The complete guide to health insurance in NZ

Like most forms of insurance, health insurance (aka medical insurance) provides peace of mind – even if you never have to use it. Many people realise that good health is one of their most important assets and are prepared to pay for health insurance, so they can have the best possible care as soon as they need it.

However, the cost of health insurance over your lifetime can be quite substantial and the policies vary considerably. That’s why it’s important to get experienced financial advice before signing up with a health insurance provider.

This guide is designed to help you understand the potential benefits of health insurance, the main types and the important features to be aware of. By reading it right through, you’ll be better prepared if you decide to talk to an adviser about choosing a policy that’s right for you.

Why do people get health insurance?

New Zealand has a free public health system for acute conditions that require urgent medical attention. We also have ACC cover for medical care resulting from an accidental injury, but not from an illness.

If you become sick or have a chronic condition, the public health system will provide help. However for conditions that aren’t life threatening, like knee replacement or tonsillectomy, you’ll be put on a waiting list. Depending on the condition, the wait can be anything from months to several years.

While you’re waiting for medical care, your condition can get worse. As a result, your quality of life can suffer and your finances can be severely affected, because you’re unable to work your usual hours.

You can choose to avoid the delay by paying for private care yourself, but it’s usually very expensive. Some surgical procedures cost tens of thousands of dollars, e.g. the current estimate for a knee replacement is $25,000 to $30,000. That’s where health insurance comes in. By paying a regular insurance premium, you can have access to prompt, private medical care when you need it. Many people see health insurance as an investment in their future health and financial wellbeing.

There are several types of health insurance to choose from and the policy details within each type vary from one insurer to another. As you’d expect, the amount you pay can also vary a lot, depending on choices you make. That’s why it’s important to get experienced financial advice to help you select the right policy for your current situation and future plans. In the meantime, here’s a summary of the most common types of health insurance in New Zealand.

What are the main types of health insurance in NZ?

Health insurance, or medical insurance, comes in many forms. This makes it easier to choose the type of cover that best suits your budget and what’s most important to you. Apart from the treatments covered, you can choose to include other family members in the policy and where the medical care is provided (some insurers have affiliated providers you must choose from). You can also choose the amount you’ll contribute towards the cost of treatment (your excess).

Generally speaking, you pay more to cover very expensive procedures, to include other family members and to contribute a lower excess towards the cost of each claim.

If you have pre-existing medical conditions (health problems that exist before you take out a health insurance policy), they may not be covered or you may have to pay extra to have them included in your policy. In some cases a pre-existing condition may be added to your cover after a few years, provided it hasn’t required medical treatment in that time.
Some conditions are specifically excluded for everyone. There are conditions that all insurers exclude, but other exclusions will vary from one insurer to another. Be sure to check for these exclusions when comparing policies.

The main types of health insurance in New Zealand are:

  • Primary care, also known as day-to-day medical insurance or minor medical cover
  • Major medical, also known as surgical cover or hospital cover
  • Comprehensive health insurance

What is primary care cover?

Primary care cover usually covers some of the cost of day-to-day medical care, but not things like hospital care, surgery or specialist consultations. It typically provides a level of cover for things like:

  • Doctor appointments
  • Prescription costs
  • Vaccinations
  • Dental appointments, including hygienist cleans, fillings, root canals, crowns, extractions, dentures and orthodontic treatments
  • Mole mapping
  • Physiotherapy
  • Psychiatrist or psychologist (mental health) consultations
  • Eye examinations, prescription glasses and contact lenses

Each policy will have its own inclusions and exclusions. They also tend to only pay a percentage of your costs, often with a maximum annual limit. Many will have a waiting period for some of the benefits, which means you can’t access them as soon as you take out the policy. For example, you might not be able to access the eye care benefits for the first six months. This is to prevent people waiting until they need the care before they sign up and start paying premiums.

Primary care cover is designed to reduce the financial burden of staying healthy. By reducing the costs involved, it can make it easier to get a medical check up or seek treatment sooner rather than later. This can help prevent things getting worse and more expensive. Depending on what’s included in the cover and the pay-out limits, day-to-day health insurance premiums can be as low as about $7 a week.

What is major medical cover?

