Greater Reliance on Private Health Sector

Media Release 25 February 2009

Kiwis Placing Greater Reliance on Private Health Sector

A significant rise in the number of elective surgical procedures paid for by not-forprofit health insurer, Southern Cross Medical Care Society, is a symptom of New Zealanders’ increasing reliance on the private health system for elective surgery.

Chief Executive Officer, Dr Ian McPherson, says the Society funded 77,399 elective surgical procedures in the 6 months to 31 December 2008, an increase of 4564 (6.2%) on the corresponding 2007 period. The total value of claims paid grew at a faster rate, up 13.7% at $253.5 million.

The increase in claims, along with continued growth in the Society’s membership, were the main features of the insurer’s release of financial information today. “Southern Cross’s rising claims are consistent with recent statements from the Ministry of Health and ACC, that indicate the demand for elective surgery, and the cost of those services, has been rising strongly,” Dr McPherson says.

“We’re also taking the claims trend, and the growth in the number of people we’re insuring, as signals that New Zealanders are continuing to rely on the private health system to meet their elective surgery needs. The flip side of that reliance is that Kiwis are clearly uncertain about whether the tax-payer funded health system will be able to deliver those services to them in the future.”

Dr McPherson says the Society’s claims cost was 93.6 cents for every $1 of premiums during the six months to 31 December 2008 – a rate higher than Southern Cross’s long-term target of 85 cents in the dollar. However, higher claims costs were offset by gains during the six months in the Society’s investment portfolio, resulting in a $12.1m surplus for the half year.

“As a not-for-profit insurer, the high claims return to members is something we regard as pleasing because enabling access to healthcare is what we’re here for. On the other hand, we have to remain watchful in the current economy that we achieve the right balance between premiums coming in and claims going out so that we are sustainable and members can continue to rely on us in the future. With the recent reduction in interest rates, we’re also very mindful that our future investment returns will likely fall.”

Dr McPherson says the not-for-profit insurer had net growth of 7083 members in the six months to 31 December 2008 period, despite the uncertain economic environment, bringing the Society’s total membership to 842,050 New Zealanders. “When times are tougher, people do weigh up benefits against costs. In doing so I think people recognise that paying for many forms of elective surgery in the private health system is beyond most household budgets, and that health insurance is the best way to access those treatment options.”

Unaudited Consolidated Income Statement 6 months to 31 Dec 2008 6 months to 31 Dec 2007 Earned Premium $270.8m $260.4m Claims Incurred $253.5m $222.9m Underwriting Surplus $17.3m $37.5m Overheads $37.1m $34.8m Operating Surplus / (Deficit) ($19.8m) $2.7m Investment and other income $31.9m $10.3m Surplus for the period $12.1m $13.0m Net member growth 7,083 5,531 Number of elective surgical procedures funded 77,399 72,835 Claims to premium ratio 93.6 85.6 -
Ends -

© Scoop Media