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Malay Mail
01-07-2025
- Business
- Malay Mail
EPF savings for health insurance: Each ringgit withdrawn today is one less for tomorrow.
JULY 1 — Malaysia's decades-long discussion on sustainable healthcare financing saw a new development with the emergence of a government proposal to allow withdrawals from the Employees Provident Fund (EPF) to pay for private health insurance. Though additional details are still forthcoming, it is possible to discuss what is being proposed. The proposed MHIT (medical health insurance and takaful) initiative appears to be an adaption of existing Bank Negara Malaysia (BNM) and EPF programmes which aimed to encourage low income Malaysians to invest in life and critical illness policies, Perlindungan Tenang and i-Lindung respectively. i-Lindung specifically involves integrating protection products into EPF retirement savings. The Perlindungan Tenang programme, providing micro-insurance and takaful products through more than 2 dozen insurance and takaful industry players and targeting lower incomes and rural areas, has been around since 2017. These are priced as low as RM30 annually providing limited but affordable protection. The use of subsidised RM 50–75 vouchers to purchase Tenang products resulted in the number of policyholders increasing from 40,000 to 4 million within a year. However, the Madani government ended the voucher programme in June 2023 after noting though the subsidy cost was RM 200 million, there were a low number of claims from policyholders. It is not known how many are still participating in this programme today. The methodology of using EPF's Account 2 for purchasing insurance and takaful products is not new. EPF members' contributions are now divided into a 75:15:10 ratio across Account 1 (Retirement Account), Account 2 (Sejahtera Account) and the Flexible Account respectively. As of September 2024, the i-Lindung initiative, introduced in July 2022, saw more than RM 44.2 million being withdrawn from Account 2 by 144,589 EPF members to purchase life and critical illness insurance. Automatically deducted, the premiums are as low as RM30 annually with coverage up to RM200,000 for critical illnesses. Uptake was below expectations. Unfortunately, the proposed MHIT initiative is not as straightforward as offering coverage for life and critical illness. Health insurance premiums were specifically increased of late to address high medical claims. These were described as spiralling out of control due to large numbers of patients utilising their policies particularly since the COVID-19 crisis, unregulated billing by private hospitals, increase in the cost of medical consumables, medicines and services, as well as the volatile foreign currency exchange. MHIT operators offering a basic medical plan that helps pay your hospital bills will likely utilise existing products which look like this: a monthly premium of around RM 40, a medical cover with an annual limit of up to RM 150,000, and a deductible (which must be paid by you for each hospitalisation before any benefits kick in) of at least RM 1,000. So is this a bad idea? On the surface, it sounds pragmatic by letting people tap into their own savings to purchase basic health insurance to bridge the gap in healthcare coverage and protection from financial catastrophe. With rising healthcare costs, especially in the private sector, many Malaysians feel squeezed between inadequate public services and unaffordable private care. This initiative theoretically has the potential to shift patients from being fully dependent on public hospitals, reduce pressure on government spending, and include private health services as a viable choice. The latter are often perceived to be less affordable and accessible to those of lower income. This proposal, which is not mandatory but optional, also provides some form of financial protection and means to pay for that access. It provides greater freedom of choice, immediate relief from out-of-pocket health expenses, and an option for those seeking faster access to treatment. But at what cost? A deeper look reveals several fundamental problems in this initiative. This move risks adding on to the erosion of the very foundation of retirement security, while failing to address the structural cracks in our healthcare system. In 2023, Anwar Ibrahim himself as Finance Minister warned that 51% of Employees' Provident Fund (EPF) members or 6.7 million contributors under the age of 55 had less than RM 10,000 in their savings. As of August 2024, that number has reduced to 33%. Low EPF savings and not having enough for retirement among lower income earners were the costs of the i-Lestari, i-Sinar and i-Citra withdrawals. The situation has improved since then but not by much. The EPF is the bedrock of retirement for most Malaysians. At present, most contributors already struggle to accumulate enough for a dignified old age. According to EPF's own data, only 18% of members have adequate savings to sustain themselves through retirement. The basic savings