OPINION: We know New Zealand has an under-insurance issue, especially when it comes to health insurance.
For many people, it’s essential. For others, it’s not a priority, rather a discretionary spend, because by and large we have a great public health system and a well-funded ACC system paid for by our taxes. So why pay twice?
But it’s a fact of life that if you need elective surgery you may be forced to wait for some time on the waiting list at your local hospital, and that’s when health insurance comes into its own by delivering its main benefit: allowing you to have quick access to private facilities.
With that comes greater peace of mind, knowing things are happening fast. Depending on the illness that’s a very big bonus.
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It also allows you to choose your own specialist and hospital from those who participate with your insurer.
Of course, this cover comes at a cost, so if you’re considering taking it out, you need to balance the cost against the benefit, and how that fits into your overall financial objectives. It’s essential you do careful research beforehand on the type of cover you need and its cost.
This will differ from person to person and family to family.
If you’re the sole income earner in your household and become sick, you may need to be able to access health care that enables you to return to work much earlier than if you otherwise would on a public waiting list.
Health insurance is also about ages and stages of life and your financial capacity to have a reduced income due to not being able to work or the ability to self-fund your health needs are all key considerations.
If you’re young with no pre-existing medical conditions, that could be the ideal time to take out health insurance, because if you then develop a medical condition, it will not be excluded in the future.
If you’re fortunate to work for a company that subsidises health insurance for employees, then the choice is not so difficult. Such schemes can also cover family members and often can be put in place without a health assessment.
If, on the other hand, you’re older and on a fixed income, and premiums are going up, you may consider the access to the private health system is not worth the cost and choose to self-insure.
Medical insurance policies fall into two basic types: comprehensive and hospital-only/elective surgery.
Comprehensive cover is in addition to surgical treatment and may pay for day-to-day medical treatment, such as GP visits, dental care, optical care, physiotherapy, radiology and specialists.
Some policies cover regular check-ups and preventative health care. These types of policies are generally more expensive, and there is now a general trend towards “hospital admissions and operations” policies which offer modular add-on’s such as specialists and diagnostic benefits.
Policies can also provide cover on either a per-year or a per-operation basis, and all have maximums and limits, so it’s important to find the right solution to meet your needs and budget.
What costs are covered and how they are calculated varies, but there are two basic ways: first, there’s a list of available treatments and procedures, with maximum dollar values, Secondly, there’s a maximum amount the plan will cover per year.
This is where you need to look at the detail. It’s essential to understand a policy’s definition of costs. Some use scheduled costs instead of the actual cost of the surgery, which can result in you having to pay the difference. Also, be aware that some policies pay a percentage of the amount claimed, while others charge a set excess (which you can set) and then pay the full amount (within the maximums). In these cases, it may mean you have to have some money set aside or have access to funds to meet the differences.
Different insurers offer different levels of cover within these. Some offer a discount if you commit to maintaining a healthy lifestyle. That may include not smoking, low alcohol intake, and routine fitness. Other insurers may offer a discount if your claims are low.
Most policies exclude claims on pre-existing medical conditions, which you will be asked to disclose when taking out the policy. Health insurance is designed to cover health conditions that arise after a policy has commenced, so pre-existing conditions are generally excluded from cover. Insurers may impose a waiting period before coverage starts or charge higher premiums to cover them.
Reviewing health insurance is often about taking stock and thinking what happens if I stop taking it and how would I feel? Could I self-insure? Could I rely on my financial position to pay for the care I need when and where I need it, or should I continue to pay for health insurance? Or just rely on the public system?
I’ve been lucky enough to have health insurance my whole life – first on my parents’ policy when I was a teenager, then I transferred to my own policy, and now we have a family policy.
Also, I’ve been lucky to have had to use it only once for something minor – to have my gall bladder removed.
But what this insurance has done for me is provide peace of mind that if something big did go wrong I would be able to access the assistance I require quickly.
Like many people, though, I’ve treated it as a lock and leave. It shouldn’t be. I’m now looking at why my family has health insurance and the levels we need going forward. This should be part of your annual review of your financial health, wealth and wellbeing, too.
In the words of my financial adviser: what risk am I prepared to fund and what sort of peace of mind do I require?
Katrina Shanks is the chief executive of Financial Advice NZ.