What's happening with premiums?

Our members are our priority

Southern Cross Health Society is a not-for-profit organisation, that is working to protect the health and wellbeing of over 840,000 members. We aim to give our members the best-possible value for their money through the peace of mind of health insurance and other special membership benefits. We need to ensure that our premium income covers the cost of health insurance claims, savings for future claims and administration. It’s a balancing act that we’ve been managing successfully for nearly 50 years.

Money paid out vs money received

Southern Cross has reimbursed members an average of 88 cents in claims for every dollar paid in premiums on average for the last five years. Because of rising claims costs, the average amount reimbursed to members in the year to 30 June 2009 was over 96 cents for every dollar paid in premiums.

This claims reimbursement level compares very favourably with our competitors and represents tremendous value for Southern Cross members. But it also reflects a trend of rising healthcare costs, which ultimately has an effect on health insurance premiums. Southern Cross is not alone in facing the challenge of funding health services on behalf of New Zealanders, as demonstrated by recent statements and reforms from ACC and the Ministry of Health. However, we remain focused on providing affordable health insurance options for as many New Zealanders as possible.

Click on the topics below to read more about premiums.

New Zealand’s need for health insurance ►
Reviewing your premium ►
What we’re doing to keep private healthcare affordable ►
How you can make a difference ►
How to reduce your premiums ►
Premiums for members turning 65 ►
The low claims reward ►

New Zealand’s need for health insurance

Research tells us there are two key reasons why New Zealanders choose to have health insurance with Southern Cross: They want to avoid public hospital waiting lists to get treatment quickly; and they want to be able to afford private treatment when they need it.

Cardiac bypass surgery in the private health system can cost $30,000-$40,000, angioplasty $13,000-$20,000 and knee or hip replacements $15,000-$22,000. Even removal of a cancerous skin lesion could make a dent in the family budget of up to $3,000, according to Health Funds Association estimates at February 2008.

The rationale for health insurance through a not-for-profit organisation is a particularly attractive one. Our focus is our members wellbeing, not to generate a profit for shareholders. Some members end up claiming more, while others claim less, but all have the peace of mind of knowing they won’t need to wait if a qualifying health issue arises.

We also work hard to cost-effectively add value to our health insurance service through initiatives like our Member programme, which sources a wide range of health-related offers and discounts for Southern Cross members, including Alive magazine – all to help manage your health and wellbeing.

A further advantage for Southern Cross members is the return achieved on its $400m investment portfolio of bonds, local body stock and bank deposits. While these returns fluctuate from year to year, they play an important role in our financial stability and moderating our members’ premiums.  We have maintained our Standard and Poors rating for eight consecutive years.

All these factors have contributed to Southern Cross’ steady membership growth in recent years. We now have more than 840,000 members.

(Return to top)

Reviewing your premium

Here are the factors we consider when reviewing premiums:

• Claims trends and premium base rates: We adjust premium base rates after we’ve analysed the cost of claims made by members. By looking at recent claims trends (based on members’ plan type and age groups), we can adjust base rates to reflect the anticipated level of claims in the coming year. 
• Ageing: It’s generally true that claiming levels increase with age. For example, in 2007 6% of members aged 21-25 made a surgical claim compared with 28% of members aged 65 or more. For this reason, the premium paid by a younger person will normally be lower than the rate paid by an older person on the same plan. Southern Cross assesses premiums based on one year age bands for members between 21 and 64 years old. This means that adult members will generally pay a slightly higher premium each year as they get older,  in addition to any base rate adjustment. 
• Rewards: Currently around 70% of our eligible adult members earn a low claims reward each year, which gives them  a 10% premium reduction. There’s more information about the low claims reward below. 
• Employer work scheme arrangements and reduced premiums: If you are a member of a work scheme, some of the factors mentioned above may not apply because of different premium arrangements that are agreed with your employer.

