Understanding health insurance options and what’s important helps you get cost-effective cover that works in conjunction with New Zealand’s very good public health system.
Health is one of those things easily taken for granted, when you are well of course. There’s a saying by Thomas Fuller – ‘Health is not valued till sickness comes.’ And the person who goes by the name of Anonymous (yes, that famous guy/gal!) and churns out expressions has said ‘he who enjoys good health is rich, though he knows it not’ and ‘the greatest wealth is health’. That Anonymous is pretty wise because when your health turns to custard you realise just how valuable it is. And you may then feel relief that we live in New Zealand which has free hospital treatment.
However, it’s not that simple and you won’t necessarily get treatment when you want it or when you’d benefit from it the most. Our hospital system is pretty clogged up, so if you don’t want to play a waiting game health insurance is very useful. It also gives you greater control about which doctor takes care of you, which is particularly reassuring if you know that someone is going to be cutting you open. Ouch.
You can choose someone with a great reputation who will take care of you from start to finish, rather than risk having someone relatively inexperienced taking care of you at the public hospital. Of course, there are great doctors at the public hospital but they are not necessarily going to be treating you.
So there are lots of good reasons to get health insurance but it costs money and can be tricky too. Here are some of the most common mistakes we make when trying to get our health insurance sorted.
Mistake # 1. Cancelling the policy
Many of the advisers who completed our survey noted that they regularly encounter clients who cancel their policies for affordability reasons. However, what many clients don’t understand is that there are often ways to reduce the cost while retaining a good foundational health insurance that covers expensive elective surgery, specialists and tests. Often insurance costs can be cut by increasing the excess (the amount that you have to pay out when you get treatment and the insurance company pays the rest). For example, excess could be $500. If you claimed on your insurance for surgery that cost $15,000, you are still paying little in the big scheme of things if you have to pay $500 of that $15,000 fee. However, at the same time your regular insurance payments are less because you have a fairly large excess, making it more affordable. Alternatively, your insurance policy could be restructured. For example it could be changed to covering major medical events only (in particular surgery).
Mistake # 2. Buying Comprehensive Cover
A number of advisers were surprised by how many people buy relatively expensive comprehensive cover including GP visits and dental and optician allowances. These allowances (and administration costs) are built into your regular insurance payments, making them more expensive. So, for example, if you have a $400 dental allowance as part of your cover, it is assumed that this will be paid out (most people visit the dentist two or three times a year) so your premium cost will reflect this. But you may be better off just paying as you go, as you may go to the dentist just once.
Included GP visits may be costing you too much in insurance too. Insurance companies increase premiums to cover the claims of others who visit their GP often. So, unless you are a regular user of GP services, it is probably best not to include GP visits as part of your cover.
Advisers say that insurance should be about management for risks that have a significant financial impact, such as surgery, and not for everyday health costs. It should also not be seen as a savings programme – you may end up wasting lots of your money because you don’t get it back in cash form.
Mistake # 3. Not insuring the kids
This is an interesting area and is subject to some debate – why would you insure the kids when public health treatment is free? However, if you have private health cover for yourself and your spouse/partner, then many of the same reasons for taking insurance cover on yourself also apply to taking it out for your children. If specialist treatment would help your kids in the event they needed it, then health insurance could help you avoid long waiting lists for treatment or appointments.
There are also two other not so obvious benefits for taking out health cover on your kids. Firstly, if you insure them while still in Mummy’s tummy (or for some insurers within three months of birth) they will be insured for congenital conditions not identified prior to birth. Secondly, once they reach adulthood, your children will have pre-existing conditions covered when they convert to their own policies (assuming that those pre-existing conditions were covered by your policy).
You will need to check the specifics of your particular policy to determine whether this applies for your cover. Sometimes adding a child is free or cheap, so it is almost always recommended by advisers.
Mistake # 4. Not understanding the role of private health cover in a publicly funded health system.
Despite many complaints and some obvious drawbacks (dental costs aren’t covered for example) our public health system in New Zealand is one of the world’s best. However, it’s not perfect and treatment options are often limited or patients end up on long waiting lists.
One of the key benefits of private health cover is that it avoids these delays, which means your quality of life is improved much faster. “It’s so disheartening to tell someone that on the one hand they would benefit from surgery but on the other hand they are not bad enough to be funded in the public sector.” (Source: http://www.stuff.co.nz/the-press/news/9353902/Surgery-wait-list-pain-criteria-merciless)
Mistake # 5. Managing excess
This ‘mistake’ is related to cancelling the policy (1, above) but warrants it’s own place on our list due to the number of advisers who mentioned it. Most policies contain provision for an excess being payable by the client in the event of a claim. This can be anywhere from $100 to $2,500 depending on the policy. The key principle is to keep premiums down by increasing your excess to a level which you can afford without being significantly disadvantaged financially if you have to make a claim.
A number of the advisers who responded to our survey noted that many clients don’t understand how excess works and how best to use it to make premiums more affordable. Many older clients who are concerned about the increasing cost of private health cover could keep cover for major procedures but have a high excess of about $2000 so they pay for the less expensive health treatment. Overall they would be better off, but still manage to go into the private health system if they needed to because of their insurance.
Private health insurance in New Zealand is often treated as an ‘optional extra’ due to the quality of our public health system. However, having some health cover in place is a good option if you can afford it because:
You can get access to medical and surgical treatment when it’s needed rather than sitting on a waiting list and having your quality of life severely compromised.
Even if your condition would benefit from medical or surgical procedures these may not be available under the public health system (your particular condition may not meet the threshold for treatment). In most cases though, private health cover would pay.
Finally, even with health insurance premiums going up as we get older, cover can still be possible with controlled costs through smart management of the excess. Alternatively, the policy can be restructured to make it more affordable.
As our good friend Anonymous would say, “don’t look back, you’re not going that way”. You’re going forward, so think about the future and what you need out of health insurance. And if you want some help putting it all together, we recommend getting an independent adviser to assist.
In New Zealand having health insurance is often considered an optional extra. Our public system is good. However, health insurance gives you options at a time when the health may not and when you most need it.
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