Health insurance costs in New Zealand have significantly increased in recent years. This blog will help you understand the current state of New Zealand's healthcare system, why health insurance premiums are rising, and what you can do to manage these costs while keeping essential coverage.
The Current State of New Zealand's Healthcare System
New Zealand's public healthcare system is facing some challenges. Many people experience long wait times for operations and specialist consultations. For individuals without health insurance, getting timely medical care can be tough. Patients often wait a long time for non-life-threatening conditions, and some may face waits of several months or more for procedures that are required to improve their quality of life.
However, with health insurance or through Accident Compensation Corporation (ACC) one can skip the public waiting list and get treated faster. This clearly signifies the existence of a two-tier system amongst New Zealand’s healthcare providers.
Rising Costs of Health Insurance
Health insurance premiums have been "skyrocketing" due to several reasons:
1. More Claims
There has been a noticeable rise in the number of claims, which can be attributed to several factors such as rising medical costs, increased demand for healthcare services, and a higher prevalence of chronic diseases.
2. Healthcare System Pressure
The overall healthcare system in New Zealand is under pressure, due to a combination of factors. By far the biggest factor contributing to the strain is the historical and ongoing underfunding of the sector.
3. Medical Inflation
According to Aon’s recent Global Medical Trend Rates Report, medical costs in New Zealand have increased significantly, positioning the country among the highest in medical inflation rates in the Asia-Pacific region. The cost of operations and treatments is rising.
4. Age-Based Premium Increases
Premiums follow a "hockey stick" pattern, staying stable when you're younger but rising sharply after age 50 and continuing to increase through your 60s and 70s. This can be tricky because people often think about cancelling their policies just when they might need them the most.
Options for Managing Health Insurance Costs
Here are some practical ways to manage rising health insurance costs:
1. Review and Remove Optional Coverage
Consider eliminating optional coverage that includes additional features like specialist consultations & test coverage. Since most standard plans already cover specialist consultations six months before and after operations, removing these extras can help reduce your monthly premiums.
2. Increase Policy Excess
By raising your excess amount from standard levels (e.g., $500) to higher amounts (up to $10,000), you can significantly reduce your monthly premiums. For example, a 56-year-old non-smoker might lower their premiums from $300 to $70 per month by accepting a $10,000 excess. It's wise to save the premium savings to cover the excess when needed.
3. Explore Reduced Coverage Options
Consider exploring insurance options that offer reduced coverage to help lower your premiums. Choose coverage only for major treatments and for smaller healthcare requirements, such as a GP visit, dental care, and optical needs, you can use your regular income.
Some insurers provide policies that cover a percentage of your medical costs for major surgeries, such as 80% of operation expenses, leaving you to pay the remaining 20%.
This approach can help you save on premiums by not paying for coverage you might not need frequently.
4. Self-Insurance Approach
Cancel your insurance and save the equivalent of premium payment to build a dedicated fund for potential medical expenses. However, this requires discipline and carries the risk of major health issues before you have enough savings.
Next Steps
Contact Your Provider / Adviser / Broker: Discuss options for reducing premiums with your insurance provider, adviser or broker.
Consider Excess Levels: Think about what level of excess you could manage if you need an operation.
Evaluate Coverage: Weigh the cost-benefit of maintaining full coverage versus partial coverage.
You might face challenges such as finding the right balance between affordable premiums and adequate coverage or deciding if self-insurance is a good option. Here is where an independent risk insurance adviser like us can help you out. We help you understand the complex options available and adjust your coverage while ensuring you retain the essential benefits. The focus is on practical solutions tailored to you. By understanding these points, you can make informed decisions about your health insurance and manage costs effectively.
Tim Ewen is a Risk Insurance Manager at Stewart Group, a Hawke's Bay and Wellington-based CEFEX-certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver solutions. Blog No 14.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