benchmark, the minimum amount needed for retirement, which is currently at RM240,000 will also be increased to RM 390,000 reflecting increases in the cost of living. For many, their EPF account is the sole bulwark against poverty in old age. Based on EPF's Belanjawanku 2024/2025, a single elderly person requires approximately RM2,690 monthly to maintain a reasonable standard of living in retirement. Old-age poverty is both a real risk, and an everyday reality for many. Diverting savings to pay insurance premiums risks making a dire situation worse, regardless of the fact that it comes from Account 2. Each ringgit withdrawn today is one less for tomorrow. Implying that they won't notice the withdrawal as it is automatic and coming from the Sejahtera account, is dangerous, encourages financial illiteracy and is disconnected from the Rakyat's everyday realities. The reality is that medical insurance premiums will also rise sharply with age, the coverage will change, and the protection offered by many products is often riddled with exclusions (such as pre-existing conditions, pregnancy, mental health), lifetime caps, and non-covered treatments. There is no guarantee that these basic policies will offer genuine protection when it is needed most. The justification used will likely be better with some protection, than none at all. Unfortunately, the proposal does nothing to address the root causes of rising healthcare costs or the inefficiencies plaguing both the public and private sectors. It simply shifts the financial burden onto individuals, expecting them to shoulder risks that should rightly and properly be managed through collective mechanisms and policy reform. Who benefits from this proposal? The government could argue that the proposal should be allowed a chance to succeed as it would benefit those of lower income. However, a look at the previous experience from the Perlindungan Tenang and i-Lindung initiatives give a clear sign of where this MHIT programme will go. As of early 2025, the EPF has over 16.3 million members. However, approximately 8.78 million are considered active contributors. The top 20 per cent, defined as EPF account holders with an average balance of RM 279,000 in their savings, hold over 82 per cent of total EPF savings, the middle 40 per cent are at 16 per cent, while the bottom 40 per cent constitute barely 1 per cent of total savings with a median of RM 1,063 in their accounts. How likely will the MHIT initiative involve the participation of the bulk of contributors? Past evidence indicates that most will likely opt-out. After all, retirement savings should not be a resource to be experimented upon. A worrying perspective has been raised during the course of this debate: higher income individuals should utilise the private healthcare system while the government hospitals and clinics should be reserved for those who are poor or of lower income. This view should be rejected. Besides being simplistic, harmful and classist, it ignores the strengths, gaps and universality of the Malaysian healthcare system. The private healthcare system is excellent but not all encompassing. It is a business after all, and there are limits to what is available. Often, patients with complex and chronic cases (read: expensive) are referred to government hospitals for follow up and long term care. There are many treatments, and medicines such as those for infectious diseases and rare conditions which are not available in the private space. Much of the specialised expertise such as clinical immunologists and geneticists are also concentrated in government facilities. Malaysia's public health system has some of the world's leading experts in their fields. This MHIT initiative is likely to be short-term and may benefit the insurance and takaful industry far more than ordinary Malaysians. Insurers stand to gain from a new stream of premium-paying customers, effectively subsidised by workers' own retirement savings. Meanwhile, the risk is offloaded onto the public: those who run out of savings will eventually fall back on the public system, but with even fewer resources for their old age. It also raises equity concerns and could deepen the healthcare and retirement divide. The proposal favours those who already have substantial EPF savings, while the most vulnerable, with little in their accounts, may be left behind. The government recognised this vulnerability when it introduced the subsidised voucher scheme for Tenang. Whether a patient's insurance coverage has reached its limits or treating an infectious disease or rare condition, Malaysians may resort to accessing and depending on the public healthcare system regardless. It is, after all, Malaysia's healthcare safety net. If not this initiative, what then? Malaysia needs a better way forward. A sustainable, equitable health financing reform model that strengthens the public system, expands social health insurance, and ensures that no one faces catastrophic health costs or impoverishment in old age. The use of the EPF as a platform for healthcare financing is good, but