This is an update to a similar article I wrote in 2016, and this shows in the seven years since, medical insurance premiums have mostly doubled and what has changed since then. Added to that is access to public health services is at an all-time low, with around 2/3 of people not being seen in required Ministry of Health time frames.
Don't take my word for it; you can check out the current Public Health services delivery response that is linked. Click time series view, and it will show you how well current public health delivery is achieving to expectations.
In the last seven years, we have seen significant changes in medical insurance, we had six providers and seven distinct options, and now we have five providers and fewer options. Partners Life recently removed its bundling discount effect and reduced its standalone medical cover premium to the discounted bundled rates.
However, what was an outlier on unfunded medicines is now provided in some way with every provider we utilise. UniMed is the only provider that sits outside this group where they focus on employee benefits and don't compete directly in the retail medical insurance advice space.
My continued message is you need to regularly review your cover to your changing needs
The reality is the type and structure of your medical policy throughout your life aren't going to remain the same because different stages require different approaches. When you're looking at medical insurance, you're often basing decisions on this policy remaining in place untouched and unchanged for 40-plus years; it's blatantly unrealistic. But people decide on and operate their policies in this way.
The point of this post is to step you through what those changes might look like and give you an idea about the resulting cover and associated premium costs. What will surprise you is I can provide coverage for a 75-year-old couple with a similar premium to a 30-year-old couple with kids. It is a matter of structure and alignment with available resources, but it is possible.
Let's get started:
The chart below outlines what I'm going to step you through. As you can see, it remains pretty tight until around 50, then it spreads, and once you approach retirement, it gets a bit squiggly. Interestingly when compared to 2016, there was significantly more variation in premiums between 25 and 50.
The clear message here is those on UltraCare, while beneficial in many ways, especially for pre-existing conditions qualification, you want to be looking at moving to Wellbeing plans as soon as possible; this is specifically one point where you need to be talking to us, as we can restructure this cover and preserve your pre-existing condition coverage.
- Also, with UltraCare, it is the only product used here that includes GP and prescription costs, so it is expected to be more expensive than the average. However, the premium increase after age 55 is astoundingly dramatic and anyone over age 55 with it, needs to seek advice now!
This is the picture from May 2023
This is the picture from February 2024
Premium is accurate at the time of publishing, based on standard premium rates and subject to a medical assessment. Some providers have additional plans available; the most equivalent plans have been used for comparison purposes. The Southern Cross premiums illustrated do not have the unfunded medicines option added and are an additional premium to this illustration.
The following uses May 2023 premiums for the examples, this is a work in progress.
20:
Ok, you’re 20, you have medical insurance probably from your parents, though you may have arranged it yourself. The most likely scenario is you have it from your parent’s plan, and they’re probably still paying for it. The average premium at this stage for a hospital plan with specialists & tests and a $250 excess is going to be about $64 per month or about $2 per day. Yes, double what 2016 looked like.
25:
Roll on a few years, and you’re 25, partner on the scene, and you’re clear of the children's premium rates that you may have been on when you were 20. Cover needs haven’t changed, though adult premiums have had an impact, as the average monthly premium is now $245 per month for you both.
30:
30 rolls around, and there’s been a few changes; married and baby, things have changed quite quickly. Checking the 2018 census data, the birth age of mum around 30 has been steady for about 10 years, making bubs arriving now still the usual. With the addition of bubs, your premiums have increased a bit to $301 per month on average.
35:
A few years later, at age 35, number two is on the scene, and the first one is off to school; your need for the type of cover hasn’t changed much, but the premiums are now approaching $400 per month.
40:
40 rolls up and hits you from behind. The kids are well into school, and there’s been a few specialists and tests done, and one of you may have had surgery. Things are starting to show up, and your cover is now returning some of that value you’ve really wanted to avoid. Premiums haven’t moved a great deal, with an average of $413 per month. If you were to take cover now, you’d face exclusions for pre-existing conditions, which also means moving between providers will have a similar issue.
45:
45 whistles up, and the kids are in high school; there may be some additional resources available to increase the excess; at this stage, it’s not going to make a lot of difference, and there’s a test pending, so we leave it be. Average premiums have been slowly creeping up; it’s now approaching $500 per month.
50:
50 comes around faster than you wanted; you still feel like you’re 30, so why are the premiums getting so high at about $574 per month? The kids are at Uni and soon to be off your hands, though not as soon as you may like. Some providers are starting to charge an adult premium for the kids. We leave it be as the kids will come off, and that will help.
