In recent weeks prior to the 2014 elections the media has been fixated on sensational topics ranging from ‘Dirty Politics’ 'Moments of Truth' and 'Mass Surveillance'. Unfortunately this media frenzy has overshadowed one of the biggest issues New Zealand is currently facing and which will affect everyone living in New Zealand.
The recent article “Health Policy missing in action” of the Sunday star times addressed the lack of attention for the growing cost for funding the Health sector.
“In mid-2013, Treasury published long-term forecasts for Government spending. It said: "The projections in our Resume Historic Cost Growth scenario suggest that healthcare costs would grow from around 6.8 per cent of GDP in 2010 to more like 10.8 per cent in 2060, a big change. And some people might see even that projection as conservative."
Currently about 30% of New Zealanders have Private Health insurance which takes the pressure off the public system. Unfortunately due to the increase in cost of procedures, often referred to as medical inflation, premiums have increased across the board. Another factor to the increase in premium is that when people get older their premiums increase due to a higher risk. As a result many people find it more and more difficult to afford to pay their premium.
A drop in New Zealanders with private health insurance is more than likely to put even greater pressure on the public system and the overall cost for the health sector. We have no control over the fact we have an aging population but there are other ways we can collectively look at to combat both private and public health funding.
Insurance companies have been aware of this problem for many years and don’t want to lose any customers as a result of this. The response from insurance companies have ranged from not doing anything and simply increasing premium to more pro-active approaches.
Southern Cross is a non-for-profit organisation. They recently have received media attention in relation to their effort to combat the medical inflation described earlier. By creating a network of affiliated providers whom have agreed to set prices to perform certain procedures it is expected control the cost of claims paid. Some people have argued it will limit policy holder's options as not all private clinics/hospitals have signed this agreement. However I applaud Southern Cross for taking a step in the right direction as premiums for health policies need to be sustainable.
Sovereign New Zealand's largest Life Insurance company, has responded with a two tier approach. Over the years their claims department has found that when they received invoices for the same procedure there could be a large variation in price. They are being more proactive to question the invoice with the provider. They have found in some cases providers were not even aware their prices were much higher than average. This strategy has not limited Sovereign's policy holders to choose their provider and would have been unaware of this ‘behind the scene’ diligence. As a result the total cost of claims has been limited which offers policy owners some protection against medical inflation.
The second response from Sovereign was to launch of a new health product called Private Health. In my next article I’ll write in more detail about this new product . This new health policy tries to combat increase in cost of claims by combining the public with the private health system. Clients will always have the option to go private but can elect for example non urgent medical treatments to go through the public hospital. As an incentive they are rewarded by receive one years free premium. (for detailed policy wording please refer to Sovereign)
In my opinion there is another, perhaps more powerful stakeholder that can influence the uptake of private health insurance. Whoever wins the 2014 elections, the first thing the new government could do to combat ever rising public medical funding is to make the premium for private health tax deductable. In many European countries Health insurance is either subsidised or even build into the tax system. As only 30% of New Zealanders are currently covered by private health insurance it’s not hard to imagine the impact it would make on public funding if this percentage could go up to either 40% or 50%. By having health insurance premium as a tax deductable expense the government does not have to carry the full cost as it will be based on the highest tax bracket.
The second thing the government could do is to remove the fringe benefit tax employers pay on group schemes premium. As an adviser I have found that over the years this has been a real deterrent for employers to pay this tax on top of their employees premiums. Employers should be rewarded for wanting to look after their staff. Such an incentive could lift the uptake on group schemes.
My hope is that once the dust has settled after the elections we have a government that will focus on ‘the bigger issues’ and address the increasing cost of Health Funding which is one of the major government expenses now and if left non-addressed will become a millstone over the next decades to come. Synergy between the government and private health providers would be a logical step.
The recent article “Health Policy missing in action” of the Sunday star times addressed the lack of attention for the growing cost for funding the Health sector.
“In mid-2013, Treasury published long-term forecasts for Government spending. It said: "The projections in our Resume Historic Cost Growth scenario suggest that healthcare costs would grow from around 6.8 per cent of GDP in 2010 to more like 10.8 per cent in 2060, a big change. And some people might see even that projection as conservative."
Currently about 30% of New Zealanders have Private Health insurance which takes the pressure off the public system. Unfortunately due to the increase in cost of procedures, often referred to as medical inflation, premiums have increased across the board. Another factor to the increase in premium is that when people get older their premiums increase due to a higher risk. As a result many people find it more and more difficult to afford to pay their premium.
A drop in New Zealanders with private health insurance is more than likely to put even greater pressure on the public system and the overall cost for the health sector. We have no control over the fact we have an aging population but there are other ways we can collectively look at to combat both private and public health funding.
Insurance companies have been aware of this problem for many years and don’t want to lose any customers as a result of this. The response from insurance companies have ranged from not doing anything and simply increasing premium to more pro-active approaches.
Southern Cross is a non-for-profit organisation. They recently have received media attention in relation to their effort to combat the medical inflation described earlier. By creating a network of affiliated providers whom have agreed to set prices to perform certain procedures it is expected control the cost of claims paid. Some people have argued it will limit policy holder's options as not all private clinics/hospitals have signed this agreement. However I applaud Southern Cross for taking a step in the right direction as premiums for health policies need to be sustainable.
Sovereign New Zealand's largest Life Insurance company, has responded with a two tier approach. Over the years their claims department has found that when they received invoices for the same procedure there could be a large variation in price. They are being more proactive to question the invoice with the provider. They have found in some cases providers were not even aware their prices were much higher than average. This strategy has not limited Sovereign's policy holders to choose their provider and would have been unaware of this ‘behind the scene’ diligence. As a result the total cost of claims has been limited which offers policy owners some protection against medical inflation.
The second response from Sovereign was to launch of a new health product called Private Health. In my next article I’ll write in more detail about this new product . This new health policy tries to combat increase in cost of claims by combining the public with the private health system. Clients will always have the option to go private but can elect for example non urgent medical treatments to go through the public hospital. As an incentive they are rewarded by receive one years free premium. (for detailed policy wording please refer to Sovereign)
In my opinion there is another, perhaps more powerful stakeholder that can influence the uptake of private health insurance. Whoever wins the 2014 elections, the first thing the new government could do to combat ever rising public medical funding is to make the premium for private health tax deductable. In many European countries Health insurance is either subsidised or even build into the tax system. As only 30% of New Zealanders are currently covered by private health insurance it’s not hard to imagine the impact it would make on public funding if this percentage could go up to either 40% or 50%. By having health insurance premium as a tax deductable expense the government does not have to carry the full cost as it will be based on the highest tax bracket.
The second thing the government could do is to remove the fringe benefit tax employers pay on group schemes premium. As an adviser I have found that over the years this has been a real deterrent for employers to pay this tax on top of their employees premiums. Employers should be rewarded for wanting to look after their staff. Such an incentive could lift the uptake on group schemes.
My hope is that once the dust has settled after the elections we have a government that will focus on ‘the bigger issues’ and address the increasing cost of Health Funding which is one of the major government expenses now and if left non-addressed will become a millstone over the next decades to come. Synergy between the government and private health providers would be a logical step.
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