumers to understand. For those who prefer to have the choice of additional benefits (such as critical illness and accidental death payouts and investment), treatment options, better non-medical services and so on — and can afford to pay higher premiums — they can opt for the “business” and “first class” MHIT plans currently offered by insurers.
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The point is that this base MHIT plan gives consumers a choice — to pay for the basic insurance coverage or pay extra for more “frills”. It is highly unlikely that insurers will voluntarily offer and promote a basic plan with lower premiums (they are profit-maximising private entities). Indeed, 70% of all policies are currently investment-linked — insurers and agents market these plans more aggressively, as they come with higher premiums, and bundle all the “bells and whistles” to create a perception of value for money. In addition, since this base MHIT is a standard plan to be offered by all insurers, it means there will be volume. And in actuarial math, volume matters. A larger volume insured (risk pooling improves statistical predictability) means a lower cost per unit. Therefore, the government is right to step in — by mandating that all insurers offer this base MHIT plan, alongside their own MHIT plans — to enable a lower sustainable cost policy.
It is crucial that consumers understand that the best insurance policy for them is not the one with the most benefits but one they can sustainably afford for life, bearing in mind that premiums will continue to rise with medical cost inflation.
In addition, knowing their policy has a lower limit will instil discipline in patients when seeking treatments. They would be more cautious and make more prudent healthcare decisions to preserve their benefits for future needs.
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The base MHIT plan also includes mandatory co-payment — requiring the policyholder to bear a portion of the total medical bill, before insurance claims kick in — another feature that we have previously highlighted as important to minimise the “buffet syndrome” that is driving up medical healthcare costs for everyone (the individual benefits while all policyholders share the cost). The co-payment amount is structured into two tiers, depending on the hospital (lists to be announced later). Tier-1 hospitals have a deductible cap of RM500 per disability while Tier-2 hospitals will include an additional co-share of 20% of the hospital bill capped at RM3,000). The point is that, when policyholders have to share the costs, they will be more inclined to weigh the necessity and value of each medical decision, as there is now a direct financial implication for every choice made. Co-payment pushes patients to be active participants in managing their healthcare expenses.
Bank Negara has also proposed a standard-plus base MHIT plan, which has a higher annual limit of RM300,000 but also higher co-payment (deductibles) of between RM10,000 and RM15,000 at even cheaper (15% to 45%) premiums than the base plan. Why does this work? The higher the co-payment, the less likely the policyholders will “overindulge” on medical and hospitalisation care. This is likely to lower the total payout by insurance companies over time. Obviously, this is not good news for private hospitals.
In short, we think the base MHIT plan is constructive. Yes, it does not address all the problems plaguing our public healthcare system and escalating medical costs. It is not meant to, on its own. It is part of the multi-pronged RESET strategy. We await more initiatives under RESET, such as DRG (Diagnosis-Related Groups) to be implemented, and whose features will gradually be worked into this base MHIT plan. What it does is give more people optionality, and the co-payment feature will encourage policyholders to make better-informed medical decisions. In fact, the base MHIT plan may not necessarily be less profitable for insurers, as it should lower the cases of overtreatment (which drives up medical cost inflation and claims) and policyholders share part of the cost.
If managed well, we can foresee that the base MHIT plan will be beneficial to the healthcare and insurance industries in the long run. Given that the base MHIT plan is the lowest-denominator product, it will expand affordability to more middle-income households, those who can afford private healthcare (note that it is not a social insurance scheme meant for everyone).
The shocking 2024 premium hikes were a watershed, shattering the illusion that buying insurance young, when premiums are low, will protect one through life. People now understand that premiums are not fixed for life and, therefore, one must select a policy that will continue to be affordable when premiums inevitably rise with healthcare costs inflation. We do not want to be caught again with the impossible choice of keeping a policy we can barely afford or give it up and risk massive hospital bills should the unforeseen happen. To be sure, premiums for the base MHIT plan are not fixed either, but they are set by the authorities (presumably Bank Negara, based on actuarial principles), as are the periodic reviews, which should translate into a higher level of governance and oversight. Coupled with lower claim limits, co-payment, DRG, standardisation and the fact that the plan is not investment-linked, future premiums are expected to more stable and predictable.
Our main concern is the proposal to allow people to pay for the premium with their Employees Provident Fund (EPF) savings. The authorities have time and again warned that Malaysians do not save enough for retirement as it is. Allowing yet another route for members to withdraw from already insufficient savings is inexplicable. EPF withdrawals should be allowed only for emergencies and in old age. As Bank Negara has stressed, the base MHIT plan is designed for those who can afford private healthcare. If they cannot afford the premium for this economy class plan, then they would in all likelihood be better off going to public hospitals.
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Co-payment encourages discipline and responsibility
We like the mandatory co-payment feature. As we have said, it cultivates discipline and self-governance, encourages people to take responsibility for their decisions and, as a result, the entire ecosystem gains. This concept should be expanded. As an example, Singapore has two schemes, called the Matched Retirement Savings Scheme and Matched MediSave Scheme, to help eligible Singaporeans boost their retirement and healthcare savings (that will be used to pay for insurance premiums and hospital bills). In essence, the government provides matching grants (with limits) for every dollar top-up to their Retirement/Special Accounts and MediSave Accounts, to encourage the saving culture. This is far better than simply giving poorly designed cash handouts. When things are given for free, they lose value very quickly. Worse, they are disincentivising and encourage unhealthy dependency, and expectation eventually hardens into entitlement. Cash handouts once initiated can never be rolled back (without risking severe political backlash) and people tend to spend free money, well, freely, including on frivolous things. Make no mistake, handouts are costly — they add to the government’s fiscal burden and divert funds from critical public services such as healthcare and productive development projects that will drive future economic growth. Ultimately, everyone pays the price, whether in terms of higher taxes, poorer public services, a weaker economy or fewer opportunities.
Portfolio commentary
The Malaysian Portfolio fell 0.3% for the week ended Feb 4. Malayan Banking (+1.2%) and LPI Capital (+0.3%) were the only two gaining stocks, while the biggest losers were Insas Bhd – Warrants C (-50.0%), United Plantations (-2.3%) and Hong Leong Industries (-0.1%). Total portfolio returns now stand at 209.4% since inception. Nevertheless, this portfolio is outperforming the benchmark FBM KLCI, which is down 4.7% over the same period, by a long, long way.
The Absolute Returns Portfolio, meanwhile, declined 1%, paring total returns since inception to 46.9%. Gains from Berkshire Hathaway (+6.4%), Ping An Insurance – A (+4.2%) and Ping An Insurance – H (+1.4%) were more than offset by losses for Alibaba Group Holding (-8.2%), SPDR Gold Minishares Trust (-8.2%) and Kanzhun (-7.7%).
The AI Portfolio fell sharply, ending the week 10.9% lower and sending total returns since inception into negative territory, down 6%. All stocks in the portfolio suffered losses last week amid the broader tech selloff. The top losers were Datadog (-17.7%), Twilio (-17.7%) and Cadence Design (-15.3%).
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports
