COLUMNS - INSURANCE

BY STEVE WRIGHT

I’m driving on a beautiful day and five minutes later I am both sad and frustrated. Sad because I’m listening to another young mother caller on talkback radio desperate because Pharmac does not fund the very expensive cancer drugs she has been recommended. Frustrated because the radio host is asking in agonising tones, “What is the solution?”

At the same time, I reckon there are many insurance advisers tuning in and shouting “health insurance”! at their radios. The question is, are they right? Unless you have access to lots of surplus cash and are prepared to spend it on unfunded drugs, it seems to me the answer is “yes”: insurance is a solution for many, maybe even most Kiwis.

Health insurance is probably the most important type of insurance for protecting against unfunded drug treatments, as long as the right product is chosen. There are health insurance products available that don’t cover drugs not funded by Pharmac, either at all or sufficiently to cover a possible six-figure expense.

The right health insurance will pay hundreds of thousands of dollars for drugs and keep paying this every year as is medically necessary, as long as the treatment and the condition is covered by the policy. It is worthwhile remembering that health insurance, just like all insurance, only pays for benefits (mostly medical treatment with health insurance) covered under the policy wording.

Health insurance does not pay for all medical treatments. You will probably be covered for treatments and drugs for conditions like cancer, cardiac conditions and a whole lot of other non-acute problems requiring hospitalisation or surgery, but what about people with congenital or chronic conditions?

Chronic conditions like multiple sclerosis (MS) are sometimes excluded generally by health insurance, meaning no medical treatment for it will be covered. Even those policies that don’t generally exclude MS are unlikely to pay significant amounts because treatment for MS does not typically include surgery or hospitalisation. So, while policies that do not generally exclude a chronic condition like MS may still pay for specialist visits and diagnostic test costs, they are unlikely to pay for expensive unfunded drugs.

Where does it leave us then if unfunded drugs for conditions like MS are not covered by health insurance? Hopefully you are mouthing “trauma cover” while reading this. In some cases, where health insurance is not a solution, a big transfer of cash into your bank account (and it may need to be a big amount of cash, six figures at least) from a trauma cover policy can help fund your drugs. Naturally, if there is an income at risk due to inability to work as a result of your medical condition, this must be protected too, with income cover or mortgage repayment cover.

I mentioned congenital conditions earlier. It is important to understand how “congenital condition” is defined in the policy, some policies don’t consider every condition present at birth “congenital” and will only exclude congenital conditions if these are discovered within four months of birth. Whatever the definition, “congenital conditions” are generally excluded from both health and trauma insurance, so there are instances where insurance won’t be an answer. Insurance may not be the perfect solution, but it does represent our best shot at protecting a great many people from the unaffordable costs of some drugs if we get the mix of insurance types right and select the right provider’s products. Trauma cover and health insurance are very complementary. Together these two products provide us with the best defence against the costs of unfunded drugs and dramatically increase the likelihood that it will be an insurance company paying for drugs not funded by government, not you or your family.

I find it hard to believe the radio host has never heard of insurance as a possible solution to the lack of drug funding by the government. What a lost opportunity to raise the possibility of insurance as a solution to all those not wanting to rely on the government for something so important. ✚

Steve Wright has qualifications in Law, Economics, Tax and Financial Planning and is General Manager Product at Partners Life.