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Health insurance choices

Health insurance: do you need it or don’t you? It’s a classic $64,000 question. If you need a hip replacement, non-urgent heart surgery, or a hysterectomy you might well wish you had insurance. If you don’t, you’ll be glad you didn’t spend the money.

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Health insurance isn’t cheap. Since 2008, more Kiwis have cancelled their policies than taken out new ones. Between 2010 and 2013 the cost of health insurance for the average Kiwi household rose by nearly 30 percent. So it’s no surprise the number of people taking out insurance has been falling. Industry figures show 11,000 fewer people were insured in 2013 compared with the previous year.

Premiums also increase as you age and as new more costly treatments come into common use. When you need it most – once you’re retired – health insurance is at its most expensive.

If you get sick or suffer from a chronic condition, the public health system will help you sooner or later. It’s the “later” bit that makes health insurance worthwhile for some people. They want the peace of mind they can get treatment when they need it and not have to wait.

And the wait can be long for elective surgery – the type of surgery for which most people use health insurance.

Talk to the Ministry of Health or to government politicians and you’ll hear that the numbers of elective surgeries done each year are increasing and waiting times are reducing. The ministry says that by December 2014, it’s expected that no-one will wait longer than 4 months.

Scratch the surface of the waiting lists and picture isn’t so clear. District health boards have targets they must meet or face financial penalties. The way the DHBs deal with that is by not putting people on the waiting lists in the first place. Waiting lists show the capacity of the system, not the need.

To get on the waiting list you need to be able to show that your pain is disabling and the operation is classified as urgent. People who don’t meet the criteria won’t feature in the statistics. Access to services is also inconsistent around the country with some DHBs providing a more timely service than others.

Do you need it?

Older health insurance policies often covered day-to-day events such as trips to the GP and prescription costs. These comprehensive policies are increasingly expensive and it’s becoming more common for people to opt for elective surgery policies that will let them sidestep public hospital waiting lists.

If you’re considering taking out health insurance, you need to ask yourself:

  1. Can you afford to put aside savings that are earmarked just for medical bills? If the answer is yes, then you’re most likely to be better off without health insurance providing you don’t need to pay for major elective medical treatment when you’re younger.

  2. Can you afford to pay for doctors’ visits? Then it’s probably not worth paying higher premiums for comprehensive cover. Likewise if you can afford the premiums for budget policies that only cover GP visits and other primary healthcare such as prescriptions then you can probably afford to pay for doctors' visits yourself.

  3. If you don’t make it on to a public hospital waiting list, can you afford to pay for surgery? A procedure like a knee replacement can cost between $15,000 and $28,000, according to the Health Funds Association of New Zealand. Can you afford to pay that? If a condition could stop you working, how much income could you lose?

  4. Are you willing to take some of the financial risk? Some companies offer cost-sharing policies that only pay a percentage of the claim. The idea is that if you have some skin in the claim you won’t want to be treated unnecessarily or have the cost of treatment balloon out of control. The other way of doing this is by taking out a higher policy excess in exchange for a lower premium.

  5. What are your chances of needing major surgery? Diet and exercise are vital factors in maintaining health and in reducing the risk that you’ll need medical treatment. Making lifestyle changes may do more for your health than health insurance.

We all hear stories of the person who paid $1000 in premiums and got a $50,000 operation in return. But for every one of those there will be others who paid $1000 and got nothing more than peace of mind. The fact is the health insurance company usually wins. It pays less in claims on average than the policyholder pays in premiums.

Terms and conditions

Buying health insurance can be baffling. There are many types of policies out there, ranging from those that pay for primary health care through to fully comprehensive policies that pay for almost any medical treatment.

Unlike Australia, companies here don’t have to provide policy information in a standardised format. If you do want to take out health insurance make sure you’re comparing apples with apples when looking at policies.

For example, 2 policies might each offer $200,000 cover for surgical procedures. But 1 may have more restrictions on the type of procedures available or limit the number of diagnostic tests and specialist consultations you can have.

As well as the headline cover, it’s important to read the exclusions. Is oncology (treatment for cancer) included or excluded? Some policies assume that you’ll be treated by the public health system for life-threatening illnesses such as this. However, you might prefer to be treated in a private hospital.

Another question to ask: are preventive or monitoring procedures or scans part of the policy?

