Rising insurance premiums spark call for tax breaks

As the need for New Zealanders to buy some form of medical insurance climbs, tax breaks should be introduced to cover the rising cost of premiums, says the Consumers' Institute.

Chief executive David Russell said there was a strong argument for tax breaks, given that people with medical insurance were subsidising those who relied solely on a public health system that was now creaking.

The institute has said that people should opt for health insurance if they can afford it.

The public system is largely seen as good for acute illnesses such as heart attacks and some cancer treatments.

But for many other conditions, including elective surgery, people were better off dodging public health waiting lists and going privately.

Early this week, health insurance heavyweight Southern Cross announced that it would increase premiums by March next year.

For some that will be the second rise in 12 months.

Andrea Pettett, executive director of the health insurance body Health Funds Association, said it was now time the Government was "honest" and delivering "real messages" about what the public health system was capable of providing.

This year the association made a case to the Government for a tax incentive for people who took out insurance.

In Australia, customers can claim back 30 per cent on their premiums.

Ms Pettett said the Government had not dismissed the association's plea, but a serious discussion was now needed on the tax issue.

"By bringing in a tax incentive it would make medical insurance more affordable for New Zealanders," she said.

"When people opt for medical insurance they are freeing up resources in the public health system and that means other New Zealanders can get treatment more quickly."

Health insurance is dominated by Southern Cross, which controls close to 80 per cent of the market.

Tower Health, which bought AXA's health insurance business, is No 2 after which comes a proliferation of tiny players.

Southern Cross has been in the Court of Appeal at Wellington this week after the Commerce Commission challenged an earlier court decision that allowed the big insurer to hold on to customers from takeover target Aetna.

Southern Cross bought Aetna last year but the commission approved the takeover only when Southern Cross agreed to sell Aetna's customer base.

Tower managing director Jim Minto said one of the problems in the market was the dominance of Southern Cross.

The number of firms competing in the market has fallen, as has the number of customers insured, as premiums have risen.

- NZPA