Is it still worth having health insurance?

What happened

With health insurance premiums up almost 75 percent in the past five years, New Zealanders are reconsidering whether private cover makes financial sense. The question surfaced when celebrity chef Simon Gault said Southern Cross declined to cover the more effective Mohs surgery for his skin cancer, offering only standard excision cover instead. Southern Cross tightened its criteria for Mohs surgery in December.

Financial advisers split on the trade-off. Russell Hutchinson of Chatswood Consulting says the case for and against private cover is defensible either way, but catastrophic risks—infrequent, high-cost events—are where insurance protects best. Jon-Paul Hale of Willowgrove Consulting notes that a recent early-stage breast cancer claim reached $265,000 in 12 months; the average person paying premiums from age 20 to 70 spends about $230,000 over a lifetime, mostly after 55. Self-funding that sum is unmanageable for most people.

As premiums have risen sharply in recent years, Hale suggests the age at which people should reassess whether to keep specialist and test cover has dropped from 65 to 55. At 55, a couple might spend $250 a month on that cover alone, yet many policies cap those benefits at $5,000 to $10,000. Taking a higher excess on premiums can reduce costs, though advisers recommend professional guidance before dropping cover.

Key facts

• Health insurance premiums up almost 75% in the past five years
• Average person pays about $230,000 in premiums from age 20 to 70
• One recent early-stage breast cancer claim reached $265,000 in 12 months
• Couple aged 55 spends about $250 a month on specialists and tests cover
• Southern Cross tightened Mohs surgery criteria in December

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