In recent years, much media coverage has been given to the alarming rise in premiums on medical insurance policies. Some policyholders claim that premiums have increased by about 30% over the previous year’s premium¹.
 
The Galen Centre for Health and Social Policy, a Malaysian based independent public policy research and advocacy organisation, estimated that medical inflation in Malaysia is at least 15.6% and as high as 18%, as compared with the country’s average headline inflation rate of 1.4% for the first seven months of 2025.² This is supported by AON’s 2025 Global Medical Trend Rates Report which reported that the medical inflation rate of 15% in Malaysia in 2024 significantly exceeded the global average of 10.1% for the corresponding period.
 
In December 2024, as part of a series of interim measures to assist policyholders, Bank Negara Malaysia³ (“BNM”) imposed a one-year moratorium on premium/ contribution increases for policyholders over 60 years of age. In the meantime, longer term and more sustainable measures were being explored to address issues that beset the country’s medical and health insurance/ takaful (“MHIT”) landscape.
 
The RESET Strategy
 
In March 2025, the RESET Strategy – a collaborative effort formulated by the Ministry of Health (“MOH”), the Ministry of Finance (“MOF”) and BNM – was announced to address private healthcare costs.
 
The RESET Strategy comprises five strategic thrusts and 11 initiatives which are summarised in the table below.
 

 
The initiatives under the RESET Strategy are not exhaustive and are to guide near term priorities that will serve to strengthen current healthcare settings and provide stronger foundations for longer-term health reform pillars and strategies outlined in the Health White Paper for Malaysia.
 
The White Paper on Base MHIT Plan
 
The White Paper on Base MHIT Plan (“White Paper”) was released on 22 January 2026. The White Paper outlines the details on the base MHIT plan (“base MHIT plan”) which is one of the strategic initiatives under the RESET Strategy aimed at transforming private health insurance offerings in the market.
 
The base MHIT plan, developed with the support of BNM, MOF and MOH, draws on feedback and input from over 60 engagements with key stakeholders, consumer focus groups and extensive analyses of available datasets to ensure the product is aligned with reform goals and market needs. It is a voluntary standardised health insurance and takaful plan that is value-based, sustainable and easy to understand, and will co-exist with MHIT products offered competitively by individual insurers and takaful operators (“ITOs”).
 
The base MHIT plan is intended to complement and not replace the public healthcare system, which will continue to provide healthcare services for Malaysians.
 
The base MHIT plan
 
Public Policy Objectives
 
The base MHIT plan seeks to achieve the following public policy objectives: 

Key considerations in developing the base MHIT plan
 
Guided by the above policy objectives, the key considerations for the base MHIT plan include, among others, the following: 

Some of the salient features of the base MHIT plan, as set out in the White Paper, are as follows:
 
Target segments
 
The base MHIT plan offers a foundational MHIT plan that is focused on two key target segments: 

The base MHIT plan will provide protection for individuals up to 85 years of age, whilst the maximum age for enrolment into the plan is 70 years old.
 
Standardised benefits
 
The base MHIT plan provides a standardised package of benefits that includes costs for healthcare services received at private hospitals associated with: 

To keep premium/ contribution levels affordable, the coverage limit under the base MHIT plan is set in reference to benchmark costs for lower and mid-tier private hospitals. An individual who seeks treatment at a higher-tier hospital will still be covered under the base MHIT plan, but the applicable annual limit and higher co-payments will mean that a smaller share of the hospital bill will be paid by the plan.
 
Individuals requiring additional coverage will be able to choose from different plans offered by ITOs, which must at minimum provide for the benefits of the base MHIT plan.
 
Annual limits commensurate with reasonable protection for most common conditions
 
The annual policy limit under the base MHIT plan is set at RM100,000. This ensures that the plan can be sustained at affordable premiums/ contributions and will offer meaningful protection against potential healthcare expenditures for high-volume procedures and common complex admissions in private hospitals. Based on the data analysed, the RM100,000 limit would be sufficient to cover 99% of treatment episodes across a range of common medical conditions.⁴ Highly complex and costly treatments that are likely to exceed the policy limits will continue to be managed within the public healthcare system.
 
As older individuals may be more likely to have multiple and more complex medical conditions which can lead to higher treatment costs, the annual policy limit will automatically adjust to RM150,000 for individuals aged above 60 years.
 
