“Do something today that your future self will thank you for.” Whether or not you are a fan of bite-sized wisdom, this is a great point from which to discuss health insurance.
In New Zealand we are lucky to have a fairly robust public health system which can lead people to think health insurance is a luxury item they can do without.
To a certain extent that may be true but it isn’t the whole story. There are a myriad of benefits to not relying solely on the state to look after you should health problems arise.
Get it before you need it. There are two main points to this argument, firstly the upcoming shift in New Zealand’s demographics, and secondly establishing a relationship with a health insurance provider while you are in good shape.
New Zealand’s demographics are changing. The government currently spends 20% of its budget on healthcare and we have 10 workers (i.e. paying tax to fund the government budget) for every old age dependent, however in the next 20 years that number is going to shift to four workers for every old age dependent. That is quite a healthcare burden and raises some questions around the sustainability of our public system.
We don’t know how this will be managed, but the government will need to make some changes to fund this and we may not have the level of public coverage we are used to. We may find health insurance is no longer a luxury but a necessity and those with health insurance already in place, with fewer exclusions, will be well placed.
Which brings us to the second point. The fitter and healthier you are the less likely you are to think about health coverage – however this is exactly when you should be establishing your relationship with a health insurance provider – before you need it. You will then find yourself to be well covered when the need does arise.
Another benefit to having health insurance is getting the treatment you want, when you want it. Whether you are treated on the public or private system you may see the very same surgeon – the difference is how quickly you will see them. Through the public system you can end up waiting months for a non-urgent procedure (defined as anything that can wait longer than a week) which you may get as soon as the next week if you are covered by insurance.
What about setting up a savings account for unexpected medical bills instead? A popular idea, but what many people don’t realise is that surgery is expensive. Really expensive. And medical inflation is rising at a rate of 10% annually. The current cost of a hip replacement is $22,000; a heart bypass is $45,000. Even a hernia repair will set you back at least $6,000. Where the emergency savings account can really help you though is in reducing your premiums by having a higher excess on your plan.
I suppose I can cancel it if it doesn’t fit the budget. Many people have seasons when the budget gets a bit tighter, and health insurance can end up being up for discussion. The two biggest downsides to cancelling your policy are finding yourself uncovered when you really need it, and when you do renew your policy finding you are no longer as well covered. Health insurance should really be a part of your long term plan, and your advisor is well placed to help you make it work.
One last note on pre-existing conditions – don’t make the assumption that you won’t be covered without talking to an advisor – some exclusions expire after a period symptom free and you will still be covered for more than you won’t be – some coverage is better than none.
If you want to discuss more about your health insurance options call one of our friendly advisers for an expert opinion.