Elderly in call for tax relief on premiums

Photo: Greg Newington

Walking away: The elderly have given up on expensive health cover.

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Elderly people and health insurers are urging the government to resurrect its pre-election proposal to provide tax relief on health insurance premiums for the over 65s – and minister Tony Ryall has raised hopes it could happen.

Inflation, particularly associated with medical technology and specialist doctors' pay, has seen premiums skyrocket, and the rises are increasingly forcing the elderly to ditch their insurance.

Before taking office the National Party flagged the idea of tax relief on health insurance premiums, only to ditch it amid the economic crisis, but a spokesman for Ryall told the Sunday Star-Times it was back on the agenda.

One elderly North Shore couple (who asked not to be named) said they were struggling to keep up their health insurance with Southern Cross despite cashing up part of their dwindling retirement nest egg each year to pay for it. The rises in their premiums have outstripped inflation.

In 1994, the man, then 64, and his wife, a year younger, paid premiums of $1420 (rounded to the nearest $10) for comprehensive cover. By 1996, they were paying $2380.

The next year it spiked to $2980, before tracking up in a series of dramatic leaps to just over $7200 in 2003.

A further rise to $7310 in 2004 was the last straw and the couple decided to downgrade their policy, cutting the cost back to $4040. But the premium inflation continued to kick in – rising to $4230 in 2006, and $4890 in 2007.

This year, they expect to pay around the same, although Southern Cross has been forecasting an increase as the growth in the cost of claims policyholders made in the past year outstripped the total premiums the insurer gathered.

The man said he felt trapped, knowing that as time goes on the likelihood of a medical emergency grows: "If I didn't have it, I would lose some peace of mind. I'm a cautious man." He said he had taken out health insurance in the 1950s on the understanding that he was paying more when young so his premiums would be manageable when he was older.

Had he known what he knew now, he said, he'd have simply put the money spent on premiums into a bank account to pay for health costs in retirement, or at least used it to help pay for premiums on a policy taken out to cover his later years.

Chief executive Ian McPherson said: "Unfortunately rising claims costs, and hence premium increases, have tended to be most pronounced for older members, who place heavy reliance on their insurance cover to access treatment that will help keep them as fit and active as possible.

"In the year just gone, 32% of all members aged 65 years or older made a claim for an elective surgical procedure. Any premium relief for members in the 65 and older age bracket would be a cause for celebration.

"Sadly, with the deteriorating state of the economy, the rebate did not become part of the National Party's election promises," he said.

David Drillion of Sovereign, the third largest provider of health insurance, said the cost crunch often came earlier than 65.

Often people felt it around the age of 55, when they passed their peak earning capacity, Drillion said.

Roger Styles, chief executive of the Health Funds Association, which represents health insurers such as Southern Cross, Sovereign and Tower, said it would also like to see the government remove company fringe benefit tax (FBT) from health insurance premiums paid by employers and also require immigrants to own health insurance.

When FBT on premiums was introduced in 1985, nearly 50% of New Zealanders had health insurance, said Stiles. That's fallen to around 33%, but if the 50% number could be hit again, there'd be an extra 760,00 people with health insurance.

The association is lobbying for the government to have Treasury do the numbers on its proposals.