Updated 01 Jun 2011

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Introduction

Shopping around for health insurance still pays off. But the best deal isn't necessarily the cheapest.

After assessing hundreds of premiums and policies from 7 insurers, we’ve found plenty of policies to recommend.

In this report we look at the most popular types of health insurance. We detail your options, make recommendations for a range of consumer profiles, and provide buying and money-saving tips.

Do you need health insurance?

The key question is: do you or your family need health insurance?

If you self-insure (put money aside for medical care rather than pay health insurance premiums) you're betting that urgent conditions can be done on the public health service and you can wait or pay from savings for elective surgery or treatments.

Younger people without dependent children are usually seen as self-insurers but even older people do it.

Health insurance ... pros and cons

Pros

• Cover when you need it.
• No waiting lists.
• Choice of specialist.
• Schedule the time and date of the procedure to suit you.

Cons

• Premiums can be very expensive.
• Premiums escalate with age.
• Pre-existing conditions are often not covered.
• Benefits don't always cover the full cost of treatment.

 

10 need-to-knows

1. Health insurance gets more expensive as you age – and with most policies the terms of cover can change as well. A number of our members cancelled their policies because the premiums cost too much as they got older. The good news is that premiums are based mainly on age bands rather than personal claims history. So you won't be charged an exorbitant premium just because you claim more often than the next person.
    
2. Pre-existing conditions must be disclosed – and are usually excluded from cover, even if you don't know you have them.
    
3. However, if you disclose conditions they may still be covered. In some cases pre-existing conditions may be covered after a "stand-down" period of months or years but this depends on each case and some insurers may charge a “loading fee” for some conditions.
    
4. If you already have health insurance, be careful about changing policies or insurers. Conditions that your current policy covers may not be covered under the new policy.
    
5. Most insurers use Pharmac's schedule to decide what medicines they'll cover. So if your specialist recommends a medicine that's not on the Pharmac schedule you'll have to pay for it yourself.  
    
6. New and experimental procedures are often specifically excluded. This can lead to battles with insurers about how experimental a procedure is. In one case considered by the Insurance & Savings Ombudsman, an insurer declined to pay for the stents used in an angioplasty procedure. The Ombudsman ruled that stents were not untried technology – so the complaint was upheld. 
    
7. Some life insurance policies may contain health-care benefits as part of a wider cover. But check that health cover in a life policy is comprehensive enough. If you want to bundle health and life insurance together, make sure you get a discount for this. And check whether at a later date you'll be able to cancel one cover while keeping the other going. 
    
8. Insurance advisers and brokers receive commissions for selling you health insurance. Ask your broker to name the companies that quoted and also to disclose what they receive for signing you up. Advisers and brokers often get another bite at the commission cherry each time you take out a new policy and so may encourage you to upgrade to a "better" policy. 
    
9. In many cases, premiums can be suspended if you go overseas for an extended period. This means your cover continues when you get back, although some of the policy conditions may have changed in the meantime.
    
10. Group health schemes are almost always cheaper than private schemes thanks to bulk buying and in some cases employer subsidies. In many cases your pre-existing conditions will be covered under a group scheme.

 

Types of health insurance

There are 3 main types of health insurance policies available.

Hospital and surgical only policies (HSO)

Also called "Hospital-only" policies, HSO policies cover expenses related to hospitalisation and non-urgent semi-acute surgery such as a heart bypass. They also cover basic diagnostic procedures and specialist consultations that are related to the hospitalisation/surgery and that take place in a defined period (usually 3 to 6 months before and after hospitalisation/surgery).

Hospital and specialist cover policies (HSO-plus)

An HSO-plus policy can help provide peace of mind when you want quick access to a diagnosis. Add-on policies usually cover specialist consultations and diagnostic procedures that aren't related to surgical treatment or hospitalisation.

In order to be covered by your HSO-plus policy, the procedure must usually be recommended by a specialist or a GP. Examples of the diagnostic procedures covered by these policies are x-rays, mammography, ultrasound, electrocardiogram (ECG), electromyography (EMG), and laboratory testing (including allergy tests).

You may find standard HSO-only policies that cover some of these HSO-plus procedures.

Comprehensive policies

Comprehensive policies include all the cover provided by HSO-plus policies, and also cover GP visits, and prescriptions.

Because these policies cover more, they cost more ... a whole lot more.

Feedback from Consumer subscribers suggests that comprehensive policies are not as popular as they used to be, and this is confirmed by figures from health insurers.

For this reason we no longer assess comprehensive policies and pricing.

Ways to save

If you decide to buy or keep health insurance, how do you make it affordable?

Concentrate on the big risks

Don't insure for day-to-day medical expenses. If you want health insurance, protect against the big risks with Hospital and Surgical Only cover. Comprehensive policies, which cover your everyday costs, are unlikely to be worth the cost. However, if the comprehensive policies are available through your employer at discounted premiums then they may be worth considering.

Shop around

Choose a policy with high claim-limits and as broad a cover as possible. Getting quotes from several insurers may uncover a difference of hundreds – even thousands – of dollars. Always carefully compare the cover you are being promised.

Choose a higher excess

An excess is the part of each claim which you pay. Health policies can often be bought with a nil excess, but many companies offer reduced premiums if you opt for a higher excess.

Take the highest excess you can comfortably afford to pay. The bigger the excess, the lower your premium.

Make sure you have the money for the excess available at short notice, in case you need it.

Look for discounts

Group premium rates available through some employers and unions can save you hundreds of dollars. If you join as a group member, you may find your pre-existing conditions are covered as well (but always check).

Package discounts (where you get a discount because you use the same insurer for other types of insurance) aren't widely available, but look into it if you have other business with a health insurer.

Other discounts. Some insurers offer a discount of up to 6.5 percent for paying annually rather than monthly and a 2.5 percent discount for direct-debit payments. There may also be discounts for non-smokers with some insurers (up to 20 percent), for people with a healthy lifestyle (10 percent), and for 2 or more people on one policy, or for not making claims. Buying life and health insurance from the same company may also give you savings on premiums.