it should not be used to pay private insurers for basic health products. It should instead be used to raise and increase financial resources available for healthcare through national health and social insurance, covering protection for both health and aged care. Earmarking federal government revenue is not permitted under Article 97 the Federal Constitution which stipulates that all collected funds must be paid into the Federal Consolidated Fund. However, using the EPF to collect earmarked funds, such as Singapore did with its Central Provident Fund back in the early 1980s, could be used instead to introduce and sustain national health and social insurance. This approach should be the way forward. This proposal would not use people's existing retirement savings. Instead, it proposes to increase the level of contribution by both worker and employer which would then be earmarked for national health and social insurance. These funds would complement and not replace the existing annual allocation under the Federal Budget, potentially bringing in new and sustainable funding. Through pooling of risk and resources, as well as distribution of costs, coverage through this proposal would provide subscribers to the national health and social insurance with access to both public and private healthcare, no exclusions for pre-existing conditions, no costly deductibles, affordable co-payments if necessary, expand and increase investment in improving existing health services in government hospitals, and afford lifesaving medicines and treatment which would otherwise be out of reach of individuals. It would include, not exclude those who are older, aged 60 years and above, ensuring that they receive necessary care. This is the way. However, there is currently a major trust deficit to overcome. The public's trust in implementing such an initiative cannot be assumed and must be earned through transparency, consultation and continuous engagement. The era of government knows best is over. We need to introduce and invest in meaningful reforms which improve access and quality in public hospitals, reform payment systems, and explore universal health coverage options, not draining or sipping at retirement savings to plug holes elsewhere. The temptation to reach into EPF savings for short-term relief is understandable, but it is ultimately self-defeating. Policymakers must resist the urge to mortgage our future for today's convenience. The retirement security of Malaysians must be protected and investments in health reforms made that serve everyone. *This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
ABC News
30-06-2025
- Health
- ABC News
Is private health insurance worth it? What to weigh up at tax time
As Australians prepare to do their tax returns and take stock of their financial affairs, those with and without private health insurance may be considering whether their cover is worthwhile. For many, it's not just a question about accessing the private health system — it can also be a maths equation that takes into account the tax penalties for not having coverage, if you earn above certain thresholds. For about 15 million Australians, private health insurance premiums jumped in April, after the federal government approved the biggest annual average premium hike in seven years. So, is health insurance a good deal for you? Here's what to consider when weighing it up. Australia's private health system is meant to complement Medicare by taking pressure off the public system. People who can afford it are incentivised to be treated privately, with shorter wait times for elective surgeries and the ability to choose their doctor. Successive governments have implemented policies designed to push people into the private system — like the Medicare Levy Surcharge (MLS). But the system is under strain as Australia's population ages, placing more pressure on public hospitals and increasing reliance on private health insurance. A report by EY for the federal government in 2023 found that for those aged over 75, average hospital claims were over $7,000 per person, while for 40–45-year-olds, the average hospital claim was about $850 per person. By 2064–65, nearly one-quarter of the population is projected to be aged 65 and over. "There are a lot of benefits and a lot of strengths of the private system," said Stephen Duckett, an honorary professor at the University of Melbourne and former secretary of the federal health department. To ensure they remain profitable, insurers have stripped back coverage, increased excess payments and hiked prices, leaving many Australians wondering if taking out cover is necessary. The answer depends on your income, age and health needs. Professor Duckett says for young, healthy Australians, private health insurance often provides little value. Some policies, he says, offer minimal benefits but are strategically priced just below the MLS threshold, enticing people to buy coverage that does little beyond avoiding a tax penalty — essentially, "junk insurance". The MLS is a tax that's been around since 1997 and is designed