Premiums rise backfires on insurers

Healthy people are opting out of health insurance in the face of escalating premiums, leaving insurers with high-cost claimants, says the Private Hospitals Association.

President Andrew Blair said there were two reasons the percentage of New Zealanders with health insurance had dropped from 51 per cent a decade ago to about 35 per cent last year.

One was the Government's introduction of fringe benefit tax, which stopped many employers from providing their employees with health insurance. This had a "dramatic" impact on numbers.

Also, every time premiums went up, the people who pulled out tended to be the healthy ones.

"Obviously if you think you are going to have a claim shortly or have got a pre-existing condition, you are more likely to stay in there because you will get your money's worth," he said.

This left insurance companies with big claimants who were "more likely to claim more often", Mr Blair said.

The average claim for Southern Cross members has risen 7.6 per cent in the past year, up almost $50. The insurer announced last week that it was likely to increase premiums by an average of 16 to 17 per cent to cover rising costs.

Mr Blair said one way to resolve the diminishing number of people taking out health insurance was to introduce tax rebates.

The 30 per cent rebate introduced in Australia had resulted in the number of people with health insurance rising from 30 per cent to 46 per cent in about six months.

Mr Blair agreed that some people who stopped paying for health insurance might put money aside but "the ability of people to front up with $12,000 when they need a major joint replacement is a lot different to putting money aside and coping with visits to the GPs or dentists".

He expected to see more people insuring just for surgery instead of covering themselves for dental and optometry costs.

That would make premiums more affordable by targeting people most needing health insurance.

- NZPA