The number of kiwis taking out private healthcare insurance has fallen to the lowest level in more than six years, keeping the level of cover below the OECD average, as a weak economy and rising general insurance costs dent demand.

Health insurance policies fell by 25,700, or 1.9 per cent, to 1.35 million in the 12 months to March, according to data from the Health Funds Association, the lobby group for private providers.

That equates to about 30 per cent of the population having health insurance, down from about 34 percent a decade ago.

The decline has sapped earnings for private health companies including Wakefield Health, which said this week a substantial uplift in demand for its private health treatments was "unlikely" in the short term.


About 19 per cent of New Zealand health spending is privately funded, compared with an average 28 per cent for Organisation for Economic Cooperation and Development nations and 33 per cent for Australia.

"The public sector can't do everything - we need to have a public debate about what we want," Rodger Styles, HFA's chief executive, told BusinessDesk. "We aren't even acknowledging there is a problem."

The New Zealand economy grew just 0.3 per cent in the fourth quarter of last year, half the pace economists had expected and Kiwis have felt a squeeze on discretionary spending because of rising costs including a jump in the cost of home and contents insurance following the Canterbury earthquakes.

"As the economy turns around and we see positive employment, positive jobs growth and positive GDP hopefully the numbers will pick up," Styles said. "Generally, health numbers go up and down on economic cycles."

The Treasury has also mooted the need for public debate on health funding. State spending on health for the 2011/2012 year will be little changed at $13.8 billion from $13.7 billion a year earlier, according to the pre-election economic and fiscal update.

Earlier this week, Wakefield posted a 27 per cent increase in full-year earnings, driven by a pick-up in work funded by Accident Compensation Corp and District Health Boards. That made up for flatter private health revenue.

"The private health insurance market, which underpins a significant proportion of the company's business, has been slowly but steadily contracting," Wakefield chairman Alan Isaac said in the announcement. "The total number of New Zealanders with private health insurance (is) decreasing."

Across the Tasman, the Australian Federal Government plans to introduce means-testing of rebates of at least 30 cents in the dollar for private health insurance on July 1. The Government is expected to reap savings of about A$2.5 billion over three years.


"We are aware that the New Zealand Government has no appetite for rebates," Styles said.

"Our industry said let's look at a series of small scale initiatives focusing on the over 65s - affordability is an issue for older policy owners."