55:
55 now, we need to get serious about the retirement plan. This medical insurance premium needs to be better managed. We’ve dropped the kids off onto their own policies, and we look at increasing the excess to $500; this brings the average premium back under $600 per month at $569 per month.
60:
60 arrives, you’ve had a serious claim, and there are a few medical things going on; we need to retain the cover but ensure it does a good job when it's needed. There’s still the occasional specialist appointment happening, so we look to increase the excess to $1,000 at this review. The average premium comes back to $685 per month.
65:
Retirement and age 65, the key focus is substantially reducing costs as income is reduced. This is where we make a couple of tough decisions, increase the excess to $2,000 and drop the specialist and testing option. This means specialists and tests will only be covered if there is an associated hospital admission. Which isn’t too bad as there are funds available to cover specialists if needed. The average premium comes back to $640 per month with this reasonably aggressive approach.
70:
70 comes around much faster than you wanted, and premiums have been creeping too. Retirement savings and plans have gone better than expected; we look at increasing the excess to $4,000 to keep premiums affordable at $674 per month. The range of premium at this point is $324 to $647 per month, depending on the product and provider. (Those on Southern Cross UltraCare have either cancelled or restructured by now)
75:
At age 75, we push the excess out as far as we can. For some providers, that was done at the review at age 70; for others, we have a $6,000, $8,000 or $10,000 excess option. This means the really serious things will still be covered; anything minor is likely to be at your cost. Financially things haven’t been too bad, and premiums are now in the $263 to $647 range for both of you. This is where it was when you were 25-30 with the lower end.
The graph below covers the same information as above, though it gives a better view of what each provider is doing at a particular age.
This is the picture from May 2023
This is the picture from February 2024
Premium is accurate at the time of publishing, based on standard premium rates and subject to a medical assessment. Some providers have additional plans available; the most equivalent plans have been used for comparison purposes. The Southern Cross premiums illustrated do not have the unfunded medicines option added and are an additional premium to this illustration.
Summary:
Looking across all providers and all ages for this sort of typical scenario, the average premium is $471 per month, including UltraCare and $400 per month without UltraCare in the mix. Some providers will be consistently positioned, and some will be across the spectrum as age and policy structure have a bigger impact than with other providers.
- This is an outline of a typical medical insurance strategy and one that plays out every day.
- This isn't my advice at work; these are the decisions clients make once they have the information to make an informed decision, decisions that affect them.
- Being able to discuss the options means you retain valuable benefits that you may have otherwise cancelled because you saw no other option.
I’ve seen people with very few claims and others who have had multiple claims and had thousands paid.
- For example, a couple of knees and a bypass, $85,000 within three years,
- and cancer surgery and treatment, $180,000.
Sometimes it's nothing for years and years, then bang, it's a run of significant claims, other times it is a consistent run of more minor things, but they add up in the same way.
- One client in the last 3-4 years has had $6,200 in specialist treatments
- and another nearly $20,000 in claims for head injury treatment in addition to what ACC funds.
Everyone is different; that's part of my point.
These aren’t small numbers, and most New Zealand families would be hard-pressed to fund them. Your average medical policy provides $600,000 to $1,000,000 of coverage per person per year. The majority of people get nowhere near that in one year, let alone a lifetime, but it’s there if it’s needed.
If you take cover at 30, when most people start looking for coverage, for you and your family and hold it until age 75, as I’ve outlined, on the average premium across all providers (including UltraCare), you’ll pay about $240,543 in premiums, which is a large chunk of money. Remember, this is over 45 years, and that’s a long time for trying to save this. Without UltraCare, that average premium is $203,092
If you and your family have $10,000 of claims every year, which is probably unlikely, but possible, you’ll have an insurance return of $450,000 straight off. If we look at average incomes over this time, it equates to around 5% of average gross income.
- Imagine what our health system would look like if it had 5% extra funding from a direct tax. I probably wouldn't be having this chat with you, and I'd be talking about something else.
- Unfortunately, it's not going to change in a hurry; medical insurance is a significant need in society.
If you take the cheapest option of this group, which is actually a good policy, then you’re going to be about $61,728 better off than the average. If you take the most expensive plan (UltraCare), then you’re going to be about $187,256 worse off than the average.
If we consider the spread on the plans excluding UltraCare, your range is $28,087 more than average to $24,277 less than average.
Interestingly the plan in the middle of the pack is the one with the least resources available to cover you in the future.
So is it worth it? Definitely!
Have a chat with us about how you can do this in a cost-effective way for you so you get the best treatment options available for your premium $ so that it’s affordable into the future for you and your family.
