The new co-payment rule is set to transform the health insurance industry, which has been affected by rising medical costs, challenging economic conditions and unnecessary claims in recent years.
Q: WHAT IS CO-PAYMENT AND WHY IS THE INDUSTRY PUSHING IT?
Slated to take effect on March 20, co-payment is a system in which policyholders share a portion of medical expenses, unlike the traditional all-inclusive plan in which all costs within the limits of the policy are fully covered.
After the fallout from the pandemic, increasing healthcare costs and incidences of policyholders making unreasonable claims for common illnesses led the insurance regulator and insurers to consider an appropriate solution to manage rising costs and ensure continued insurance options.
On Feb 6, the Thai Life Assurance Association (TLAA) announced a co-payment clause will apply to policy renewals and new policies from March 20, though it will likely affect only 5% of health insurance policyholders.
According to the TLAA, co-payment will be triggered by specific conditions. If policyholders make three claims for common medical conditions such as a headache, influenza, diarrhea, muscle inflammation, stomach acid, or gastroesophageal reflux, amounting to 200% of the annual insurance premium, they will be subject to co-payment in the subsequent year.
Those who make three claims for general diseases with the total amount reaching 400% of the annual premium are also subject to co-payment in the subsequent year.
For those meeting one of these two criteria, the policyholder is subject to a 30% co-pay for any medical cost the subsequent year, whether it is related to simple, general or critical diseases. If the policyholder falls into both categories, the co-pay is 50% for any medical cost the subsequent year.
However, co-pay does not apply to major surgery or critical illnesses, said TLAA president Nusara Banyatpiyaphod.
A recent study by Willis Towers Watson found Thailand has the highest average rate of medical inflation in the world. While the global and regional average was 10% last year, Thailand's rate of medical inflation grew by 8-15% according to the study, driving up insurance costs and creating financial pressure for the industry.
Medical inflation of 15% is well above the general consumer inflation rate, driven by an ageing population, emerging diseases, air pollution, medical advancements and healthcare system structures, said Ms Nusara.
At this rate of inflation, healthcare costs will double every eight years unless some measures are taken, potentially leading to an unsustainable and unaffordable healthcare system, said Thomas Wilson, president and chief executive of Allianz Ayudhya Assurance.
"The real value of the co-pay clause is not the scheme, but rather providing an incentive for insured individuals to manage the effectiveness of their healthcare expenses even if it is not triggered, supporting a sustainable healthcare system and helping to keep the price of private insurance affordable," he said.
A sustainable healthcare system requires alignment of insurers, policyholders, regulators and healthcare providers, focusing on effective care and prevention in a cost-effective manner, said Mr Wilson.
Q: WHAT ARE THE LIKELY IMPACTS OF THE SCHEME?
The co-pay scheme will have both short-term challenges and long-term benefits for the insurance industry.
In the short term, the limited number of consumers who trigger the clause may perceive the higher out-of-pocket expenses negatively, leading to hesitation in purchasing or renewing health insurance policies, Mr Wilson told the Bangkok Post.
"This could impact overall premium growth. However, the long-term benefits are overwhelming as co-pay helps to control medical cost inflation by encouraging responsible healthcare consumption, reducing unnecessary medical expenses and ensuring the sustainability of private health insurance," he said.
By sharing the cost of medical expenses between insurers and policyholders, co-pay can help reduce overall healthcare costs, which is important as costs continue to escalate.
InnovestX Securities said the co-pay model may influence policyholders' behaviour by reducing hospital admissions for minor illnesses and simple diseases.
"The change will take effect upon policy renewal, possibly causing a decline in outpatient visits to hospitals in the short term," the brokerage noted.
However, the overall impact on hospitals is expected to be minimal, as this segment contributes only a small proportion to total hospital revenue, said InnovestX.
The co-pay model could also help to reduce premiums when compared with traditional health insurance.
"The reduction in insurance premiums resulting from co-pay could enhance accessibility to private health insurance for a broader population over the long term," noted the brokerage.
Q: HOW IS CO-PAY APPLIED IN OTHER COUNTRIES?
In Singapore, the healthcare system operates on a co-pay model with consumers paying 20% of their healthcare expenses.
This strategy aims to encourage responsible healthcare use, while keeping costs low for both the government and its citizens, said Kasem Prunratanamala, head of research at CGS International Securities (Thailand).
The system also includes MediSave and MediShield Life, which are national medical savings schemes that help Singaporeans save for healthcare expenses. Private insurance products supplement MediShield Life's coverage by requiring lower co-payments or providing higher coverage limits.
Co-pay, MediSave, MediShield Life, and private insurance plans combine to create a sustainable and accessible healthcare system in Singapore, resulting in savings of up to 25%, according to industry estimates.
Malaysia implemented a co-pay scheme on Sept 1, 2024 following medical cost inflation of 12.6% in 2023, exceeding the global average of 5.6%, said Mr Kasem, citing information issued by Bank Negara Malaysia.
Insurers and takaful operators (ITOs) must offer consumers an option to purchase medical and health insurance/takaful (MHIT) products with a co-pay feature. Takaful refers to a cooperative system of reimbursement or repayment in the case of loss, organised as an Islamic or sharia-compliant alternative to conventional insurance.
Consumers who already purchased MHIT products without a co-pay feature can continue with these existing products at renewal. ITOs can also continue to offer MHIT products without a co-pay feature to new consumers.
The Malaysian central bank reported the premium/contribution amount for MHIT products with co-pay features was 19-68% lower than similar products without co-pay, depending on the level of co-pay.
With the option of co-pay, consumers can purchase MHIT products at a lower cost, based on their financial circumstances and needs, said Mr Kasem.
Q: HOW CAN PEOPLE AND INSURERS ADJUST TO THE CHANGE?
To mitigate any negative effects during the transition, Mr Wilson said Allianz Ayudhya plans to focus on customer communication, educating policyholders on the long-term benefits of co-pay such as improved premium stability and healthcare sustainability.
Product innovation will also play a key role, offering flexible co-pay options tailored to different customer segments to balance affordability and coverage, he said. Strategic partnerships with healthcare providers can help establish preferred hospital networks, ensuring policyholders receive cost-effective care, said Mr Wilson.
To support customers, insurers should expand value-added services, including telemedicine, wellness programmes, and preventive healthcare initiatives, reducing the need for costly medical treatments while enhancing policyholder satisfaction, he said.
Mr Kasem said co-pay should cut premiums by eliminating unnecessary claims and promoting financial stability in the insurance business.
Insurers can provide a greater range of policies to match clients' various financial and healthcare demands, making coverage more affordable for individuals and families, he said.
"We believe this encourages prudence and keeps healthcare costs and insurance premiums affordable and sustainable over the long term," said Mr Kasem.
Saree Ongsomwang, secretary-general of the Thailand Consumers Council, said the government should impose a ceiling on fees charged by doctors for medical services.
Thailand could learn from Singapore, where the government set fee benchmarks for private hospitals and doctors, she said.
Wealth managers say lower insurance premiums will encourage people to purchase more health insurance protection, benefiting hospitals in the long run as more customers will come to use their services.
People worried about whether they have sufficient health protection and the complexity of the new system are urged to purchase new insurance policies before the co-pay rule takes effect.
