Understanding Medical Revisions: Why Your Insurance Premiums May Rise and How to Navigate Them
Health insurance provides a unique medium for people unable to pay out of pocket for the healthcare services they need. As an instrument that provides coverage against the risk of incurring unexpected medical and related financial costs, health insurance is an indispensable resource in today’s society where medical emergencies never have good timing.
It serves as a vital safety net during medical emergencies or routine healthcare expenses, ensuring individuals and families can access quality medical care— without incurring excessive costs. In fact, without health insurance, individuals may encounter substantial medical debt or even face the difficult choice of forgoing specific medical treatment.
What is a medical revision?
In the context of health insurance, a medical revision is a methodical adjustment made to an individual's health insurance policy based on their current healthcare costs and lifestyle.
In practice, medical revisions principally seek to ensure that customers have access to the latest state-of-the-art medical treatments and medication by aligning insurance premiums with prevailing healthcare costs. However, medical revisions may often increase premiums.
Fundamentally, this insurance mechanism encourages healthcare providers and facilities to deliver high-quality care and stay up-to-date with the latest advancements in medicine to meet the standards and guidelines set by insurance companies— ultimately benefiting patient outcomes.
What are insurance premiums?
An insurance premium is a specified amount of money an individual or business pays over defined periods to access an insurance policy that guarantees financial compensation for the damages or losses incurred—as long as timely payments are made.
What factors affect medical revisions and insurance premiums?
The main factors that affect medical revisions and insurance premiums are:
Medical inflation
Medical inflation refers to the increase in the costs of medical treatment over time, driven by advancements in medical technology, medications, and treatments.
Medical inflation is a significant driver of insurance premium increases. Medical inflation rates in Malaysia have been higher than the global average, with an average of 9 to 10% annually between 2013 and 2018. Part of this statistic may be attributed to an ageing population and a high prevalence of non-communicable diseases
Furthermore, as the cost of prescription drugs and advanced treatments continually rises, insurance companies must adjust premiums to cover these expenses.
Increased utilisation of health services
The ageing population and increase in non-communicable diseases in Malaysia have led to an increase in the utilisation of health services—for example, doctor visits, diagnostic testing, surgeries, and hospital stays.
This consequently has led to higher insurance premiums to cover the cost of increased healthcare utilisation. Furthermore, the utilisation of health services per person may vary over time as the health industry moves to more advanced and costly treatments and medications.
Unhealthy lifestyle choices
Unhealthy lifestyle choices, like tobacco smoking, excessive alcohol consumption, and poor diet, may lead to chronic diseases that require costly long-term treatments.
Consequently, these costly treatments may contribute to medical inflation and medical revisions, leading to higher insurance premiums. This is because insurance companies may file more claims for policyholders who necessitate ongoing long-term medical care, thus raising the overall healthcare cost.
Impact on insurance premiums
Medical revisions impact insurance premiums in different ways, for example:
Premium rate adjustments
The 80/20 Rule generally dictates that insurance companies spend at least 80% of premium payments on healthcare costs and quality improvement activities. The other 20% may be administrative, overhead, and marketing costs.
In this regard, insurers may iteratively adjust premium rates in response to medical revisions to sustain balanced and sustainable medical plans that improve healthcare quality. Due to the recent BNM repricing interim measure, the adjustment required for 2024 to 2026 will be fixed at yearly adjustment of less than 10% in the first 3 years for at least 80% of policyholders.
This methodical adjustment process helps ensure that insurance plans remain financially viable for all individuals despite evolving healthcare dynamics—allowing policyholders to access quality medical services while keeping the insurance system sustainable in the long term.
Ensures access to the latest medical treatments
In a rapidly advancing healthcare landscape, emerging treatments and therapies offer the potential for improved patient outcomes and enhanced quality of life. Insurance plans may adapt to accommodate such new technologies to ensure that policyholders receive the best possible care.
This adaptability supports patients in accessing state-of-the-art medical solutions whilst fostering an environment of continual medical research and advancement. This consequently reinforces the principal goal of insurance— to safeguard individuals' health and well-being in light of uncertainty.
How to navigate the rise in insurance premiums?
