24 May

Health Budget 2022 – what it means for medication costs and waiting lists

Last week brought news that a key part of Budget 2022 was a $11.1 billion dollar operating budget for Health New Zealand over the next four years. The government described this amount as the largest investment ever in our health system, with another $1.3 billion in capital expenditure going towards refurbishing hospitals and other health infrastructure. As part of this, the medicines purchaser Pharmac has received its largest ever funding boost, with $191 million across the next two years.
Added to the $200 million boost over four years announced in 2021, Pharmacs budget is up 43% under Labour, according to the Health Minister. It’s still much less than what it would take to fund all of the drugs on Pharmac’s wish-list though. The drug buying agency would need around $400m to clear its wait list, which has about 130 applications. This is just the start though, as those with certain rare diseases are still fighting to even get a spot on this list.

Whats it mean for medication costs and waiting lists?

As much as its good to hear about this injection of funding for Pharmac in the budget announcement, its important to remember that there are still a lot of people who will have to pay for their own medications, or miss out on treatments. Its good also to hear about the increase in the total operating budget, which hopefully will go some way to easing waiting lists. Like a lot of you, Ive heard that waiting list delays have increased significantly since Covid.

These waits have been well publicised, with Stuff recently reporting on a south Auckland woman who says moves to reduce waiting lists are too little too late, after waiting four years for an operation. Stories like this are all too common, as are reports of worse access to medications here in NZ, compared with Australia. Another story from Stuff noted that 18 cancer treatments publicly funded across the ditch are not available to Kiwis, despite offering substantial clinical benefit. Last month Te Aho o Te Kahu, the Cancer Control Agency, identified 20 different gaps across 9 cancer types, 18 individual medicines, where a cancer medicine was funded in Australia but not in NZ.

Do I still need health insurance?

These stories reinforce the importance of taking out private medical insurance. Despite the recent boost to the health budget, treatments for uncommon conditions remain unfunded. Thankfully, there are some medical insurance providers in NZ that cover Pharmac funded and non-funded treatments, so even uncommon conditions are covered in the right plan. With the right cover, you arent forced to use generic drugs or treatments that arent as good as potential solutions available in Australia or the US.
This makes health insurance a must. Dont assume you are bulletproof, or your health wont be impacted by something obscure that needs critical attention. Health insurance is there to provide peace of mind for the what ifs? in life.

How likely is it Ill use health insurance?

Statistically, we are much more likely to experience a significant health event, than have our houses burn down. Despite this, we place more emphasis on house insurance, often at the expense of other insurance policies, like health insurance. Recent research from Quality Product Research Limited, notes non-smoking couples aged 18 – 65, have a 28% chance of becoming temporarily disabled. This means being unable to work for six months. People rarely consider what they would do if they were out of work for six months without any sort of cover.

We all know people that have cancelled their medical insurance, only to be hit with something that is not covered in the public system. Often these are people that had never used their health insurance, and so decided to cancel it not understanding the risks. If you are considering personal health insurance and you arent sure of the benefits, talk to someone that has used their insurance. They will give you an authentic opinion on the importance of health insurance in the NZ environment.
Lets hope that the injection of funds into the NZ health system has a real impact on waiting lists and costs for treatments. At the same time, why risk being caught without the protection of health insurance should your health be compromised? There is no question that there is still the need for personal health insurance, to reduce wait times, and because you can access treatments with a good private policy whether they are funded by Pharmac or not.

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15 Mar

Is it smart income insurance, or an unfair jobs tax?

Recently, the Government presented details of the New Zealand Income Insurance Scheme (NZIIS), announced at the Budget last year. NZIIS is an unemployment insurance plan allowing people who lose a job due to redundancy, layoffs, health conditions and disabilities to claim support worth as much as 80% of their former income.

Under the scheme, someone who loses their job will be given payments worth 80% of their former income (capped at salaries of $130,911), for up to 7 months after they lose their job.

Of course, the scheme comes at a cost: it will be funded by levies on wages and salaries, with both workers and employers paying an estimated 1.39% each.

That would mean someone earning $880 a week would pay $12.23 a week in levies and receive $704 a week if they were made redundant. A person earning $2000 a week would pay $27.80 in levies and receive $1600 a week in insurance if they were laid off.[1]

ACC will collect the levies and administer the scheme. Like ACC, levies could change over time, but would be frozen at 1.39% for the first 2 years of the scheme.

The plan is in draft form, and will go out for consultation before any final decisions are made.

The reaction to the proposed scheme has been decidedly mixed with political parties on the left and right being critical of aspects of the proposal. National and Act raised concerns that the scheme was too expensive and created a disincentive for hiring people. National leader Chris Luxon called it a “jobs tax. The Greens were also critical of the scheme, saying it risked opening up a gap between the level of support received by people who are able to work and those who are not. The party raised concerns the proposed levy would be too high for people on the lowest incomes.

