KEY POINTS:
Budget-conscious kiwis are "trading down" on comprehensive health insurance policies in favour of cheaper, hospital-only cover, as premiums continue to soar.
Yet even cheaper policies are cutting into the average family budget, with at least two major insurance companies reporting bills 40-50 per cent higher than five years ago.
Sovereign and Tower's premiums rose between 8 and 10 per cent a year over the past five years - driven by medical inflation, new technology, an ageing population and a higher rate of claims - while Southern Cross' rates had increased an average of 5 per cent, the companies said.
Southern Cross (with a 60 per cent share of the market), Sovereign, and Tower responded to questions from the Herald on Sunday based on what an invented family of four would expect to pay for different levels of health cover.
For a healthy, non-smoking family with no pre-existing medical conditions - mum and dad aged 45 and 48 respectively, and two teenagers aged 16 and 13 - basic hospital cover now costs between $108 and $139 a month, with nil excess. Throw in specialist care (with nil excess) and the family would pay $157 to $174.
Comparatively, the most comprehensive plan available to the same family, offered by Southern Cross - which included GP, chiropractor, osteopath, dietitian and podiatrist visits, as well as $400 a year for dental and $300 a year for optometrist treatment - would cost the same family $386.84 a month.
Yet despite the rising bills, more New Zealanders are signing up. A third of us now have private medical insurance, a figure that climbs to about 50 per cent for those aged 50-54.
Industry experts spoken to by the Herald on Sunday agreed consumers were worried they could no longer count on the public sector to meet potential health needs.
Roger Styles, executive director of Health Funds Association of New Zealand, said policy holders were less concerned with the cost of GP visits, especially since new subsidies had been introduced. "They are looking to cover the things they cannot count on the public system delivering with any certainty - the big one being elective surgery. Waiting lists are always on people's minds."
He said comprehensive policy holders were choosing to "trade down" to major medical cover in increasing numbers, especially as they approached retirement age and premiums climbed.
While comprehensive cover extended to GP visits, dental care and prescriptions, major medical policies provided hospital-only, or hospital plus specialist-only cover.
Numbers of people with major medical policies had increased by 300,000 since 2000 to 860,800, or 62.5 per cent of the 1.377 million lives covered. Conversely, those choosing comprehensive cover dropped from 800,000 to just 515,700.
Styles said health-cost inflation had outstripped CPI inflation, a trend that looked set to continue, while new technology and new procedures further added to insurers' costs.
Costs were also being driven up by an increase in claims, up 5 per cent in the year to June 2007 to $590 million.
Styles said latest, as-yet unreleased, figures for the September quarter were expected to show further steady increases in the number of Kiwis taking out insurance, a trend that saw a peak during the December 2006 quarter when insurers signed up nearly 100 customers a day.
Financial adviser Phillip Booth, of Lifetime Financial Group in Auckland, said comprehensive plans could be expensive. "People have to do their homework and identify whether it's really worth it. Is it worth paying $600 for optical medical, when you are only going to get $400 benefit from it?"
WATCH OUT FOR THE FINE PRINT
It pays to keep well-informed of exactly which procedures your health insurance policy covers you for, and to always read the fine print, as an Auckland family found.
The family were shocked to find a $16,000 operation needed by one family member, which had previously been covered by their comprehensive plan, had suddenly dropped off the list this year.
Their insurance company, in good faith, eventually agreed to a one-off payment, the Herald on Sunday has heard, but the problem caused months of stress for the family involved.
Insurers told the Herald on Sunday they always sent out letters detailing policy/premium changes, but sometimes their customers failed to read them.
Insurers such as Southern Cross, which has 60 per cent of the New Zealand market, undertake regular reviews of their benefits, limitations, general exclusions, and schedule or list of procedures. In the past year, 105 procedures were added, while operations relating to the jaw and facial skeleton were removed.
"Protecting the longer term affordability of premiums sometimes involves having to place limitations on policies," said Dr Ian McPherson, group chief executive of Southern Cross Healthcare.
He said Southern Cross had been incurring claims costs for treatment, which was cosmetic or not medically necessary, and which was also behind the restricting of cover for varicose veins in 2004.
Financial adviser Phillip Booth said it was essential for policy holders to seek advice about exactly what was covered because some policies could be "very difficult" to interpret.
"You need to be a claims officer to be able to understand it - often it's only when you are making a claim you find out [that something isn't covered]."
He said "lots" of companies changed what was covered without directly letting customers know. Changes were often buried in fine print. "You need to make sure the policy wording is protected, which means they can add to the policy but not subtract from it."