There are several ways one may navigate the continual rise in insurance premiums. Here are a few tips to follow:
Understand your medical plan
Amid continually rising health premiums, it is essential to understand your medical plans for two main reasons. Firstly, understanding your medical policies may help you to offset your medical expenses with facilities like an employee stipend, deductibles, and out-of-pocket maximums.
Secondly, carefully evaluating your medical plans may help you to protect yourself financially from exceptionally high healthcare costs. Thus, enabling you to make informed decisions about your healthcare and to choose the best plan that meets your unique needs.
Managing increased premiums
Individuals may consider several strategies to manage and mitigate the impact of increased health insurance premiums. First, iteratively reviewing their policy and coverage options to ensure they have the most suitable plan for their needs.
Secondly, they may attempt to adopt a balanced lifestyle to reduce healthcare costs, and to take advantage of No Claims Benefit. Under this benefit, a monetary benefit may be provided to the insured party if no claims are raised in the previous policy tenure.
Third, individuals rewarded for their health effort with No Claims Benefit can redeem up to RM1,000 annually for healthcare packages like medical checkups, vaccinations, diagnostic tests and subscription programmes.
Importance of comprehensive coverage
Maintaining comprehensive health insurance coverage is imperative despite premium increases because it provides financial protection against unexpected critical illnesses that could be expensive. Thereby reducing the financial strain on individuals, families, and communities.
Furthermore, without health insurance plans, individuals may sometimes delay or forgo necessary medical care, leading to more severe health problems and higher costs in the long run. Additionally, comprehensive health insurance coverage may include preventive care to help detect and treat health problems early before they become serious and expensive to treat.
FAQ
How are health insurance premiums calculated?
Insurers typically calculate premiums based on the overall claims experience of their entire risk pool, an individual's age, gender, occupation, and health history. They also methodically analyse broader demographic and actuarial data whilst considering projected costs for the coming year.
The number of individuals covered by the plan, whether an individual or family, may also play a role in the calculation. Additionally, deductibles and out-of-pocket maximums set by the policyholder may influence premium calculations.
Are health insurance premiums tax deductible?
Yes, health insurance premiums are tax deductible in Malaysia. One may claim tax relief for premiums paid for medical insurance for themselves, their spouse, or their child. The maximum amount of tax relief one may claim for medical insurance premiums is RM3,000.
What happens if you stop paying life insurance premiums?
The response to this question depends on the policy type one maintains. For example, with life insurance, no death benefit will be paid if one passes away after the policy lapses.
Other insurance policies may allow one to cash out the policy, agree to a reduced death benefit that no longer accumulates cash value, or convert to term coverage if one stops paying premiums. On the other hand, some providers may offer a non-forfeiture option that allows one to stop paying premiums altogether.
So, to avoid losing coverage, it's mission-critical to communicate with your insurer and explore available options for maintaining your policy during financial tribulations.
What is the difference between insurance premiums vs deductibles?
Premiums are the defined regular payments one makes to keep their insurance coverage active. On the other hand, deductibles are the initial amount one pays out of pocket before insurance coverage kicks in.
Is insurance premium an asset?
Insurance premiums aren’t considered assets for policyholders. Rather, they are expenses or liabilities because they represent an outflow of resources.
How to reduce insurance premiums?
To reduce one’s insurance premiums, one may choose to increase their deductibles and bundle multiple insurance policies with the same provider to access discounts. Additionally, maintaining a good credit score and healthy lifestyle may contribute to lower premium costs.
Does a higher insurance premium mean better insurance?
No, a higher insurance premium doesn’t necessarily translate into better insurance. The cost of insurance premiums and the quality of coverage aren’t directly correlated.
Instead, the quality of insurance is determined by factors like the breadth of coverage, reputation and customer service, policy terms, and the financial stability of the insurance provider.
Conclusion
Policyholders need to make informed decisions and continually take proactive steps to manage their insurance costs effectively. As we have seen, premium increases may result from various factors, like changes in the policyholder's risk profile, claim history, or medical inflation.
By understanding these factors, policyholders may be equipped to explore available discounts or even consider alternative insurance providers to mitigate rising costs— ensuring they strike the right balance between financial protection and affordability.
Overall, understanding why one's insurance premiums rise and how to navigate them helps them save money and ensure they have the right coverage for their needs in an evolving economic landscape.