In an article on Good Returns Cigna New Zealand chief executive Gail Costa noted that: If adopted the scheme wont cover anyones full insurance needs, so wed encourage people to speak with an adviser to understand how the scheme impacts them and what the right level of cover is for their needs both in the short and long-term.

Hamish Anderson from Fidelity Life noted that the company was still assessing the scheme and what it might mean for the business. He found this silver lining related to the scheme: Were broadly supportive of ideas that help educate New Zealanders about the importance of protecting whats important to them, and help address New Zealands under-insurance problem.

I agree that its great to get Kiwis thinking about protecting their livelihoods, and how different insurances fit into this. However, Im not sure that introducing the NZIIS is the best way to do this, or that the cost of the scheme on individuals and businesses is affordable at what is, for many, a financially shaky time. This was Chris Luxons point when he said: It’s a new tax, reducing incomes at a time when with high inflation businesses and workers can’t afford it.

Its important to remember the scheme is still in proposal form and the exact details of what kinds of self-employment and contractors will be covered by the scheme, are yet to be ironed out. Currently, the discussion document says there is a desire that self-employed people who most resemble employees should be covered.

Regardless of where this proposal goes, its important for people to look at what personal insurances, including income protection, they have in place.

Anyway, this scheme has definitely got people talking. What do you think about it? Is it smart income insurance, or an unfair jobs tax?

[1] https://www.mbie.govt.nz/dmsdocument/18666-a-new-zealand-income-insurance-scheme-a-discussion-document#:~:text=It%20will%20be%20funded%20by,ACC%20will%20manage%20the%20scheme.

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01 Dec

Why have private health insurance when you can get health care for free?

There was a story on Stuff recently regarding a 67-year-old who was shocked to discover she had bowel cancer. After numerous tests and medical appointments, she was told she needed surgery to take out the tumour and determine how advanced the cancer was. While preparing herself mentally, she organised time off work and childcare for her grandchildren. Two days before the surgery, she received a second shock when her operation was cancelled due to a lack of beds. It turns out she was just one of over fifty patients, who had their planned surgery cancelled at short notice that week.

Stuff Article – Cancer patients’ surgeries cancelled due to bed shortage at Christchurch Hospital.

Reading this story made me think of my Mum’s recent experience with the health system. She had a single hip replacement 5 years ago and at that time was told by her specialist that her other hip would need replacing at some stage. A few weeks ago, Mum decided it was time. She contacted her specialist, had a consult with him the following week and is now booked in for surgery next week.

All of this done within a month and solely because she has private health insurance and able to arrange this when she wanted to, on her own terms and not having to wait in the long queue for surgery that exists in the public system.

3 key reasons you need private health insurance

New Zealand that has a public health system which has to ration services based on resources. The benefits of having private health insurance is:

1. Insurance gives power back to you the patient, because you are able to schedule treatment according to your life circumstances. You are not relying on the public health system and things like nurses strikes or lack of beds intervening in your treatment.
2. You are guaranteed to receive the best treatment options New Zealand has to offer. This includes things like operations, medications and advice from experts.
3. If you have to wait six months or more to receive treatment in New Zealand, you have the option of going overseas to receive treatment (some providers offer this so check with your adviser).

Our health system is great for emergency procedures, but to get non-acute procedures or elective procedures you have to go on a lengthy waiting list. If your surgery is not deemed urgent, you can be bumped for something that is deemed more acute. With private insurance, you have timely access to the best treatments, procedures and medications.

There is a lot of fine print with health insurance and different providers offer different options. You shouldnt just pick a generic package, instead you need to tailor your insurance based on your current circumstances. Importantly, health insurance can be structured so it is not expensive depending on your requirements.

Come to see me if you need advice on what can be done to make insurance affordable while protecting your health. Dont be caught up a creek without a paddle, or a personalised lifestyle protection plan from Rix Insurance, this winter.

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17 May

Income Protection VS Life Insurance: Who wins in the money stakes?

If the last year has taught us anything, its expect the unexpected. Or even better, prepare for it. How long could you survive without your income? Three months? Two? One? Recent surveys show most Kiwis have less than $500 in savings , but they dont do anything to protect their most valuable asset – their incomes.

For some reason protecting this asset with income protection insurance is something that most Kiwis never think about. Thats despite the fact that many have insurance to protect other, less vital, assets.

Maybe its because Kiwis think that if anything happens, ACC will provide cover. Unfortunately ACC only pays out if you have had an accident. That means it wont help if you get cancer or degenerative health issues, which could stop you from working temporarily or permanently.

Health and disability allowances are paid by the government, but they are means tested, which means if your partner works you could be out of luck. And as weve seen in 2020, life is full of surprises and most people cant last long without money coming in the door.

The numbers: 🤨 how does income protection compare with life insurance?

To test the numbers when it comes to these two forms of cover, lets look at 2 examples. They show differences in age and income levels significantly influence both payouts and premiums.

