Malaysia to roll out new basic medical insurance plan in January 2027

KUALA LUMPUR: Malaysians struggling with increasing medical insurance premiums will have a more affordable option when MediAsas, a basic medical insurance and takaful plan, is rolled out nationwide in late January 2027. The plan, which has been operating as a pilot program in Klang Valley since late July 2026, is designed to broaden access to essential medical protection.

The initiative is supported by financial incentives announced under Budget 2027, aiming to encourage more people to obtain coverage. These measures are particularly relevant for workers whose employers do not provide medical insurance and for policyholders finding it difficult to maintain existing coverage due to rising premiums.

Existing medical insurance and takaful policyholders can switch to MediAsas with their current insurer or takaful operator without undergoing fresh medical underwriting or serving new waiting periods. This option is intended to help policyholders facing higher premiums after repricing to retain medical protection.

Bank Negara Malaysia (BNM), the central bank of Malaysia, has encouraged existing policyholders to maintain their current policies until MediAsas becomes available. Interim measures introduced by BNM limit annual premium adjustments arising from medical claims inflation to no more than 10 percent for most policyholders, remaining in place until the end of 2026.

Unlike conventional medical insurance products, MediAsas is designed around a standardized package of medical protection, with participating insurers and takaful operators offering the same basic benefits and policy terms. The plan is offered as a standalone product, not linked to investment products.

The annual coverage limit for MediAsas is RM100,000, increasing to RM150,000 for individuals aged 61 and above. A Standard-Plus option is also proposed, offering a higher annual limit of RM300,000, though this comes with a higher deductible and lower premiums. The coverage includes common medical treatments and services such as hospital room and board, surgical procedures, hospital supplies, medication, day surgery, selected outpatient treatments, and pre- and post-hospitalization services. Proposed outpatient coverage includes treatment for dengue, influenza A and B, bronchitis, pneumonia, and bronchopneumonia, subject to final confirmation by BNM. Individuals can purchase the plan up to the age of 70, with protection extending until they reach 85.

To keep premiums affordable, MediAsas incorporates cost-control measures, including a tiered co-payment arrangement. Under the Standard plan, there is a deductible of RM500 per disability, rising to RM1,000 for individuals aged 61 and above. Patients at in-network hospitals will not pay an additional percentage-based co-payment, but those at out-of-network hospitals will incur a 20 percent co-payment, capped at RM3,000 per disability, in addition to the deductible. For the Standard-Plus option, a higher deductible of between RM10,000 and RM15,000 is being considered.

MediAsas will also progressively adopt the Diagnosis-Related Group (DRG) payment system, which provides hospitals with a fixed payment for each patient based on their diagnosis. This system is expected to be tested in selected public hospitals for common treatments by the end of 2025 and widely adopted in both public and private hospitals by 2027. The Malaysian government and healthcare industry are jointly providing $14 million under Budget 2026 to support the implementation of the DRG system.

Budget 2027 introduces several financial incentives to make MediAsas more accessible. Eligible small and medium-sized enterprises (SMEs) will receive a government subsidy of RM200 (approximately $49) for the first year’s MediAsas premium for up to 50 employees per company, benefiting up to 200,000 workers. Employees Provident Fund (EPF) members under 55 can use their Akaun Sejahtera savings to pay MediAsas premiums. Budget 2027 also proposes increasing individual tax relief from RM9,000 to RM12,000, effective from assessment year 2027. Tax relief of up to RM4,000 is available for premiums paid for medical or education insurance.

At least four major private hospital groups in Malaysia have expressed interest in joining MediAsas, according to Deputy Finance Minister Liu Chin Tong on November 11, 2026. Final premium prices for MediAsas will be announced before the plan’s launch in January 2027.

Medical cost inflation in Malaysia reached 15 percent in 2024, exceeding the Asia-Pacific average of 10 percent, according to Bank Negara Malaysia. The Department of Statistics Malaysia (DOSM) reported that health insurance-related prices increased by 9.1 percent in 2025. In 2024, medical and health insurance and takaful (MHIT) costs in Malaysia rose by 21.6 percent, while premium increases were 13.2 percent, according to a World Bank Group report. Private hospitals’ revenue grew from RM16.5 billion to RM30.5 billion between 2020 and 2024, with profits increasing from RM400 million to RM3.9 billion.

Private hospital operators have expressed concerns that the DRG system could reduce margins and profits if reimbursement rates do not keep pace with treatment costs. Consumer advocates have warned that using retirement savings to pay insurance premiums could create long-term problems. However, Ahmad Zulqarnain Onn, Chief Executive Officer of the Employees Provident Fund (EPF), viewed the plan to allow withdrawals for basic medical insurance or takaful (MHIT) as a positive step.