Media commentator Brian Edwards and wife Judy Callingham faced this when they tried to claim for more than 1 PET (positron emission tomography) scan in a year from Southern Cross. They had to fund most of the bill for 2 of the 3 $2500 scans themselves. The couple pays $700 a month for health insurance and have had the policy for decades.

Brian Edwards said the policy didn’t make financial sense because PET scans could save Southern Cross money by identifying metastasis (spreading of the cancer) at an early stage when it could be most easily treated. “The cost is $2500 per scan. That would seem to me more economic than spending a hundred grand or more on late-stage surgery or other treatment. The PET scan is the most reliable way of telling if it has spread to other parts of the body. You can only describe this as ‘vital information’.”

As he points out, you don’t think about how many PET scans are allowed when you take out the policy. “We didn’t really know then that, 23 years later, one of us would be diagnosed with oesophageal cancer. And the other problem is that over those 23 years the terms of our policy have been changed numerous times.”

Report by Diana Clement.

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What the claims tell us

Southern Cross Health Society, which receives hundreds of thousands of claims every year, has listed the top 5 surgical claims for different ages.

In the 20-29 year old age band the most common procedure for both men and women is removal of teeth.

By 40-49 the top 2 surgeries for women are hysterectomies and endometriosis surgery; and for men it’s colonoscopies and excising skin lesions.

Hip replacements start appearing in the top 5 for men in the 40 to 49 age band and women in the 50 to 59. For the 70+ age group, the 2 most common procedures, although not in the same order, are cataract and knee-replacement operations.

While few procedures cost more than $100,000, a minority of claims can be very expensive. In the 2013 calendar year, out of the 153,000 elective surgeries it funded, Southern Cross had just one claim above its $100,000 policy limit – at $104,000.

In the case of Accuro, the highest claim paid was $110,000 for spinal surgery.

Some of Sovereign’s most expensive claims for the 2013/14 year were:

  • Spinal surgery $156,000
  • Lung cancer $131,000
  • Breast cancer $108,000.

Other common surgeries are cheaper. According to Southern Cross, eye-lens replacements and removing cataracts range from $3100 to $4700; removing gallstones $8000 to $10,000; and a coronary artery bypass graft $38,000 to $57,000.

Southern Cross top 5 procedures 2013

Women Men
20-29 age band20-29 age band
Removal of teeth Removal of teeth
Endometriosis surgery Septoplasy (straightening nasal septum)
Freeing of abdominal adhesionsExcision skin lesion
Ovarian cystectomyHernia - inguinal repair
Cholecystectomy (gall bladder removel) Endoscopic sinus surgery
30-39 age band 30-39 age band
Endometriosis surgery Removal of teeth
Hysterectomy Excision skin lesion
Freeing of abdominal adhesionsColonoscopy
Removal of teeth Hernia - inguinal repair
Cholecystectomy Vasectomy
40-49 age band40-49 age band
Hysterectomy Colonoscopy
Endometriosis surgery Excision skin lesion
ColonoscopyHernia - inguinal repair
HysteroscopyHip replacement
Excision skin lesion Arthroscopy - knee
50-59 age band 50-59 age band
ColonoscopyHip replacement
Hysterectomy Colonoscopy
Hip replacement Excision skin lesion
Excision skin lesion Knee replacement
Knee replacement Coronary angioplasty
60-69 age band 60-69 age band
Knee replacement Knee replacement
Hip replacement Hip replacement
ColonoscopyCoronary angioplasty
Cataract Prostatectomy
Excision skin lesion Excision skin lesion
70+70+
Cataract Knee replacement
Knee replacement Cataract
Hip replacement Excision skin lesion
Excision skin lesion Hip replacement
ColonoscopyCoronary angioplasty

Checklist

If you're searching for a health insurance policy, here are some key questions to ask:

  • Are relatively common procedures or medical conditions excluded by the policy?
  • Are treatment limits per procedure or per year?
  • How generous is the policy about scans and investigative procedures?
  • Can you claim if these procedures don’t result in hospital treatment?
  • What type of minor surgery will be covered?
  • Will non-Pharmac funded drugs be paid for?
  • Is there home-based nursing available for post-operative care?
  • Will you be able to claim for post-operative physiotherapy?
  • Will the insurer allow you to go overseas for treatment?
  • Are your children covered from birth – and until what age?
  • Are pre-existing conditions covered after a stand-down period?
  • Can you cost-share or is there a good trade-off between taking a higher excess for each claim and premium reduction?
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