Rising medical insurance costs may soon affect how employers structure healthcare benefits for their staff. With projections pointing to double-digit premium increases in 2026, many companies are now reviewing their medical plans to stay financially sustainable, according to the Malaysian Employers Federation (MEF).

Employers Reassess Healthcare Plans As Costs Climb

MEF president Datuk Dr Syed Hussain Syed Husman said the rising cost of medical insurance is no longer sustainable for employers. Without systemic reforms, he warned, companies might eventually need to reduce coverage or share part of the cost burden with employees.

He noted that insurers have started imposing steeper premium renewals and stricter policy conditions, including higher deductibles and new exclusions, especially for high-claim groups. These changes are especially challenging for micro, small, and medium enterprises (MSMEs), which have less bargaining power to secure better terms.

Employees Already Feeling The Impact Of Higher Costs

Findings from the RinggitPlus Malaysian Financial Literacy Survey (RMFLS) 2025 reflect how rising insurance costs are affecting individuals too. Despite higher premiums, 64% of Malaysians have kept their existing insurance or takaful coverage, but 22% have either switched to cheaper plans or cancelled their coverage altogether due to cost increases. 

The survey also found that 43% of Malaysians are not covered by medical insurance, while 15% rely solely on company-issued medical cards. 

These figures suggest that any reduction in employer coverage could widen the protection gap, particularly among middle-income households already struggling with living costs.

Balancing Employee Welfare And Business Viability

Despite these pressures, most employers remain committed to maintaining medical benefits as part of their total rewards strategy. However, many, particularly MSMEs, are struggling to balance rising operational expenses, statutory obligations, and employee welfare.

“Most employers are not cutting benefits outright but taking a more strategic approach,” said Syed Hussain. Companies are now reviewing policy limits, introducing co-payment or shared-cost schemes, and exploring managed care models that focus on preventive health and cost efficiency.

Some organisations are also experimenting with flexible benefit structures that allow employees to tailor their coverage according to personal needs. Wellness programmes that encourage healthier lifestyles are gaining traction as a long-term strategy to reduce medical claims.

A Call For Joint Action On Cost Control

MEF cautioned that cutting medical benefits too drastically could harm employee morale, retention, and employer branding, especially in today’s competitive job market. To address the issue more effectively, the federation urged insurers, healthcare providers, and the government to work together in curbing medical cost escalation.

It called for greater transparency and standardisation in healthcare pricing, as well as policy measures that encourage preventive and primary care instead of hospital-based treatment. MEF also emphasised the importance of promoting value-based healthcare and tighter cost management within the insurance industry.

“Employers are taking prudent steps to manage medical costs, but the focus remains on maintaining fair and reasonable healthcare coverage,” Syed Hussain said. “A coordinated, multi-stakeholder approach is key to balancing cost control with employee protection.”

He added that employers are also taking steps to educate staff about the true cost of healthcare and to encourage shared responsibility in sustaining long-term benefits.

Medical Cost Trends Show No Signs Of Slowing

MEF’s comments follow the release of the Mercer Marsh Benefits (MMB) 2026 Health Trends report, which found that medical cost trends remain high across the globe.

After averaging close to 11% globally in 2024 and 2025, insurers forecast another 11% year-on-year increase in 2026. In Asia, the medical cost trend is expected to reach 12.5%, with Malaysia projected to face one of the highest increases at 15%.

MMB also reported that 63% of insurers in Asia anticipate reducing coverage to manage cost increases in 2026, compared with 43% in 2025.

Preventive And Data-Driven Approaches Seen As The Way Forward

Steven Yu, Mercer Marsh Benefits Asia Leader, said the findings should serve as a reminder for both employers and insurers to address the issue proactively.

“Another year of double-digit medical cost growth across Asia is a reminder that short-term cuts can harm long-term outcomes,” he said. “Reducing benefits may ease budgets now, but it transfers financial risk to employees and weakens retention.”

Yu encouraged employers to collaborate with insurers on data-driven plan designs, targeted funding for high-cost claims, and greater efficiency in managing resources. He also highlighted the importance of investing in preventive care and mental health support to preserve protection and ensure long-term affordability.

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