Private health insurance needs shake up

MIKE YARDLEY
Last updated 05:00 27/05/2014

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OPINION: Ryman Healthcare is undoubtedly one of Christchurch's stellar business performers, with the company's after-tax profit soaring to $195 million.

The Christchurch-based retirement village powerhouse, which admirably pays its care staff more than the market average, has been spreading its wings beyond our shores, commencing a successful expansionary programme in Australia.

Wouldn't it be great if Ryman decided to diversify its interests and enter the private health insurance market? It has no such plans, but the company strikes me as just the kind of star performer which could really shake up the industry.

Recently, while discussing the state of private healthcare with members of a Christchurch Probus club, it was startling to discover how many seniors had been forced to cancel their insurance cover, because of the punitive premium costs in your golden years.

Many of these Probus folk had been life-long loyal customers of the likes of Southern Cross, yet when their clocks struck 60, their annual premiums took a stratospheric turn.

There appeared to be no financial recognition for their long-term loyalty, let alone any premium sweeteners for those who had kept great health and hadn't clocked up stonking costs for private care.

Private health providers, like Southern Cross, were recently challenged to rework their premiums, whereby younger members could "pay it forward", with higher premiums earlier in life, in exchange for guaranteed premium discounts later in life - when your insurance cover really counts.

Regrettably, Southern Cross scuppered the chance to be bold and big-minded. Perhaps a daring new player in the market would rock the status quo?

Meanwhile, the Government has missed a huge opportunity in Budget 2014 to show some vision about our future health needs and place the public health system on a stronger footing, by actively encouraging Kiwis to undertake private heath cover.

In the past 25 years, private health coverage rates have plummeted from just over 50 per cent of the population to now just 30 per cent. Much of that plunge can be blamed on previous governments scrapping the tax rebates on health insurance, plus the imposition of fringe benefits tax on workplace-based health insurance packages.

Perversely, New Zealand is the only country in the OECD that actually taxes contributions to private health insurance schemes.

In election year, scrapping the Fringe Benefits Tax and reinstating tax rebate sweeteners for private health cover would be a highly appealing, hugely welcome political policy. Such measures would help re-stimulate the uptake in private health insurance, which in turn will greatly help take the heat off the public health system, as the grey tsunami looms.

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Mike Yardley is a Christchurch broadcaster and commentator.

- The Press

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