Insurers battle over healthy youngsters
A medical insurance battle is unfolding with the major players aiming to win the hearts, minds, and wallets, of younger people.
Health insurer giant Southern Cross has responded to Australian-owned nib's launch of cut-price medical insurance for the young, with the launch of a dollar-a-day policy.
The policies are not traditional health insurance which people buy to cover the "major medical" bills of private surgery and hospital stays which allow them to avoid a long wait in the state health system.
Instead these budget policies allow people to claim back for comparatively minor things like GP consultations, and the cost of prescription glasses, the kinds of costs most people just take in their stride.
Nib, an Australian listed private company, and Southern Cross, a not-for-profit owned by its members have designed the policies to be attractive to young people who do not see traditional health insurance as worth the money, but many of whom, the insurers' research shows, would pay for a policy on which they are likely to be able to make claims.
The insurers argue the policies will encourage the carefree young to adopt good habits of regular dentist check-ups and GP consultations and the policies represent a foot in the door to build their brands with the "major medical" policyholders of the future.
So which company represents better value in this area - nib or Southern Cross? With insurance, the devil is in the detail, and comparing insurance contracts can be notoriously hard, which is why many seek professional advice.
That's not possible for such cheap policies which are not costly enough for an insurer to pay commission to an adviser.
The Southern Cross and two basic nib policies are very similar, and due to the limited amount of cover, the offers are relatively easily compared (see table). Care must be taken to note the "stand down" periods which a person must own a policy for before they can make a claim.
For example, a new policyholder does not qualify for a dental claim under Southern Cross for three months, while under the nib Basic cover the stand down period is two months. On the nib Mid Everyday Cover, which has more dental coverage, the stand down period is a year.
Care must also be taken over exactly what is covered. For example, dental care on both the nib Basic and Southern Cross Health Essentials policies do not include wisdom teeth extractions.
The cheapest of the three policies - the nib Basic policy, which can be thought of as a GP, basic dental care and glasses/contact lens plan (with a small physiotherapy benefit) provides the lowest possible claims potential of the three policies.
At the cost of $4.95 a week (64 cents a day), it is cheap, but when a treatment is covered, there is a cost gap as nib will pay only 60 per cent of the treatment cost, up to the maximum allowable claims in a single year.
Nib's more costly Mid Everyday policy at $9.45 a week ($1.36 a day) provides higher maximums for dental coverage - up to $750 and allows claims for root canals and wisdom teeth, as well as cover for minor GP surgeries. It also pays up to $5000 for specialist consultations and diagnostics.
While CAT scans for under 30-year-olds are rare, they can easily cost $1000 and a specialist consultation can cost upwards of $200.
If surgery is needed, the policy does not cover the cost of a surgeon, anaesthetist, operating theatre, or hospital stay. The policyholder would have to wait for a public hospital to operate.
Southern Cross's Health Essentials policy sits between the two nib products. It is more costly than the Basic Everyday policy because it provides slightly more cover, and pays out 75 per cent of the cost of claims up to the policy maximums.
And it is cheaper than the Mid Everyday policy because it provides lower GP and dental maximums. It does cover eye check-ups, and pays out up to $250 towards the cost of contact lenses or glasses, compared to a maximum of $350 on the more expensive nib policy.
Most importantly, people buying these policies must understand the risks they are choosing not to cover.
- © Fairfax NZ News
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