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It's Summer - So Health Insurance Premiums Must Be On The Rise

It's Summer - So Health Insurance Premiums Must Be On The RiseAs sure as night follows day and winter follows autumn at this time of year all health insurers seem to increase their premiums.
Southern Cross usually bear the brunt of the media focus given they are by far the largest insurer and therefore affect more New Zealanders with over 800,000 policy holders.

A recent article in the NZ Herald highlighted a member who received their renewal letter advising premiums had risen by 20%.
Southern Cross provided plenty of information as to why such an increase was necessary - primarily members claiming more benefits. While premium rates were increased, on average by 6%, the actual experience is greater. Premiums are set by age and this is also factored in at the policy anniversary.

Southern Cross had good news for the members in the article - their premiums included a 10% "no claims discount". However, if at some stage they claim on their policy the loss of this discount will increase their premiums.

On top of all this Southern Cross recently removed the Funeral Benefit for all their membership. This was effectively a cost reduction exercise and the argument can be made that the primary purpose of the policy is to meet health costs not final expenses.

Southern Cross have to date endeavoured to provide stability in premiums to their older members by charging the same premium for 65 year olds as they do 95 year olds. There is merit in this approach in trying to provide certainty of cost to members who are more than likely no longer working and on fixed incomes or spending capital to meet living costs.

The actual claims experience (13% of members are over 65 but account for 36% of claims) means that younger members are significantly subsidising older members. Southern Cross have flagged they will move to a rate per age premium for up to 75 year olds in the next 5 years.

When you couple this with the expansion of medical treatments and procedures that were previously unavailable, we see outcomes such as patients living longer and surviving events. Which in turn leads to more claims, greater costs and an ageing population all putting upward pressure on health insurance premiums.
All the above is not to put the spotlight on Southern Cross, as the same plight is being experienced by policy holders of all health insurers. Information on Southern Cross is easy to access and I applaud their transparency.

Health insurance world-wide is becoming a major issue - it is likely to be a big factor in the 2020 US Presidential elections. With over 10% of their population having no insurance some candidates are proposing a single payer platform. That is, to eliminate private insurers and have health care fully government provided.
You could argue we already have such a model here in New Zealand. However, it is also supported through ACC and our private health insurance industry still plays a significant role.

As a result of these ever-increasing premiums it's probably time to re-visit the proposition of 'value' versus 'benefit'.

The New Zealand public health system measures up well on an international basis. Life threatening situations, be it accidents or medical events (heart attack, stroke etc), are met with the best care available and all fully funded.

Primary care (GP and prescriptions) are by and large affordable and for children free doctor visits have been extended to all under 14 year olds.
So, what's the value in a health insurance policy?

Well, there are many medical investigations that are non-life threatening or quality of life issues. A visit to the doctor these days may well lead to a referral to a specialist or for a diagnostic test. These services are not available "on demand" and as a consequence Waiting Lists for public treatment are the norm. Health insurance allows for a reduction in waiting time as well as choice in provider.

Similarly, surgery that is non-life threatening or for quality of life procedures (think hip replacements etc) can have Waiting Lists of over two years.

Other areas of value in a health policy are funding for non-pharmac approved drugs (this is a big area in the treatment of cancer) or support for overseas treatment.

While we are undoubtedly getting greater scope of coverage, for some there can be a point at which it becomes too expensive for the average household. When premiums are costing thousands of dollars for people in their 80's one eye must surely be on the bank balance. Yet, experience shows this is when it is most likely to be used.

While I personally have health insurance I also accept the fact that more folk are choosing to "self-insure". That is, accept the public system will cater for acute situations and for non-threatening conditions be prepared to sit on a Waiting List. If it is a quality of life issue then whether to wait or pay for private surgery is a personal choice based on discomfort, cost and what limits the condition puts upon you.

What I do know is I've never seen anyone return the proceeds of an insurance claim. At the time of need the benefit paid has been welcomed and necessary. For those who "self-insure" and never claim, it is a good call. For those who insure and never claim it might be considered retrospectively a waste of money - but then what price do you put on peace of mind?


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