As a mom of three, keeping up with the rising cost of health insurance sometimes feels like a tug of war between protecting my family’s health and maintaining financial stability.

I’ve watched as medical inflation has surged by as much as 15% in Malaysia, raising a difficult and increasingly common question for many households: will private health insurance eventually price us out of the very protection we rely on?

The pressure stems from multiple sources, creating the perfect storm.

We have an aging population, a rise in lifestyle diseases like diabetes, and the high costs of importing advanced medical tech and drugs, all occurring at the same time. And our public hospital talent is stretched to the max.

Our health expenditure is expected to grow at a compound annual rate of 8.7% through 2028, according to BMI. As for those of us in the private healthcare system, rising claims have forced insurers to raise premiums by as much as 70% over the past few years.

For all of us at this critical juncture, Malaysia’s recent Base Medical and Health Insurance Takaful (Base MHIT) white paper shows us another way forward.

It lays out a concrete path toward an alternative form of private medical insurance, designed to improve affordability, transparency, and long-term sustainability.

The framework is already underway for pilot implementation later this year, followed by full implementation in 2027.

What is the Base MHIT Plan?

The Base MHIT Plan is a proposed standardised private health insurance framework designed to rein in rising premiums. It aims to separate core medical coverage from investment-linked elements, improve benefit portability, and introduce clearer cost-sharing mechanisms across insurers.

It is a central initiative under the RESET strategy, led by the Ministry of Health (MOH), the Ministry of Finance (MOF) and Bank Negara Malaysia (BNM).

Who is the Base MHIT Plan For?

Now, about the plan. The base MHIT plan is a foundational MHIT plan that focuses on two key target segments.

The first segment consists of individuals who do not have insurance or takaful protection for major health expenses, but who are sustainably able to afford private health coverage.

The second group includes individuals seeking more affordable alternatives to their existing MHIT plans, often after being hit by repeated and significant premium increases over time, particularly those who are older.

The gravity of the problem is already evident.

Insurers and takaful operators reported that 340,000 MHIT policies were surrendered by policyholders following repricing exercises linked to medical inflation.

Many of these individuals now face a stark choice: accept sharply higher premiums or lose coverage altogether, with few viable options in between.

What Makes the Base MHIT Plan Different?

For many Malaysians, the biggest fear around health insurance is getting older and finding that coverage quietly disappears just when it is needed most.

The plan tackles rising healthcare costs through four core design choices: longer coverage duration, standardised benefits, standalone medical protection, and clearer cost sharing.

Longer Coverage, Clearer Benefits and No Investment Risk

One of the standout features for me, therefore, was that the base MHIT plan has an extended protection horizon. Policyholders are covered up to the age of 85, with enrolment open until 70, providing a clearer line of sight for long-term health protection.

The plan also provides a standardised set of benefits to help pay for healthcare services received at private hospitals, which I feel tackles the complexity of riders and opaque exclusions.

The base MHIT plan includes the following: hospital room and board, hospital supplies and services, surgical fees, anaesthetist fees, in-hospital physician visits, medications associated with a treatment episode, selected high-cost outpatient medications for serious illnesses that are listed by the MOH, ambulance fees, intensive care, operating theatre fees, day surgeries and immediate pre- and post-hospitalisation services.

Just as importantly, the base MHIT plan breaks away from investment-linked structures altogether. According to the white paper, more than 70% of MHIT plans are sold as riders to investment-linked products.

This means a person’s medical coverage can fluctuate with market performance or changes in investment balances. The base MHIT plan removes that layer of uncertainty by keeping medical protection standalone and purpose-built.

A Standard-Plus Option for Catastrophic Medical Bills

In addition to the standard base MHIT plan, the white paper also proposes a standard-plus base MHIT plan aimed at individuals who want protection against large, unexpected medical bills while keeping premiums as low as possible.

Under the standard-plus plan, policyholders would receive a higher annual coverage limit of RM300,000, but with a trade-off. In the event of hospitalisation, individuals would first bear the cost of medical bills up to a deductible level, currently being considered at between RM10,000 and RM15,000.

Once that threshold is met, the plan would cover remaining eligible expenses above the deductible.

This structure is designed for a specific group of consumers. It may suit individuals who already have some form of medical coverage through employer benefit plans, or those who are financially able to absorb higher upfront costs and are primarily concerned about protecting themselves against catastrophic medical expenses.

How the Base MHIT Plan Keeps Premium Increases More Predictable

As an insurance policyholder, my biggest concern goes beyond premiums simply being high. It is the growing unpredictability of those premiums and the lack of visibility over how and when they will rise.

Thankfully, this is where the Base MHIT plan attempts to make a meaningful shift.

The proposal places a premium setting on a more disciplined and transparent footing, with prices determined by the authorities using sound actuarial principles and guided by a target loss ratio that allows for reasonable operating margins.

