Hard times mean health insurance cuts

People quitting health insurance because of the economic downturn have prompted a warning they may face higher premiums if they want to resume their cover.

An association representing health insurers says that in the year to the end of March the number of people with health insurance shrank by 25,700 to 1.35 million.

The Health Funds Association said this took the number of lives covered back to the September 2005 level, "when better economic times saw health insurance coverage levels increasing".

Association chief executive Roger Styles said yesterday health insurance coverage numbers were sensitive to fluctuations in the economy.

"It's closely linked with changes in GDP growth.

"When things were tracking nicely from 2000 to 2008 there were regular increases."

December 2008 was the peak for that period, he said, and the number of lives now covered was 40,000 fewer than then.

Mr Styles said households' discretionary spending was under pressure.

People were also paying much more for home and contents insurance because of the Canterbury earthquakes.

"Many people have had to make some difficult choices in the last year, although I would urge people to talk with their insurer rather than simply dropping their health cover.

"In many cases there will be options for changing the plan they are on to something more affordable, possibly with a change in the level of excess or coverage."

Mr Styles said that if people took a break and then sought to resume cover they risked being charged higher premiums or being unable to obtain cover for complications of what might now be considered "pre-existing" health problems, such as a heart attack, which occurred during the no-insurance gap.

The country's largest health insurer, Southern Cross, is investigating ways to limit costs for elderly policyholders.

Their costs rose after it introduced narrower age bands and linked prices more closely to claims costs in each band.

Shareholders' activist Bruce Sheppard forced Southern Cross to examine ways to avoid the higher rates elderly policyholders faced and is now part of the team investigating possible changes.

At its annual meeting last December, the insurer's members asked the board to look at ways to recognise long-standing members.

In February Southern Cross, commencing a consultation process, asked members if long-term policyholders should be recognised for their loyalty and if other members would be happy to pay more to finance this.

OPTING OUT
* 1.35 million - number of people covered by health insurance at the end of March.
* 1.9 per cent - the reduction from March last year.
* $199.30 - average premium for three months.