👉 Ryan, a 40 year old, non-smoker in a professional occupation.

He has an income of $100,000 and a mortgage of $600,000. He would spend about $50[1] per month for life cover, which would pay out $600,000 in the event of his death. Income Protection Premium is more expensive at about $85[2] per month, but the total payout should Ryan suffer an accident or illness and be unlikely to return to work is far higher at over $2.7 million[3] (75% of income payable to 65). The numbers make it clear that income protection offers much more financial benefit.

Its a slightly different picture for women.

👉 Anna is a 30 year old professional, non-smoking woman.

She has an income of $100,000 and a mortgage of $600,000. Her life cover premium of $600,000 is $32.73 per month. Her Income Protection Premium for a benefit of $75,000pa (75% of $100,000 payable to the age of 65) is $93.09 per month.

This is a higher per month premium payment, but the benefit payout is also much higher. Her total income protection benefit if claimed today would be $3,612,725[1]. This is significantly higher than both the life cover payout and the payout of income protection that we saw Ryan receive.

If Annas earnings increased to $150,000 by 45, before she decided to take out income protection, she would be paying a premium of $288.92 per month to receive $112,500 pa (75% of income) in the event of an accident or illness that prevented her from working.

Her total benefit payout to age 65 would be $2,994,792. $600,000 life cover for the same client would cost $63.65 per month.

🤔 The final word – what the examples teach us.

Although its more expensive than life cover, income protection also offers far more financial benefit if it pays out.

Income protection allows you to protect your other key assets by maintaining a source of income if you cannot continue to work.

Adjustments to your settings can significantly impact both payouts and premiums, so talk to a financial advisor that specialises in insurance for ideas on how you can fit income protection into your budget – you wont regret it.

[1] Life Cover Premium of $600,000 = $51.73pm

[2] Income Protection Premium for benefit of $75,000pa (75% of $100,000*) payable to age 65 = $86.51pm. The maximum insurable amount is 75% of annual income. As per AIA quote software, based on Indemnity Value Income Cover with a 13 week stand down and benefit payable to age 65.

[3] Total Income Protection Benefit if claimed today = $2,715,695.

[4] This is based on Indemnity Value Income Cover with a 13 week stand down and benefit payable to age 65.

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31 Mar

3 questions you need to ask before selecting your financial adviser

Ten years ago when I was working in corporate insurance, there were people in the insurance advisory space that operated in their own best interests, rather than those of their clients. That meant instead of finding the best cover for a particular client based on their needs, they could have been driven by the incentives offered by insurance companies.

Seeing this firsthand was the catalyst that led me to start my own business providing financial advice that was truly unbiased and specific to my clients needs.

Law changes you need to be aware of this year

Now thankfully, a lot has changed. New legislation came into force this year that means anyone who gives regulated financial advice must, hold, or operate under, a Financial Advice Provider (FAP) licence.

It takes time and effort to gain this licence (I achieved the qualification after four years of part time study).

As well as being qualified, all providers of financial advice must now follow a Code of Conduct that includes a proviso placing the interests of their clients first. This common sense legislative change means people can have much more confidence when they go to advisers to discuss things like insurance, mortgages and investments.

As a Financial Adviser that specialises in insurance, its great to see this change in law and the up-skilling and increased professionalism in our industry that has accompanied it.

Despite better consumer protections in law, its still important to think carefully about the people you choose to get advice from, especially when it comes to vital financial issues. So, when youre considering an adviser, I recommend asking these three questions:

How long have they been around? The new financial advice regime that came into force on Monday 15 March 2021 was designed to bring more transparency to our industry. That meant along with being registered on the Financial Service Providers Register (FSPR), advisers must now disclose important information to clients to ensure they can make informed decisions. Included in this is disclosing any conflicts of interest, commissions advisers are paid, and limits on the companies or products they advise on. For example, Im able to give advice on insurance, but not mortgages or investments. Do some research on your adviser before you consider using them. Find out what their expertise is and exactly what financial information they can provide to you.

What is their reputation like in the industry? Background, experience and reputation are vital areas to investigate when you are considering engaging an adviser. Do an internet search on them, looking at things like LinkedIn to see if their public profile matches what they say about themselves on their website. Spend some time researching whether they have a positive reputation and can give you advice on a range of financial entities that they have preexisting relationships with.

What is your rapport with them? It sounds obvious right? But personal rapport is a key part of developing a strong relationship with an adviser. If a person is going to be your trusted adviser, you need to think about whether you are comfortable discussing personal matters with them. If you feel like they dont have your best interests at heart, or arent available in the way you would like, its best to move on.

The changes we have seen to the financial service providers industry this year are, in my view, long overdue. They will help ensure the public can receive good financial advice, and the bad behaviour we saw in the old days is significantly reduced. If you want to talk about any of the issues raised in this article, just connect with me on 021 650 082. Corey Rix Financial Adviser aka Lifestyle Protector

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