Photo: Pixabay
Canadian migrant Zac says there has been a lot to get used to in the New Zealand healthcare system - but one thing he is struggling with is the increase in health insurance premiums.
Zac, who does not want to be named because of a dispute with his insurer, was shocked to be told that his Southern Cross premiums had increased 25 percent in a year. "I am a healthy young adult with no health conditions."
He is on the country's largest health insurer's Ultracare plan, with an additional chemotherapy cover.
"The fear of having a terminal diagnosis or disease being missed or extremely delayed by New Zealand's alleged universal healthcare system is what prompted me to take out private health insurance as soon as I was eligible. I've been a member of Southern Cross for over three years."
He said he almost "fell off his chair" when he moved here and found it was normal to have to pay $60 or more to see a GP.
- Do I have to use my KiwiSaver to pay for my partner's care? Listen to No Stupid Questions with Susan Edmunds
But he said he was frustrated at having no recourse for rising premiums. He had had claims declined that should have been covered by his plan, he said.
"There really is no watchdog and government authority that can impose and mandate insurance companies to cap their premium hikes."
Zac is one of a number of people who have contacted RNZ about their health insurance premiums in recent weeks.
Russell Hutchinson, of Chatswood Consulting, said every health insurance was increasing premiums by a similar amount to what Zac has experienced. "Some of the increases have been 50 percent this year."
Stats NZ data shows that health insurance premiums, as measured in the CPI, were up almost 20 percent year-on-year in September.
They are up 62 percent over five years, 114 percent over 10 years and more than 200 percent over 15 years.
Consumer NZ's insurance specialist Rebecca Styles said people regularly got in touch with her organisation, expressing concerns about their premiums rising, and wondering how to keep their cover.
"As more people cancel - particularly younger people - it's likely this puts more pressure on the public health system, and yes, it also means insurers are earning less and/or the risk profile of those insured goes up, which means they may increase premiums for those still insured to make up for the shortfall."
Southern Cross noted in its latest annual report that it was experiencing a high volume of claims as customers used their health insurance "more than ever before".
"This coincided with ongoing challenges within the public health system, including the accessibility of elective surgery."
Southern Cross chief customer officer Regan Savage said there were several factors that drove premium increases.
He said medical inflation was one part of it, and this would usually increase at a faster pace than general consumer inflation. "The medical industry is, as you'd be aware, fueled by new technology and private equity capital and all sorts of things, which means that it becomes an increasingly expensive and very high tech business, which pushes up the cost."
People would also pay higher premiums as they got older and their risk of claiming increased.
That increased by a small amount every year, he said.
"And then when we get to an older age band, then we rate that whole group of people together. I don't want to go into the exact age cutoff we use because that's getting into the realm of commercial sensitivity. But generally it goes up a little bit for every year that we age and we rate everyone in that age that year. And then it gets to a certain point in older years where we stop moving every year and we just rate everyone above that age in one group."
He said one question he heard often was from people who had not claimed for years.
"[They say] 'now I am claiming, but you're putting the price up right when I need it the most'.
"And I think what's really important to explain to people is that an insurance book is an entire risk pool. And if we don't price it cheaper at the younger end, when people are less likely to need it, then they won't come into the market and the insurers won't have the customers and the customers won't have the insurance when they do get older and need it."
Tim Fairbrother, a financial adviser at Rival Wealth, said health insurance premiums would usually begin to rise in someone's 40s and 50s as chronic conditions and elective procedures become more common.
"From age 60 onward, premiums increase sharply because of higher claim volumes and the cost of treatments like joint replacements, cardiac procedures, and cancer care.
"Costs for a typical 70-year-old at present range from $800 to $1400 per month depending on the type of product and excess that are applied, which also needs to be taken in the context that this person shouldn't need any income protection or life insurance."
People who took out cover young would have protection for conditions they developed through their lives, Savage said.
"We want them to be able to hold on to that cover for as long as possible. And that's where looking at your plan and looking at your excess comes into the mix.
"It is true that you pay more as you get older, but if it had never been an affordable, reasonable product for you when you were young and relatively healthier, you probably never would have taken it out in the first place. So we believe that the age weighting is a more equitable way of managing the pricing."
He said people who were struggling with premiums could talk to their insurer or adviser about what changes could be made.
"We have a range of products that people can consider where you can have a full comprehensive suite of benefits that includes all your surgical, but also things like vision and dental.
"Or you can dial it back to a much more surgically focused plan and potentially that might have co-pay on it. So you would pay a percentage of all of your bills … or an excess."
He said he had seen more people adding excesses to their policies, which could reduce their premiums.
Savage said most people who had been with Southern Cross a long time would end up claiming what they had paid in premiums over a couple of decades.
The Financial Services Council said 1.35 million New Zealanders have health insurance, and cover increased 3.3 percent between March 2024 and 2025.
It said removing fringe benefit tax for employers who offered it to staff would help improve affordability.
Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make, spend and invest money.
