Most countries in the OECD offer incentives to encourage people to take out insurance, Financial Services Council chief executive Kirk Hope says. Photo: Pixabay
Health insurance is becoming too expensive for some New Zealanders and it's prompted a call from the industry for tax breaks to help.
Research from the Financial Services Council, which represents life and health insurers, shows that a third of people with health insurance have downgraded or reduced their cover in the past year.
A third of New Zealanders have health insurance and another 27 percent said they previously had it but no longer do.
Southern Cross - the country's biggest health insurer - has an online tool which shows that a 40-year-old female non-smoker with a 45-year-old male non-smoker partner and a 10-year-old child would pay $120 a fortnight for the KiwiCare plan, which splits the cost of treatment between the patient and Southern Cross.
Wellbeing One, which offers standard surgical and healthcare cover, is $136.
For older people, it becomes much more expensive.
A couple who are aged 60 and 65 could pay $324 a fortnight for Wellbeing One if they were non-smokers. At 70 and 75, that could increase to $518 a fortnight.
This does not account for pre-existing conditions.
Health insurance premiums can increase annually in line with insurers' claims expenses, inflation and the cost of doing business. But they also rise as someone gets older.
Southern Cross chief sales and marketing officer Regan Savage told Checkpoint last week that some of its customers had cancelled their cover.
He said all insurers were increasing their premiums.
"Up to March this year our premium increase was around 16.5 percent, that changes to about 20 percent when you include ageing. One of the things about health insurance is your risk increases with every year you age," he said.
Southern Cross said in its most recent full-year results announcement, the cost of claims was rising faster than premiums. It is a friendly society, which means it is not set up to make a profit.
Financial Services Council chief executive Kirk Hope. Photo:
Financial Services Council chief executive Kirk Hope said health insurance would provide faster access to care, lower out-of-pocket costs and should support overall wellbeing.
He said the majority of people with insurance felt they received value from it.
"It certainly plays out when you have something happen to you which is not covered… people go 'yeah I wish I had done that at the time'."
But he said cost was a key barrier. He said older people often chose to increase the excess on their insurance, which could lower their premiums, or target cover to the areas they were most concerned about.
But he said the country needed to do more to help.
He said most countries in the OECD offered incentives to encourage people to take out insurance.
"In Australia, if you don't take out health insurance by a certain age, you're charged more tax."
Hope said it would make sense to expand cover through workplace schemes. At the moment, 56 percent of people with health insurance pay for it themselves and 78 percent of those with life insurance.
But he said employer contributions to life and health insurance should be exempt from fringe benefit tax (FBT). FBT is paid on benefits given to staff and Hope said this could act as a disincentive.
"FBT on employer provided group insurance schemes discourages businesses, particularly small and medium-sized enterprises, from including insurance as an employee benefit," he said.
"There are important policy implications here.
"Improving access to life and health insurance can enhance workforce resilience, reduce pressure on the public health system, and provide critical financial buffers for families and individuals in times of crisis. This tax effectively penalises employers for supporting the wellbeing of their staff."
He said many other countries allowed premiums paid to be deducted from a person's taxable income, which would help people who were retiring or coming out of the workforce and no longer in group schemes.
"New Zealand is an outlier in the OECD because we literally provide no deductibility for insurance with the exception of income protection. That's an area where there should be a degree of focus."
Founder of Enrich Retirement Liz Koh. Photo: Supplied
Founder of Enrich Retirement Liz Koh said whether health insurance made sense would depend on someone's personal circumstances.
They might think about the likelihood of suffering a health problem in the future, the financial consequences if that happened and their ability to pay for care.
"How much of that risk am I willing to take on myself and how much risk do I wish to pass on to someone else by paying an insurance premium?
"Some people choose to self insure as they have significant financial assets. Others simply can't afford the premiums. In that case they need to reduce risk by living a healthy life - eating the right foods, exercising...
"The risk for young people is that they think they are bulletproof when they are not. Health issues can come out of the blue. It pays to have at least some cover before you develop health issues, because once you have pre-existing conditions this may affect your premium and/or your ability to get insurance cover."
She said some people expected to rely on the public health system.
"The thing is that once you get into the public health system it's fantastic. The problem is in getting into it. Long waiting lists, staff shortages..."
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