(Return to top)

What we’re doing to keep private healthcare affordable

For our members, Southern Cross works with healthcare providers to try to ensure private sector healthcare stays affordable for as many people as possible. Our initiatives include:

• Negotiating guaranteed rates through our expanding Affiliated Provider network of selected health service providers, surgeons and facilities. 
• Continuing to present a case to Government for some form of subsidy or rebate for older members with health insurance.
• Strongly opposing cost shifting from the public to the private sector, such as laboratory test fees. 
• Exploring whether some minor procedures could be performed by doctors rather than surgeons.
• Talking to medical providers about reasonable charges. 
• Looking at innovative product design such as Health Assist. 
• Regularly reviewing our plan benefits and the treatment options available in the market, to balance premium affordability with value.

(Return to top)

How you can make a difference

The actions of Southern Cross members can also help to keep the costs of private healthcare down. Here’s what you can do:

• Ask to be referred to a Southern Cross Affiliated Provider if you need surgery or high cost diagnostic services.
• Support our efforts for your behalf, such as making submissions when District Health Boards publicly consult on changes to public health services, e.g. laboratory test costs for private patients.
• Talk to your local MP about areas you think the Government could look at, such as subsidies or rebates for older people with health insurance and public health cost shifting.
• Be prepared to shop around for treatment.

(Return to top)

How to reduce your premiums

If you’d like to reduce your health insurance premiums, Southern Cross has a range of plan and payment options to suit most needs and budgets.

Generally speaking, the broader the range of healthcare services your plan covers, the higher your premiums. Most Southern Cross policies provide a level of cover for elective surgery, because this area of healthcare is typically the most expensive and prone to delays in the public health system. Some plans also provide a level of cover for medical hospitalisation, specialist consultations, diagnostic tests, day-to-day treatment (like doctor consultations and prescriptions),and optical and dental benefits. If it suits you to reduce or remove cover for some types of healthcare services (i.e. you pay for these services out of your own pocket rather than claiming them on your health insurance), you’ll see a corresponding premium reduction. Some plans also have excess options that can reduce premiums.

We also recommend that you consider paying your premiums by direct debit. This will provide a 2.5% discount on the premium you would otherwise pay.

You may also be able to lower your premiums through our low claims reward if you don’t claim over the low claims threshold.

Employer work schemes
If you belong to a work scheme, your options to change plan or payment method could be limited. Please call us on
0800 800 181 to talk about what you could do. 

(Return to top)

Premiums for members turning 65

The main reason health insurance premiums increase for members turning 65 years old is that members tend to claim more as they age.

The increase is also to do with the age bands that Southern Cross uses to calculate premiums. In simple terms, we look at the claims made by all members in a particular age group (or band), and calculate premiums to cover those claims costs. For adult members aged 21 to 64 years, we look at claims made by members in one year age bands. But at 65 years old, Southern Cross analyses claims and sets premiums in a band covering all members aged 65 and older.

This means there can be a significant increase when you turn 65, because your premium reflects the average claims costs for all members that are 65 and over. Once you reach the 65+ age group, there are no more yearly age bands. However, you will still be affected by changes in premium base rates for the 65+ age group at a yearly review. 

(Return to top)

The low claims reward

The low claims reward – a 10% premium reduction - is how we recognise and reward good health. It’s given to members who have stayed under their claims threshold for a period of two years. The reward applies for up to 12 months.

The policy premium chart that’s mailed to you at your yearly renewal shows the claims paid and claims threshold for each person covered by your policy. Remember that not qualifying for the reward simply indicates that you’ve had good value from your health insurance in terms of claims. More information about this reward.

Employer work schemes

If you belong to a subsidised work scheme, low claims rewards are handled differently. An equivalent discount has already been included in your premium rate.

Footnote:

The information above is general in nature, and provided to help members understand some of the factors that affect premiums. These factors can and do change from time to time. In particular, the rising cost of healthcare can be expected to impact on health insurance premiums in the future. While generally true for most members, the factors discussed above could apply differently in specific circumstances for some individual members or members of some employer work schemes.