Granted, premiums and takaful contributions will still be risk-rated, taking into account factors such as age, gender, and health status. This is necessary to ensure the long-term sustainability of the risk pool and its ability to meet claims, rather than relying on blunt pricing approaches that may prove unsustainable over time.

Several mechanisms are proposed to improve fairness while keeping premiums stable.

These include narrowing the premium gap between younger and older policyholders to flatten the risk curve, as well as pooling risks more broadly across participating insurers and takaful operators through risk equalisation arrangements.

These measures would help reduce claims volatility and support greater premium stability over time. Limits will also be applied to individual loading, based on their health status.

The target premium range draws on inputs from consumer focus groups and assessments of household disposal incomes to strike a balance between affordability and meaningful coverage.

Maintaining this balance, however, will depend heavily on cost containment strategies. The white paper points to co-payments, the gradual shift toward diagnosis-related group-based payments, and better use of data analytics to inform product settings, claims management and the procurement of healthcare services.

These serve as critical levers to keep premiums from spiralling.

Indicative premium ranges are expected to be released ahead of the plan’s launch, with final pricing to be announced closer to its anticipated rollout in 2027.

A Two-Tier Co-Payment Model to Control Costs Without Removing Choice

To curb unnecessary cost escalation while preserving choice, the Base MHIT plan introduces a two-tier co-payment structure.

Tier 1 applies to in-network hospitals, which are hospitals that demonstrate an “appropriate use of resources aligned to best-practice, cost-efficient care models, and are committed to minimum standards of cost transparency and service levels.”

Under this tier, a deductible of RM500 would apply per disability, increasing to RM1,000 at the age of 61 in line with a higher annual coverage limit. The deductible covers single or multiple bed admissions arising from the same or related cause or any complications arising from it.

No co-share applies under Tier 1.

Tier 2 applies to out-of-network hospitals. The deductible structure mirrors Tier 1, with RM500 per disability, increasing to RM1,000 from the age of 61. In addition, a co-share of 20% applies, capped at RM3,000 per disability. This tier covers bed capacity, the operating theatre, and diagnostic facilities to handle patient volumes.

The Base MHIT Plan Is Not A Social Insurance Scheme

The BNM white paper is explicit about one thing: that the Base MHIT plan is not a social insurance scheme.

Participation is voluntary, and premiums are not subsidised or pooled through mandatory contributions. Rather, the plan operates as a national initiative that individuals choose to opt into based on their own circumstances.

As a result, premiums for the Base MHIT plan will be borne by individuals through their own income or savings.

For EPF contributors, there is the option to pay premiums using funds from Account Sejahtera, which is already earmarked for healthcare, education, and housing expenses.

Importantly, there is no obligation to draw on EPF savings, and the decision remains entirely with the individual.

To support longer-term planning, the white paper notes that tools and guidance will be developed to help individuals estimate how much they should set aside for medical expenses over their lifetime, including allowances for reasonable future premium increases.

That said, this design choice also highlights a broader tension. While keeping the plan voluntary preserves personal choice and avoids additional mandatory contributions, it also means that affordability challenges for lower-income or financially constrained households may persist.

Without some form of targeted support or subsidy, there is a risk that the Base MHIT plan primarily benefits those who are already able to plan and pay ahead, rather than those most exposed to medical cost shocks. How this balance is managed in practice will be an important measure of the plan’s long-term inclusiveness.

A Lower Barrier to Switching Over to the Base MHIT Plan

One of the less visible, but potentially most impactful features of the Base MHIT plan is its attempt to fix a long-standing friction in Malaysia’s private insurance market: portability. For the consumer, this has very practical implications.

It means people should be able to switch between insurance of takaful insurers offering the standardised base MHIT plan more easily, downgrade from a more expensive plan to the base plan with the same provider, or move from a group- or employer-provided medical benefits plan to an individual base MHIT plan without losing essential coverage.

In theory, this reduces the all-or-nothing decisions many people face today when changing jobs, experiencing income disruption, or reassessing coverage after sharp premium increases.

Will the Base MHIT Plan Work?

The move towards the base MHIT plan reflects an acknowledgement that our current approach to private healthcare financing has reached its breaking point. From young adults to families and the elderly, every household has been trying its best to absorb the costs, in spite of premium hikes and shrinking choices.

The base MHIT plan does not pretend to solve every problem overnight. However, it does lay out a more disciplined framework that prioritises sustainability, transparency and the continuity of coverage.

By standardising benefits, separating medical protection from investment risk, improving portability, and introducing clearer cost-sharing mechanisms, the Base MHIT plan attempts to restore a sense of order to a system that has become increasingly difficult for the regular Malaysian to navigate.

Whether the Base MHIT plan succeeds will ultimately depend on how it is implemented, how accessible it is across income levels and regions, and whether cost discipline can be maintained without compromising care.

Its success hinges on execution.

Featured image edited by Fintech News Malaysia based on an image by freepik on Freepik

Last updated: 27 January 2026