to encourage higher-income earners to take out private hospital cover. The tax ranges from 1 per cent to 1.5 per cent of income and kicks in once individuals earn above $97,000 or couples/families earn above $194,001. Professor Duckett said the MLS was "a strange concept [for] a private market". "Remember, the purpose of this is to force people into private health insurance who will not use the product at all, so that the risk pool is improved." Individuals can work out how much their MLS would be using the ATO's calculator. Whether your spouse and any dependent children have private hospital cover also affects your liability for the MLS. The surcharge is calculated when you process your tax return each year, rather than covered in your employer tax withholding, so may affect the amount of any tax refund or add to a tax bill. It's also based on the number of days you hold cover for, so if you don't have coverage for the full financial year, you may still end up paying tax. Greg Jericho, chief economist at The Australia Institute, said the private healthcare system was struggling "because it is not attractive to those who are least likely to need it, and [those people] are also the most likely to be profitable". In his opinion, private health insurance was not a good option for young Australians. "Possibly if they are in competitive sports and at higher risk of needing knee or shoulder surgery. But otherwise, there is no real need." He also said junk insurance policies had become more common. "In 2000, around 3 to 4 per cent of private health insurance policies had exclusions — now it is around 65 per cent. "Similarly, we have gone from around half of all policies having excess payments to now around 85 per cent. "So there are many more policies that don't cover much and which require co-payments should they be used." Introduced by the Howard government, Lifetime Health Cover (LHC) loading penalises those who don't take out private hospital cover by age 31. The penalty is an extra 2 per cent for every year someone does not have cover after age 31. It's capped at 70 per cent and removed after 10 years of continuous cover. Before this policy, only 30 per cent of people in their 30s had private health insurance. A campaign titled Run For Cover boosted this figure to 50 per cent, but uptake has since dropped back down, according to Mr Jericho. Mark Blades, an insurance analyst from Choice, warns that LHC loading often catches people off guard in their 40s. For example, a 41-year-old who first takes out private cover would be hit with a 20 per cent LHC loading on their premium. But he said in most cases, it works out better for people to just pay the loading when they need health insurance, rather than take out a basic policy to avoid it later in life. "Basic cover is essentially overpriced for what you're getting because you're getting very, very little," he said. Mr Jericho said many people did "not see actual value in private health insurance and are merely taking it out to avoid penalties". Once someone is over 31 years old and earns above $97,000 a year, a double whammy comes into play — the MLS if you don't have hospital cover, and the lifetime loading. Mr Blades said those earning above the threshold could take out a cheap cover to save a couple of hundred dollars, but he warned it would likely be "a product you can't really use". The government contributes about $7.5 billion annually to subsidise private health insurance through a rebate program. The rebate is means-tested and ranges from about 8 per cent to 32 per cent, depending on income and age. Individuals earning more than $151,001 and couples earning more than $302,001 are not eligible. However, it has been progressively reduced in recent years due to rising medical costs and Australia's aging population. The rebate is indexed and was dropped last year by a few percentage points. And it dropped again this year from 24.6 per cent to 24.3 per cent. While big health insurers tend to make it difficult for people to drop their policy and pick up a new one (due to waiting periods and losing unused benefits, for example) — especially for top-tier cover — it's worth checking what you're covered for and shopping around. There is a range of websites comparing the market, including from the government, that help consumers look up the details of exactly what their policy covers — called a Private Health Insurance Statement — and compare policies across all health insurers in Australia. Factors worth weighing up include waiting periods and exclusions. Also, some policies require you to take out extras as well as hospital cover. If you are considering a cheap hospital policy to avoid tax penalties, Choice's Mark Blades says you need to consider extra costs that could come into play if you do need to make a claim. "If you did use it, you would be out of pocket from paying the excess, which is usually about $750 for basic cover, and pay gap fees. Disclaimer: The information in this article is general in nature. If you need personalised advice, please see a professional.
