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There is a common belief that the expansion of private health insurance is a threat to Aotearoa New Zealand’s public health system; the more it expands the more the system is threatened. While I can understand why people believe this, it isn’t a belief that I hold. private car and house insurance. While not compulsory I choose to have them because I consider them to be necessities. However, I chose not to have private health insurance because I didn’t consider it to be a Influence of parental wisdom influenced by my parents who chose to put some money away just in case they wanted to use the private system instead of paying insurance premiums. It proved to be the right prudent decision for them. It also led me to believe, back in the 1990s, that the biggest threat to private health insurers was not public hospitals providing planned non-acute care. Instead I believed that ‘pay-as-you-go’ was their biggest threat. I continued to hold this view for some years after that tumultuous decade. But much has changed in the public health system; initially for the better but in the past decade plus, for the worse. This changing context required my reconsideration. Evolving reconsideration belief on what was the greatest threat to private health insurers required reconsideration. This first became evident in the 1990s when the then National-led government was hell-bent on applying neoliberalism in the health This ideology included basing the health system (both public and private) on so-called market forces. That is, an ‘internal market’ based on business competition between public hospitals and with private providers was introduced. Public hospitals were negatively affected during this period by both underfunding and an ideology intended to favour private healthcare provision and insurers. Like many theory based decisions, there were unintended consequences one of which directly affected private health insurers. Previously the norm was for many of the insured not to use their insurance for private hospital care. With proportionately greater planned non-acute care being undertaken in public hospitals, those who opted to use private hospitals did so more for the ‘hotel-type’ benefits. This included greater privacy and food. However, with greater financial constraints on public hospitals, by the mid-1990s more of the insured were using their insurance to access private hospitals. Increasing claims quickly compelled insurers to increase their premiums in order to ensure financial viability and profitability. The pressure to increase premiums started to abate when the government resolved to increase funding specifically for public hospital planned treatment in the late 1990s followed by increased relative funding under its Labour-led In September 2023 the Association of Salaried Medical Specialists (ASMS) produced a publication called Creeping Privatisation that included observations on private health insurance: Creeping Privatisation. Among the observations was that the number of adults with private health insurance had increased by 13.5% from 2014 to 2020. This increase was similar to the rate of adult population growth over the same ASMS suggested that this might mean that the real growth in the use of private hospitals (and specialist clinics) was because of an increase in insured people needing treatment and an increase in self-funded care (that is, like my parents). This observation is consistent with but adds to my earlier above-mentioned conclusion made over two decades earlier when I was ASMS Executive What further adds to the analysis are two recent events involving health insurers – calls for tax breaks and deficits. Health insurers call for tax The first event was covered Radio New Zealand on 15 July by its money correspondent Susan Edmonds. She reported the call from health insurers for a fringe benefit tax break: Health insurance crunch prompts calls for tax break. was because it had become clear that health insurance was becoming too expensive for some New Zealanders. Financial Services Council, which represents life and health insurers, had conducted research revealing that a third of people with health insurance have downgraded or reduced their cover in the past year. Around one-third of New Zealanders had health insurance. Highlighting the impact of premium increases was the fact that another 27% said they previously had it but no longer did. Health insurance premiums increase annually in line with insurers’ claims expenses, inflation and the cost of doing business. But they also rose as the insured aged. Southern Cross, the largest health insurer, revealed that up to March 2025 its annual premium increase was around 16.5%. The cost of claims was rising faster than premiums. However, this 16.5% increased to 20% when ageing was included. In this insurer’s words. “One of the things about health insurance is your risk increases with every year you This tax break call from health insurers was also covered the same day by NZ Herald business editor Jenée Tibshraeny. Her similar coverage also included Revenue Minister Simon Watts disinterest in the call (paywalled): Political disinterest in tax break call. Southern Cross reports financial deficit The second event involved New Zealand’s biggest health insurer, Southern Cross Health Society. In contrast with most of its competitors, rather than a shareholders-owned for-profit company, its legal status is a ‘friendly society’. societies are member-based legal entities registered under the Friendly Societies and Credit Unions Act 1982. They are formed to provide mutual benefits or for charitable purposes operating through voluntary subscriptions. for big differences in scale and type of health system, Southern Cross has some similarities with Kaiser Permanente in the United States. Neither is responsible to shareholders and both also own hospitals. But both need to be profitable to survive. Nevertheless, it does have to be financially sustainable. This has now come into question as reported by NZ Doctor journalist Stephen Forbes in a 22 October paywalled article: Record health insurer Forbes reported that the Society has just recorded a $51.8 million deficit after a 16% rise in claims for the financial year 1 July 2024-30 June 2025. drivers of increasing claims were knee and hip replacements and colonoscopies. Coupled with ageing insured people, it meant that claims were outstripping premiums. 2024-25 deficit was not a one-off. It followed a $16.5 million deficit in 2022-23 and an $88.2 million deficit in Southern Cross Health Society’s chief executive Nick Astwick tried to give this bad financial news a positive spin by anticipating a surplus in the current financial year. In his words: We expect the increase in demand for private healthcare to continue. The plans we have in place to meet this continued increase in demand, and associated claims cost escalation, are beginning to deliver results as intended. However, the Society’s annual report told a different narrative. It revealed a small membership decline over the previous year from 955,301 to 951,808. Making sense of it My 1990s view that the biggest threat to private health insurers was ‘pay-as-you-go’ patients rather than public hospitals squeezing them out of the market by providing more planned non-acute care was not too bad. But it was deficient including insufficiently nuanced. the 1990s the public health system was in a dire state due to National’s flawed ideological market forces ideology. However, today the state is even direr. This is due to the compounding combination of the health system being under the ‘light austerity’ under National’s watch (2008-17), Labour’s elitist and linear thinking watch (2017-23), and now National’s hardline, soundbite based and private health provision orientation watch. to all three ‘political watches’ of the public health system was continuous, give or take the odd blip, neglect of health professional workforce capacity. Over time this extended to cover the medical, nursing and allied professional, scientific and technical workforces. Compared with today, in the 1990s when I first began to form views on private health insurance the following factors applied: system-wide workforce shortages didn’t exist;public hospitals were relativity better resourced to undertake planned (elective) non-acute surgery and other treatments; andthe rate of acute (unplanned and undeferrable) hospital demand was less than the rate of population growth and consequentially not causing hospital inpatient ‘bed-blocking’. Revised analysis: the greatest threat to private health insurers to my revised analysis of private health insurance. Since the time when my parents opted instead for ‘pay-as-you- go’ it has migrated from an option to a necessity for those who can afford it (inaccessible for those who This is because of the rundown of public hospitals. While, on the one hand, this has increased the demand for private health insurance, on the other hand (and to a greater extent) it has threatened the financial viability of private health ‘Pay-as-you-go’ remains a threat to private health insurance but the greater threat is now the rundown of public hospitals due to the political leaderships of successive governments. Private health insurance is not a threat to the public health system. Rather, the former is a symptom of the latter’s crisis. I think my parents would have agreed with © Scoop Media
