Monthly paying disability payments. It can be great cover. It can also be a minefield. What is agreed value? What does indemnity mean? And why
HEALTH INSURANCE – WHY BOTHER?
The myth is that you don’t need health insurance because of ACC, or because of the NZ public health system. Other myths are that health insurance is a waste of money or that all insurance companies are the same.
This article will challenge those myths and will help you learn how to protect yourself from poor health treatment choices.
- ACC and the public health system: It is not an either-or choice
- Not all health insurers are the same
- The only two levers in your control to keep the cost of cover down
ACC And The Public Health System: It Is Not An Either-Or Choice
We are very fortunate in New Zealand to have both ACC and a very effective public health system, by comparison to many other OECD nations. That said, they are not to be viewed as the total solution for all of your health treatment needs.
Firstly, let’s keep this straightforward. ACC (Accident Compensation Corporation) is for accidents. If you need cancer surgery, ACC won’t help. Secondly, there are two types of basic care on the health system; elective and acute care.
The public system is great for acute care. Elective treatment is (loosely) having the choice of when treatment might happen. Acute is, for example, the ride in an ambulance; sudden and an emergency. The quality of elective care you may receive depends largely on where you live in NZ. You need ACC and you need the public system for acute care. Private health insurance covers elective conditions and treatment only.
The public health system is under stress. Over 4 million people trying to use the services designed for 3 million, among the heap of other challenges which the public health infrastructure faces. Read any news provider in any given week and you’ll find a story about treatment waiting times, certain treatments not covered (the non-PHARMAC drugs debate rages large), or overworked and stressed nurses and staff.
You cannot get the best treatment in the public system for certain types of illness and conditions. Cancer is the obvious discussion point because it affects so many New Zealanders. The public system cannot provide the best drugs, which are too expensive and need to be bought outside of the PHARMAC funding. Oh, and don’t forget the cost of actually administering the drugs – that is another issue!
If you are concerned about the public health system, more importantly, if you are concerned if they can meet your family’s needs when they need it, you need health insurance.
If you want the best cancer treatment available in New Zealand, you need private health cover. If you have seen your friends or extended family wait for months, just to get to the next appointment in the treatment process, while they suffer more and get worse, you need medical insurance.
To get the best cover for non-PHARMAC drugs (not just for cancer), so that you improve your chance of survival, you need health insurance. On balance, private medical cover gives you the best chance of recovery in the fastest time.
Not All Health Insurers Are The Same
Some health providers leave their members out of pocket for huge expenses. Traditionally what has been known as “80% Plans” or ‘co-share’ arrangements. Or, there are “Benefit Maximums” which mean the insurer will in some cases pay below the actual costs of your treatment because they think those costs are unreasonable. Maybe they are, but if you are the one paying for cover, why should you be penalised? For example, if your surgery costs $60,000 an insurer may only pay $40,000 as that is the benefit maximum. That means, you the member, need to stump up $20,000 yourself. There are products on the market where your entire treatment costs are covered.
Many health insurance providers will tell you where to get your treatment too, even if they are not the best available. If you are paying a premium for a premium service, wouldn’t you want a choice? There are products on the market where you have that choice.
Non-PHARMAC cover is another minefield. Consider this: a particular cancer drug may cost $150,000 for a course of treatment, yet the health insurers best flagship plan only covers you to $20,000. Another pitfall is in the fine print where the insurer may only provide non-PHARMAC drugs while you are in the hospital. Or, they may only provide non-PHARMAC drugs for cancer care (and not the myriad of other possible conditions). None of this is bad in itself, but you need to know what you are buying. The marketing hype and glossy web pages don’t tell you.
Non-PHARMAC cover could be just that – no strings!
The Only Two Levers In Your Control To Keep The Cost Of Cover Down
Before we get to those two, let’s talk about how the premium cost is put together (from the members perspective). There are three components; age of member, CPI/inflation rate and the costs of the product. We have no control over those three aspects.
What can be done, is to choose the type of cover carefully and to use an excess if you are in a position to do so.
One of my team ran a quote for someone this week; The client wanted a dental option, which is fine except that the additional premium costs for this person were ~$600 a year. The maximum benefit available to the member (assuming they claimed all the dental) was ~$550. This is what we call “dollar-swapping”. There is no point.
In my opinion, you are better off covering for the big-ticket things that ordinarily, you cannot afford. Many people cannot cover a $40,000 operation, but they can cover $40 for a GP (for example). Don’t insure for the things you can afford, insure for the events you cannot afford. That is the point of insurance.
As for an excess, be sure that if you need to call on the money quickly, you can get it. There is no point in having a $6,000 excess for surgery, if you cannot get hold of $6,000 when you need to. Yes, the monthly insurance premium will be significantly lower, but your financial position may not sustain that level of excess.
Get advice from a professional insurance adviser. Don’t listen to Uncle Ray who thinks he knows something. Speak with a professional. We are mandated by law to follow an advice process that is stricter than your accountant’s or lawyers. Yes, you read that correctly, that is true. Your adviser will steer you in the right direction. If they can’t or won’t, talk to me. I’ll match your circumstance to your budget.
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