Standard-plus plan offered as a lower cost option
 
Individuals will also have the option of buying a standard-plus base MHIT plan that provides a higher amount of coverage with an annual policy limit of RM300,000, at significantly lower premiums/ contributions. However, under this plan, individuals will have to bear the costs of hospital bills up to the deductible amount in the event of a hospitalisation episode, and the plan will pay for any costs above that amount. In line with comparable products in the market, the deductible levels of between RM10,000 and RM15,000, are being considered for the standard-plus plan.
 
The standard-plus plan caters to individuals who may already be covered under medical benefit plans provided by their employers, or who have the ability to bear a larger share of payments for hospital bills and only wish to protect themselves against catastrophic expenditures. Premiums/ contributions for the standard-plus plan are expected to be between 15% and 70% lower across different age bands due to lower overall claims that will be borne by the insurance/takaful pool.
 
Indicative target premium/contribution range
 
The White Paper provides the following as an indicative premium/ contribution target range for the base MHIT plan:
 

 
The final premiums/ contributions will be announced closer to the launch of the base MHIT plan in 2027.
 
Greater premium/contribution stability
 
Premiums and contributions for the base MHIT plan will be set by the authorities based on sound actuarial principles and with reference to a target loss ratio with reasonable margins to meet expenses. Premiums and contributions will be risk-rated, factoring in an individual’s age, gender and health status to ensure the sustainability of the risk pool to meet claims.⁵ Premiums and contributions for the base MHIT plan will be subject to periodic review by the authorities to ensure the premium/contribution levels remain sufficient to pay claims.
 
Differentiated co-payments
 
Co-payments (in the form of deductibles or a percentage of the cost of treatment borne directly by the individual) will be a key feature of the base MHIT plan to control unnecessary utilisation of expensive and less efficient healthcare services.
 
The base MHIT plan will apply a two-tier co-payment structure. The amount to be co-shared by the individual will depend on whether the healthcare provider is categorised as a Tier 1 (In-network hospital) or Tier 2 (Out-of-network hospital). Tier 1 (In-network hospitals) 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. The selection of hospitals within the network will also consider factors to ensure adequate access (in terms of location and capacity) for individuals under the base MHIT plan.
 
The co-sharing formulae are as follows:
 

 
Access to optional wellness and preventive care packages
 
To encourage a greater focus on prevention to reduce direct and indirect healthcare costs, wellness and preventive care services will be offered to individuals under the base MHIT plan as optional purchases at discounted rates. Individuals can avail of these additional benefits at their own cost for selected vaccinations, general health screening services and other wellness packages designed to encourage early detection, promote healthier lifestyles, and support proactive management of one’s health.
 
Not investment-linked product or social insurance
 
The base MHIT plan will be a standalone medical protection plan and will not be linked to investment products. The base MHIT plan is also not a social insurance scheme. It is a national initiative, but participation is voluntary. Premiums/ contributions for the base MHIT plan are to be borne by individuals from their own savings or income. EPF contributors will have the option, but are not compelled, to pay for premiums/ contributions from savings in their EPF Account Sejahtera.
 
Improvements on current health insurance/ takaful products
 
Part C of the White Paper sets out reasons why the base MHIT plan improves on current private health insurance/ takaful products in the Malaysian market⁶, including but not limited to the co-existence of the base MHIT plan with individual MHIT products offered by ITOs subject to further regulations to be introduced by BNM, coverage for specific conditions⁷ in an outpatient setting, transition to a DRG-based payment system⁸ and minimum coverage of standard benefits under the base MHIT plan by participating ITOs.
 
Launch date
 
A pilot product will be launched in the second half of 2026, followed by the eventual launch of the base MHIT plan in early 2027.
 
Comments
 
The base MHIT plan is a significant step in the RESET Strategy. Its design features appear to have been adopted after extensive consultation and data analysis by MOH, MOF and BNM. The indicative premiums/ contributions appear attractive except for the premiums/contributions for individuals above 75 years of age, in particular for the standard plan. While acknowledging that the medical claims for these individuals are likely to be higher than for younger individuals, the question arises as to its affordability for this category of individuals.
 
The base MHIT plan is to be welcomed as it provides an opportunity for uninsured and under-insured individuals, especially those from the lower and middle income segments of Malaysian society, to take medical and hospitalisation insurance/ takaful cover at an affordable rate. It also enables policyholders, especially at older ages, to switch to a more affordable plan whilst still maintaining their existing protection.
 
 
Article by Sheba Gumis (Partner) and Francine Ariel Paul (Senior Associate) of the Healthcare Practice of Skrine.
 
 

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