Southern Cross calls for subsidies

Southern Cross executives and board members. Photo / Sarah Ivey

Healthcare insurer Southern Cross is calling for Government subsidies for the sector because a rapidly ageing population is threatening the system.

Ian McPherson, group chief executive, told almost 500 society members in Auckland yesterday that state handouts might be needed to avoid a crisis.

"For private healthcare to remain accessible to a wide range of New Zealanders, we strongly believe that some form of Government intervention will very likely be necessary.

"This might come in the form of tax incentives to take up health insurance or by regulating the industry in order to change how your premiums are calculated.

"Another option might be a KiwiSaver style health savings fund where the Government makes contributions," he told the annual meeting where many older policy holders spoke out against unaffordable premiums.

McPherson said private health insurance was declining as financially hard-up New Zealanders dropped their policies.

"The difficult economic conditions of recent years have already had an impact. The number of New Zealanders with health insurance cover decreased by nearly 25,000 or 1.8 per cent in the year to June," he said.

Southern Cross has 61 per cent of the market and lost 6500 members.

He called for a fair balance between private and public funded healthcare and said $4 million was recovered from the state's Accident Compensation Corporation in the last year and that the sector's funding was of national importance.

"How New Zealand funds its healthcare is going to be one of the defining issues of the next decade," McPherson said.

The society received $662.5 million in premiums, had $577.1 million claims and accumulated reserves of $334.4 million in the year to June.

The outcome of resolutions will not be known until later today or tomorrow.

Bruce Sheppard, an accountant and shareholder advocate, grilled chairman Graeme Hawkins about the amount of financial headroom the society had but Hawkins cited the effects of Christchurch's earthquake as an example of how an insurer needed to be prudent. He said reserves represented just seven months of claims and the board did not intend to grow that fund yet needed to balance income against costs.

Sheppard put forward a motion to reward people aged 65-plus even as he said the society was unfriendly, criticised the society's advertising budget, called for reduced charges for long-standing members and encouraged others to let the board know they were unhappy with pricing policies.

The society holds "hundreds of millions of dollars of undistributed profit [reserves] while its older members struggle to make their payments or reduce their level of cover," Sheppard said.

But the board accused Sheppard of demanding younger people pay higher premiums to subsidise the elderly.

New insurers were competing aggressively and successfully for younger people, he was told.

Members heard how the society was trying to keep costs down. Peter Tynan, society chief executive, said $5.7 million had been saved on angioplasty procedures since 2008 after the society introduced its affiliated provider relationship in 1997.

"In the last two years we have stepped up our efforts to contract with a greater range of healthcare providers. We have now signed more than 600 specialists and surgeons nationwide," Tynan said, telling how some procedures were covered only if members visited affiliated providers.

He cited colonoscopy, gastroscopy and cataract extraction.

SOUTHERN CROSS

* NZ's biggest private health insurer.
* Has 830,000 members.
* Processes 580,000 claims annually.
* Funds 158,000 elective surgeries annually.
* AGM voting results out today or tomorrow.
Source: Southern Cross