KUALA LUMPUR (Dec 16): Rising insurance premiums could strain businesses’ financial health, particularly micro, small and medium enterprises (MSMEs), according to the Malaysian Employers Federation (MEF).

MEF president Datuk Dr Syed Hussain Syed Husman highlighted that the steep hikes in insurance premiums ranging from 40% to 78% will pose a threat to MSMEs that operate on tight budgets.

The president warned that this increase could also compel businesses to pass on the higher costs to consumers, contributing to inflation by affecting general price levels and decreasing consumers’ purchasing power.

“To mitigate increased costs, some employers may reduce their insurance coverage levels, leading to less comprehensive health benefits for employees.

"Adjustment in benefits may have several implications on employee retention, workforce morale, productivity and competitiveness,” he said in a statement on Monday.

In response, it added, many employers have taken precautionary measures to reduce medical claims by improving employee health, ultimately ensuring stable insurance costs.

For instance, flexible work arrangement is provided by almost half of private sector employers in Malaysia, allowing employees to have control over their schedules and enhancing work-life balance.

Syed Hussain said household health expenditures in Malaysia accounted for some 34% through out-of-pocket payments, which is higher than Singapore (30.1%) and Organisation for Economic Co-operation and Development (OECD) countries (13.9%) in 2019.

"These reflect the demand for private healthcare instead of the heavily congested public health sector, motivating the drive for private healthcare insurance (PHI) ownership. Despite these, PHI coverage in Malaysia remains considerably low."

Based on data from the National Health Morbidity Survey 2019, 14.3% of the Malaysian population owned individual-purchased PHI, and 14.6% owned employer-sponsored health insurance, with others holding both types of health insurance (7.3%), while 63.7% of the population remained uninsured.

MEF reaffirms that medical health insurance should be made more affordable so that both employees and employers are encouraged to take insurance coverage.