Daily Mail
17-06-2025
- Health
- Daily Mail
The fresh cost of living blow every Australian paying for private health insurance needs to know about
Australians forking out for the highest level of private health insurance cover are facing double-digit hikes to their premiums. Health Minister Mark Butler this year approved a 3.73 per cent average increase in private health care premiums, that came into effect on April 1. But Australians seeking gold cover have been dealt a major cost of living blow with average, annual hospital insurance soaring by 13.8 per cent, or more than three times the government-approved average increase, a Canstar analysis showed. This equates to $442 extra a year for individuals, who are now paying $3,653 a year for the top-tier cover, which typically includes in-hospital procedures listed on the Medicare Benefits Schedule and ambulance cover. Canstar data insights director Sally Tindall said private health insurers were legally allowed to hike their premiums by double-digit figures. 'The government-approved 3.73 per cent premium price rise was always just an average, not a cap,' she said. 'What we can now see is that some policies have risen by up to 13.8 per cent – particularly for those with the top level of cover. 'The reality is, Australians who have the top level of cover have been hit with the highest price hikes.' Canstar calculations showed an individual with gold cover could save $1,296 a year, and slash their annual bill by a third to $2,357 by switching from an average to the lowest-priced product. A family with gold cover could save $2,493 a year, also slashing their annual bill by a third, by switching from an average to a lower-priced product. This would see their annual bill fall from $7,207 to $4,714. 'If you haven't done a health check on your policy since the April price rise, now is the time to do one,' Ms Tindall said. 'Find out exactly how your premium sits against the lower-cost insurers and if there's a cheaper option for the same level of cover, consider making a switch.' Switching to the same cover could also eliminate the long waiting periods to get coverage for elective surgery. 'What a lot of people don't realise is that if you are switching to the exact same level of hospital cover, you will not have to re-serve any additional waiting periods, which minimises the risk,' she said. Private health insurance costs increased by 4.7 per cent for silver cover. This worked out at an extra $83 a year, or $1,838 overall, for a premium product without birth-related services. But the increases were much more moderate for lower levels of cover. Bronze saw a small 1.5 per cent increase, with the $20 annual change taking premium costs to $1,336 for a product offering hospital cover but not benefits for those with children. Basic cover in fact fell by 0.6 per cent or $7 to $1,070, with this product catering to younger, healthier people offering coverage for accidents. While headline inflation has moderated to 2.4 per cent, overall health care costs rose by 4.1 per cent in the year to March. More than half of Australia's 27.3million people are covered by private health insurance, either individually or as part of a family package.
Yahoo
14-06-2025
- Health
- Yahoo
$8,000 ATO tax change for millions of Aussies in weeks: Good news'
The threshold to pay the Medicare Levy Surcharge will increase in weeks for the third year in a row. Taxpayers are being urged to consider whether they need to take out private health insurance now, or risk being hit with an extra tax for every day they are uninsured. The Medicare Levy Surcharge is applied by the Australian Taxation Office (ATO) to those who earn over a certain amount and don't have hospital insurance. From July 1, the singles threshold will increase from $97,000 to $101,000, while the family threshold will go from $194,000 to $202,000. Tax Invest Accounting director Belinda Raso told Yahoo Finance the increase was 'good news' for taxpayers. The increase means singles will be able to earn an extra $4,000 a year before the surcharge is applied, while families will be able to make an extra $8,000. RELATED Biggest ATO tax return mistakes costing Aussies hundreds: 'Extra $1,000' ATO, Centrelink warning over $100 million Powerball lottery win Centrelink cash boost coming from July 1 for millions of Aussies 'They don't go up every year, but they have for the past three years,' Raso said. Raso said now was the time for taxpayers to consider whether they wanted to take out private health insurance to avoid the tax next financial year. 'These decisions can cost or save you thousands of dollars over the next financial year. We all know private health insurance keeps going up so now is the time to start deciding what will be best for you,' she said. The cost of health insurance will depend on factors like your age, the type of policy you take out and the coverage level. Finder found the average single Aussie pays $165 per month for health insurance, which works out to $1,980 a year. Basic policies, the lowest level of cover, cost $78.36 on average, or $940.32 a year. Raso said some people would not want to take out private health insurance, and that was fair enough, but it would mean you would have to pay an additional tax. 'So you're just paying a tax for no reason, you may as well pay for something,' she said. The Medicare Levy Surcharge is a tax applied to people who do not have private hospital cover and earn above a certain income. It is paid on top of the Medicare levy, which is 2 per cent. The tax is between 1 and 1.5 per cent, depending on your income. If you are a family or couple with a combined income over the threshold, you must hold hospital cover for you, your partner and your dependents to avoid the surcharge. The family threshold covers couples with no children, couples with children, and single-parent households. If you have reached the threshold for this financial year, the bad news is you can't take out a health insurance policy now to avoid the charge. 'You're going to be liable for the surcharge for the days that you were not covered by the private health insurance,' Raso explained. Raso said it was 'very hard' to avoid paying the surcharge if your income had hit the threshold. That's because the definition of income is broader than just your taxable income. 'A lot of people don't realise that reportable fringe benefits will get them in most cases, because they get grossed up,' Raso said. Income also includes investment losses added back in and salary sacrifice added back in. Raso said that was why it was important to consider your total income, consider the cost of taking out insurance and see whether it was worth getting insurance to avoid the charge next in retrieving data Sign in to access your portfolio Error in retrieving data
