Health insurance is a big carrot for employees, says the Southern Cross Health Society. Picture/file
New Zealand’s largest health insurer says it has seen a 170% increase in corporate mergers over the past year, reflecting the tight labor market and pressure on the public healthcare system.
Cross says the “psychological” impact of the Covid-19 pandemic is another factor fueling general membership growth, with companies in particular keen to offer subsidized bonuses as an incentive to recruit and retain staff. personnel, and to provide employees with faster access to medical and return-to-work procedures.
Southern Cross Health Society chief executive Nick Astwick said by the end of May, the nonprofit’s earnings this fiscal year had boosted membership to 939,000. Of these, 3,500 were businesses and other organizations covering a total of 503,000 employees, meaning that businesses accounted for about half of the total membership.
In fiscal 2022, the company reported a net increase of 20,000 members, which at the time brought its membership to a 30-year high of 908,000.
The company has 62% of the health insurance market, but says it funds 74% of all private health insurance claims in New Zealand.
It handles 4 million health claims a year or 14,000 a day and partners with 2,500 healthcare providers, including specialists and its own Southern Cross Hospital Trust, to provide access to healthcare private.
Southern Cross’ shareholder is its collective membership, unlike for-profit insurers. But its main difference, says Astwick, is that it pays nearly 90c of every bonus dollar it receives, while its competitors pay 65c. That means last fiscal year it paid its healthcare partners $314 million more on premiums received than its competitors.
While the insurer has a positive story to tell about growing interest from the corporate sector, what happens to membership numbers in an economic crisis like today?
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And how does it respond to a common complaint from older members of an aging population that at an age when they most need access to medical care, they cannot afford it because premiums have become prohibitive ?
On the first question, Astwick says the “cautious” cost-cutting by Kiwis and companies is not fundamentally affecting the business at this point, but it is bracing for slower growth due to the economic environment.
“Many of our contacts [with members] is discussing their plans, if they are on the right can they consider excess [plans] or downgrade a plan.
As for the irony of loyal members whose price is out of coverage, Astwick offers startling data.
“When you look at the churn rate, how much do we lose each year and in which group, the only group close to 10% – that’s one in 10 members – is the 20-29 age group. They are who think they are bulletproof and [reckon] they do not require elective surgery.
“We lose one in 10 from the age of 80, and we only lose one in 20 in the 55-85 bracket, so the attrition is very low.
“The best way to keep premiums as low as possible is to get younger, healthier new members.”
Statistics confirm why premiums tend to skyrocket at the age when medical procedures are most needed.
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Astwick says people aged 65 and over make up about 12% of members and claim 33% of the total annual claim. In fiscal year 2022, this total claim was $1.08 billion – $1.35 billion was received in premiums.
Those over 65 claim three times the average because when they need treatment, “that’s the big deal,” he says.
“When we assess [premiums] we take each age group and look at the next few months and ask what they are likely to claim. We base our premium on that claim and a little for our overhead and a little for our services, but that’s it. There is no other price.
His recommendation for older members struggling with premium costs is to explore excess options with Southern Cross staff.
“You can have a $1,000 deductible, a $2,000 deductible, a $4,000 deductible. When you get a little older, your claim is going to be big. An excess [payment arrangement] $4,000 can cut a premium in half, so that’s pretty significant. Say you were to have a $25,000 surgery, you would pay the first $4,000 and that’s for the year. The excess really helps you stay in health insurance when it comes to the big stuff.
Astwick rates medical insurance affordability and strategies to achieve it as the number one challenge for company executives.
When asked if he thought health insurance should be compulsory for workers as is the case in some European countries, he answered a definite “no”.
“If you look around the world, the magic is in having a good public system and a good private system working together. No public system can do it all, and no private system can.
“The private system is complementary, not complementary, to the public system. We don’t do emergency, we don’t do deep chronic care.
“My view is that New Zealand really needs to think deeply about the two systems working together rather than competing. It is immature to say that the public system is public – it uses a lot of private care, general practitioners for example, and it uses private hospitals.
Restructuring the public health system is going to take a long time, says Astwick.
“It’s New Zealand’s biggest employer.
“There are fantastic people in this system who are under duress on the front line. The system must listen to the front line and react. It’s not easy, but we need it to get by.
A big gripe for member companies is having to pay an employee benefits tax (FBT) on top of their employee insurance co-funding, Astwick says.
“They are frustrated about it. This is a challenge we would like to see resolved…they feel they are being penalized by investing their hard earned money in insuring their staff to keep them out of the public system.
“It’s still a real problem.”
“We believe that if FBT were removed, many more New Zealand businesses would invest in health insurance. Many more people would be covered and there would be far fewer constraints on the public system when it comes to elective surgeries.
Benefits tax was introduced in the late 1980s and discussions with governments about an exemption were unsuccessful.
“But they are listening. There is a thaw there. It is now recognized that the private system working with the public system is a solution for the future. But it’s not a priority [for the Government].
“What people don’t remember is that Southern Cross membership is much more representative of New Zealand than it was perhaps at the time – 50-55% of our members are now paid by the companies.”
Meanwhile, with three in 10 New Zealanders holding health insurance, Astwick says the hunt is on for the fourth Kiwi in 10.
In December 2016, he says, 1.36 million New Zealanders had health insurance. Today it is around 1.51 million.
“We’re not trying to get more market share. It’s about growing the category in what we consider to be everyone’s collective interest.
“Everyone has access to the public system. Knee surgery or a pacemaker can be done in both systems. Our promise is to try to secure access for people when they need it as quickly as possible and get employees back to work as quickly as possible.
“We need to do a better job, I think, of raising awareness about the health proposition, better job of affordability. Ultimately, the secret of the fourth New Zealander is to keep our members longer, hence our focus on affordability.
Andrea Fox joined the Herald as a senior business journalist six years ago and specializes in writing about the dairy industry, agribusiness, export and logistics sector and supply chains. supply.