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Personal finance: Health insurance a long-term relationship

Six in 10 New Zealanders with health insurance won't switch insurer because they fear losing cover for pre-existing conditions, a new survey has found.

The survey by consumer research company Canstar reveals only 4 per cent have changed insurers, despite only half being happy with their current policy.

The rest said changing was too hard, pointless or would involve losing benefits or disrupting other family members.

Of the nearly 1000 people surveyed 61 per cent agreed with the statement: "I stay with my current provider because I have pre-existing conditions."

It might sound anti-competitive.

But Insurance and Savings Ombudsman Karen Stevens is delighted. "It's a very informed view and a major step forward."

Her case files are peppered with people who have been caught out by pre-existing health conditions or symptoms of conditions: headaches, diarrhoea, anxiety or sore backs.

She warns if people change insurers having already developed a condition or even symptoms of one, they may not be covered if they need to claim.

The older you get, the more likely you are to develop something.

One woman wrote Stevens a poignant letter after she left her insurer of 20 years on the advice of a telemarketer and had to pay for her own knee surgery.

"She didn't know an x-ray or appointment with the doctor two years ago was something she should disclose," says Stevens.

Another woman got stuck paying for her $20,000 hip operation after her financial adviser stressed the cost savings from switching, but not the possible pitfalls.

Even changing policies with the same insurer is risky, as a third unlucky complainant found.

Financial adviser Janine Starks, of Liontamer investments, says most people with a health scare behind them are "mad" to switch.

"I can see that you might think it is not competitive," she says. "But most people with pre-existing conditions are stuck."

What's your condition?

Pity the poor telemarketer selling health insurance who cold-called a house and got the insurance ombudsman. Stevens decided to give them a grilling.

"I talked about non-disclosure and the person on the phone had no idea what I was talking about," she says. "You get people who are just working the phones who can't provide any guidance or advice."

Disclosure is complicated. Almost any niggling health complaint can be classed as a pre-existing condition if the insurer believes it pointed to a bigger problem. A women needing nasal surgery was refused cover because her insurer believed the problem was probably caused by pre-existing hayfever.

Policies can exclude conditions that haven't yet been diagnosed, and complaints for which you probably should have consulted a doctor, but haven't, says Stark.

Insurers are not infallible: one man who had diarrhoea and weight loss when he bought insurance, which later turned out to be from pancreatic cancer, eventually got his insurer to pay after arguing his cancer was not diagnosed when he signed up.

"It's a bit like you can't insure your house after it's burnt down. You can't insure your health if you know there is something serious wrong," says Roger Styles, chief executive of the Health Funds Association.

If you do switch, you can't be too careful, says Stevens. "The best way to cover yourself is to attach your full medical records to the application."

That might seem like overkill, but: "It's all about what is material to a prudent underwriter, it has nothing to do with what you personally think is relevant. If you are doing it by phone or in a hurry you may not disclose things completely unintentionally."

She warns that just because you have signed a waiver letting the insurer check your medical records, it does not mean they will. In fact it is unlikely.

"Unless there is something particular that alerts them, they rely entirely on what is in the application."

Once you come clean the insurer will tell you if they want to impose a stand-down period for any health issues or exclude any conditions.

"Then you can make an informed choice," says Stevens.

Healthy picture?

Only about a third of New Zealanders have health insurance.

Even fewer have full-cover policies that include things like GP visits.

These days the most popular use for private insurance is to shorten waiting times for non-emergency surgery, including hip surgery, colonoscopies, hysterectomies, cataract surgeries and vasectomies.

"Over the last decade or two insurance has gone from two-thirds of people having comprehensive cover and one-third having major medical to one-third having just cover for surgical and specialist," says Styles.

Many people answering the Canstar customer satisfaction survey said they trimmed their policies as premiums rose (37 per cent) or could only afford surgery and specialist cover (56 per cent).

Not only did premiums rise just as the global financial crisis was hurting salaries, "doctors visits became a lot cheaper and a lot of charges we had for hospitals in the early 90s were removed", says Styles.

Canstar's managing director Derek Bonnar says limited policies make sense when the public system is good, as it is here.

"The public system comes in for a lot of flack but in my recent experience with family members is it has been really good, even with non-urgent care."

And many older people, like Bonnar's parents, simply can no longer afford private insurance because premiums spike towards the end of their lives.

"When you want that cover is in your income earning years so you can get back to your feet quickly," says Stark. Her advice, if you want to buy health cover, is to buy carefully and stick with it.

Stuck in one place

So are you forever stuck with your first health insurer or can you shop around?

Stark admits her strong note of caution is coloured by her own health history, in which she has clocked up an estimated $50,000 in claims. She signed up for health insurance at 23 and has clung to it through a number of health scares - even going so far as to keep paying premiums when she spent six years overseas. First there was a cancer scare and, later, a brain aneurism.

People with less dramatic histories might be able to switch, she says, but she warns against accepting long stand-down periods unless you are a first-time customer with no choice.

"If the (conditions) are very minor and things that insurers are very familiar with, and there is a very short stand-down period - for example if you don't claim within six months then you are covered - then you might make that call."

"I cannot imagine advising anyone with an existing condition to go through a stand-down period as long as a year or two."

Both Bonnar and Starks say breadth of cover is worth more to them than saving a few dollars.

"I personally would be happy to pay a higher premium if I know a provider has a good claims record and the ability to meet my needs. It's more important that they act ethically and morally when it comes to claim time," Bonnar says.

Like many in the survey he is both a happy customer of his current provider and afraid of switching. "I'm very happy where I am. And if I was to switch to another provider now I would have to go through a medical and there would be a lot of exclusions"

Shopping around

Since it may end up being a long-term relationship, Stark says you should choose an insurer carefully.

"The market is quite competitive at the entry end, so do the best you can early on," she says.

She advises using online calculators and asking insurers to project your premiums forward a few decades so you can see what happens if you stick with them. Take a note of which companies have been raising premiums, and why, she says.

"One insurer might be kinder to smokers and old people, one might be kinder to women," says Stark.

She says using a broker may help get you broader cover, though they are not so useful for shopping around, since they tend to be attached to certain companies.

Once you are in, hang on, says Stark, making sure you stay covered during career breaks, travelling overseas and leaving employers.

If, like her, you suffer a health scare, you may end up wedded to your first insurer for decades and destined to ignore cheaper suitors.

"In my situation I just have to suck it up," says Stark.

"Insurers profit from people not claiming. So why do they want risky people?"

Highlights

Health benefits

Switched insurers: 4%

Stayed put because they were happy: 52%

Stayed put because of pre-existing conditions: 61%

Reduced cover because premiums rose: 37%

Source: Canstar

Written by Eloise Gibson. First appeared on Stuff.co.nz.