Threat of more health cover rises

By MARTIN JOHNSTON

Older people with health insurance face potential ongoing premium rises as the industry prepares to dismantle cross-subsidies from younger, healthier policyholders.

From February 1, Southern Cross Healthcare is introducing a new age band, for 46 to 64-year-olds. It is also increasing premiums by up to 30 per cent for all of its 311,600 policy-holders over 45.

New Zealand's biggest health insurer says the changes will make its premiums fairer because they will reduce the present cross-subsidies. Older members make more and costlier claims.

The rises may lead to another wave of policy cancellations by disgruntled members, which could put pressure on the public system.

Southern Cross was swamped with calls yesterday from concerned members who had read of the changes in the Herald, says the insurer's chief executive, Roger Bowie. Not all those affected had yet received letters explaining the reasons for the changes.

"We are getting a much more understanding and muted reaction from people who have the letter."

He said that Southern Cross had no immediate plans to introduce even narrower age bands, but they were a possibility.

Health insurers and the Human Rights Commission were working to develop guidelines which he expected to be published soon. They were likely to recommend greater use of age bands, Mr Bowie said.

Southern Cross' introduction of a third adult band - the existing ones are 19 to 64 and 65 and over - was in response to competition.

The Health Funds Association executive director, Andrea Pettett, said age bands of less than five years were typical of health insurers other than Southern Cross. Younger people had shopped around and gone to those with the narrower bands.

The Consumers Institute chief executive, David Russell, said the Southern Cross move was a sad symptom of a competitive market, but the institute "recognises what is happening from a commercial point of view."

Subsidies from Southern Cross' younger to older members were once even more marked than now, he said.

He urged holders of comprehensive policies - which covered bills from doctors and pharmacies as well as hospitals - to check whether their premiums cost more than the value of their claims. If so, they should look at switching to a hospital-only policy, and "self-insuring" for the rest.

Mr Bowie said it was not yet possible to state precisely what effect Southern Cross' latest changes would have on individual policyholders, since no-claims bonuses had to be taken into account.

Southern Cross was also introducing a new surgery policy, aimed mainly at the elderly, which offered lower premiums but carried a $600 excess.

A spokesman for Health Minister Annette King said that while she had not been briefed on the possible effects of the Southern Cross changes, she expected that any significant number of policy cancellations would have an effect on the public health sector.

Substantial price rises in the past had led to many cancellations, making more people reliant on the public system, he said.