Major medical policies provide a level of cover for the more expensive treatments and procedures. They typically involve specialist or hospital care, and sometimes approved medications not subsidised by the New Zealand government. Again each policy will be different. Here are the main things that might be included in a major medical insurance policy:

  • Specialist consultations, usually after a referral from your GP
  • Diagnostic procedures, such as x-rays, MRI examinations, CT angiograms and PET scans
  • Hospital-stay costs, including prescriptions, medical supplies, meals and room fees
  • Surgical costs for anything from wisdom tooth extraction and skin lesion removal to knee and hip replacements
  • Cancer diagnosis and treatments, often including accommodation and travel expenses
  • Medications approved by Medsafe, but not subsidised by
  • Pharmac (so not available through the public healthcare system)

Surgery-only policies are quite common. These can have a lower premium, but only provide cover if surgery is involved. If you see a specialist and it turns out surgery isn’t required (which would be good news of course), you’d have to pay for the specialist yourself – including any diagnostic procedures such as scans. If surgery does result from the specialist visit, the specialist’s charges are typically included in the cover provided.

What is comprehensive cover?

Comprehensive cover is basically a combination of primary care and major medical health insurance. Some insurers offer it as a separate product. Others point out there’s very little overlap between the two types, so you can simply sign up for both to meet your needs.

What are the common health insurance exclusions

Exclusions are the things that are not covered by a health insurance policy. When you’re shopping around for health insurance, it’s important to check the exclusions to ensure you’re making fair comparisons and getting the cover you want. While many exclusions are common to most policies, there will always be differences between one insurer and another.

Exclusions are sometimes listed in two groups in the policy details. One group is general exclusions, which apply to everyone with that particular policy. The other group is personal exclusions, which relate to your own medical history or pre-existing conditions.

General health insurance exclusions

Here are some examples of conditions and procedures that are often listed as general exclusions in health insurance policies:

  • Cosmetic treatments
  • Self-inflicted injuries
  • Conditions caused by substance abuse
  • HIV/AIDS or any sexually transmitted disease
  • Organ transplants
  • Assisted reproduction
  • Gender reassignment
  • Dementia
  • Chronic asthma or arthritis
  • Overseas treatments
  • Public hospital treatments or those covered by ACC

Pre-existing conditions or personal exclusions

Some pre-existing conditions might be covered after an initial waiting period, provided they haven’t required treatment in the meantime. Others may be covered if you agree to pay a higher premium. However, there are certain pre-existing conditions that most insurers will not cover at all, such as:

  • Cardiovascular conditions
  • Knee or hip conditions
  • Conditions related to transplant surgery
  • Cancer, although some may cover non-malignant cancers that were treated by a registered specialist

If you’ve had serious or ongoing illness caused by Covid-19, be sure to check whether it would be considered a personal exclusion. It’s a relatively new situation and there’s some variation in how each provider is responding to it.

When should you get health insurance

If having some type of health insurance would make you feel more secure, and you can afford the premiums, then it usually pays to sign up sooner rather than later. The main downside of waiting is the potential to develop a new condition that might be excluded from any future policy.

Health insurance premiums are lower when you’re younger and steadily increase with age. That’s because you’re more likely to develop a condition as you get older, particularly one that’s expensive to treat privately.

If you’re thinking of starting a family, many health insurance policies also cover your children up to a certain age. This can remove a lot of stress and make sound financial sense if your child requires corrective surgery, or even something as common as surgical wisdom tooth removal.

The other advantage of health or medical insurance is that getting prompt treatment can significantly reduce the time you’re off work and not earning your usual income. An insurance industry study revealed it can take (on average) 100 days longer to get publicly-funded surgery than private.

Some people choose to ‘self insure’ by setting money aside in addition to their normal emergency fund of about three months’ income. When you consider that many fairly common surgeries can cost $20,000 or more, fully self-insuring can be a challenge. One possible compromise is to build a smaller self-insuring fund, so you’d be able to pay a higher excess if you needed to make a claim. Opting for a higher excess enables you to pay a lower premium, which might make health insurance affordable for your situation.

By the time you reach your 60s, health insurance premiums are quite expensive – and they continue to rise. Many people are tempted to cancel their cover because their income is lower and it’s consuming a lot of money. Others have no choice; they simply can’t afford it any more. The problem is, you’re more likely to need health insurance at this stage, which is the very reason the premiums are higher in the first place. Early financial planning advice can help ensure you’ll be able to afford the higher premiums later in life.

Next steps for getting health insurance

Getting the right health insurance is not as simple as phoning up to insure your car. It’s a decision that can have a big impact on your financial future. That’s why it’s important to get experienced financial advice to help you choose the best policy for your situation and budget. Switching health insurers later on can come with problems, especially if you’ve developed a condition in the meantime that will now be excluded.

A good financial adviser or insurance broker will have the experience and policy knowledge to explain the best options for your situation. Like mortgage brokers, they’re usually paid by the insurer you decide to go with, so there’s normally no extra cost to you.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

Table of Contents
Need balanced mortgage information and expert advice?

Visit our sister website for all your mortgage needs and access to expert advisers.

Keep reading...