# Base MHIT plan by Bank Negara Malaysia – a step in the right direction
Last month, Bank Negara Malaysia released a White Paper on the proposed Base MHIT (Medical and Health Insurance/Takaful) Plan as part of the RESET strategy. RESET is a private healthcare reform framework led by the Ministry of Finance (MoF), Ministry of Health (MoH) and Bank Negara to tackle rising medical cost inflation and improve affordability, conceptualised in the aftermath of the public uproar over steep premium hikes in late 2024.
Our quick take on the base MHIT plan? It is a step in the right direction, addressing some, if not all, of the most pressing issues (finer details still to be announced).
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## What is the Base MHIT Plan?
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, 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 medical insurance policy in the market today:
| Target group | Ages 21–35 | General |
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 responsible and how to mitigate?” [The Take, 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.
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## Why This Makes Sense
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.
**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”.
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## Why Regulatory Intervention Is Necessary
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.
Since the base MHIT plan is the **lowest-denominator product** to be offered by all insurers, it means there will be **volume**. In actuarial mathematics, volume matters: a larger insured pool (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 plans — to enable a lower sustainable cost policy.
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## Affordability and Sustainability
It is crucial that consumers understand that **the best insurance policy 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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## Co-payment: Encouraging Discipline and Responsibility
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. This is another feature 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**: Deductible cap of RM500 per disability
- **Tier-2 hospitals**: Additional co-share of 20% of the hospital bill, capped at RM3,000
**The point is**: 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.
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## Standard-Plus Base MHIT Plan
Bank Negara has also proposed a **standard-plus-base MHIT plan**, which has:
- Higher annual limit: **RM300,000**
- Higher co-payment (deductibles): **RM10,000 to RM15,000**
- Cheaper premiums: **15% to 45% lower** than the base plan
Why does this work? **The higher the co-payment, the less likely 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.**
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## Overall Assessment: Constructive but Not a Silver Bullet
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, whose features will gradually be worked into this base MHIT plan.
What it does is:
- Give more people **optionality**
- Encourage better-informed medical decisions via **co-payment**
In fact, the base MHIT plan **may not necessarily be less profitable for insurers**, as it should lower cases of overtreatment (which drives up medical cost inflation and claims) and policyholders now 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**.
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## Who Is This For?
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: It is not a social insurance scheme meant for everyone.**
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## A Watershed Moment: Lessons from 2024
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 cost inflation. We do not want to be caught again with the impossible choice of:
- Keeping a policy we can barely afford, or
- Giving it up and risking 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 be **more stable and predictable**.
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## Our Main Concern: EPF Withdrawals
**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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## A Better Approach: Learning from Singapore
This concept of co-payment and responsibility should be expanded.
As an example, **Singapore** has two schemes:
1. **Matched Retirement Savings Scheme**
2. **Matched Medisave Scheme**
These help eligible Singaporeans boost their retirement and healthcare savings (which 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, it discourages personal responsibility.
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## Conclusion
The base MHIT plan is a **meaningful, targeted reform** that introduces choice, affordability, and discipline into Malaysia's private healthcare and insurance ecosystem. It is not a complete fix — but it is a solid start.
