Southern Cross chief Nick Astwick on why health insurance premiums keep rising - Money Talks

Southern Cross Medical Care Society chief executive Nick Astwick had planned to be a police detective.

But when he took a short-term job at the National Bank in Christchurch after finishing his university degree, it changed the course of his life.

On the Money Talks podcast this week, Astwick talks about his career path and transition from investment banking in Britain to state-owned Kiwibank and then to the not-for-profit health insurer Southern Cross.

“We’re fundamentally a social enterprise,” he says.

“What that means is our million customers are our shareholders. We are very profit-conscious, and we have to generate profits because a friendly society can’t borrow or raise capital. But we are not profit-driven.

“Fundamentally, we are there to deliver the health services our members need and to make sure that we are economically sustainable to do that for the next 50 or 60 years.”

Okay, so let’s deal with the elephant in the room: why does it feel like health insurance premiums are always rising?

That’s a question Astwick isn’t shy of tackling.

“The best way to describe that is that for every dollar of premium you pay us, 90 cents of that goes to pay for your healthcare. Ten cents goes to pay for our operating costs.”

That’s at a high level for industry, he says.

In a higher profit-based model, for every dollar, about 60c goes to pay for healthcare and about 40c goes to costs and shareholder return, he says.

Astwick accepts the premise that premiums have risen a lot.

“If you look back over the last 20 years, they’ve been going up about 6% or 7% a year,” he says.

“Now, 70% of that price increase is our members using more healthcare services. Only 20 or 30% of that premium is because of the cost of the procedures.”

That’s why the premiums are rising faster than the Consumer Price Index, he says.

So while there are cost rises around new technology and procedures, the main reason your premium is going up is that, overall, the members are using more services each year.

On the podcast, Astwick also provides some tips for those looking to minimise premiums as they age.

Listen to the full episode to hear more from Nick Astwick.

Money Talks is a podcast run by the NZ Herald. It isn’t about personal finance and isn’t about economics – it’s just well-known New Zealanders talking about money and sharing some stories about the impact it’s had on their lives and how it has shaped them.

The series is hosted by Liam Dann, business editor-at-large for the Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.

Money Talks is available on iHeartRadio, Spotify, Apple Podcasts, or wherever you get your podcasts.