Southern Cross surge in claims unsustainable

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Southern Cross Medical Care Society reported a $7.1 million deficit after dipping into its reserves to help cope with a 7% rise in health-care claims and said its payout ratio is "unsustainable". 

Wednesday, September 15th 2010, 9:35AM

by BusinessWire

Claims rose to a record $562 million in the year ended June 30, while premium income was $597.3 million, the society said. It returned more than 94 cents of every dollar in premiums, processing 555,000 claims including 150,000 elective surgery procedures.

"The significant year-on-year increase in healthcare costs is an issue faced by governments and healthcare funders the world over," said chief executive Ian McPherson.

"While our 94.1% claims-to-premiums ratio represents outstanding value for our members, it is unsustainable long-term."

The society plans to increase its use of its Affiliated Provider programme, where it contracts with healthcare providers for services at a fixed cost, such as surgeons and specialists. It will also lobby the government to introduce tax rebates on premiums for those aged over 65 and seek removal of fringe benefit tax on employer-subsidised health insurance.

In the latest year, more than 25,000 of the society's 842,000 members downgraded their policies to reduce premium costs, 33% more than in 2009.

Downgrades were most common among those aged over 65, who make up 11% of the society's members. However as a group they are responsible for 35% of claims paid.

Southern Cross has 60.6% of New Zealand's health-insurance market.

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