Changes to health insurance promoted

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Income and fringe benefit tax breaks on health insurance, plus employer and health insurance part-funding of district health boards, are all advocated in a major report by the Health Funds Association.

Wednesday, October 13th 2004, 11:50PM

by Rob Hosking

Income and fringe benefit tax breaks on health insurance, plus employer and health insurance part-funding of district health boards, are all advocated in a major report by the Health Funds Association.

The HFA, which represents the country’s health insurers, has suggested the methods as a way of curbing the surge in public health spending over the past few years, and also as a way of getting more New Zealanders to take out health insurance.

The HFA says accident compensation premiums, paid by the employer, are not covered by fringe benefit tax, yet health insurance premiums, which are part of a remuneration package, are.

“Eliminating the unfairness in FBT tax treatments…would engage employers in the process.”

And it suggests that employers and health insurers could, together, purchase health services from district health boards.

The report advocates this by an analogy with the ACC accredited employer scheme, whereby larger employers can opt out of paying ACC premiums but instead purchase health coverage directly.

Middle and upper income earners could be given the ability to opt out of paying the portion of their tax which goes toward health spending: instead, they could link with employers and health insurers to purchase health-care directly from district health boards.

“Health insurers would need to continue to deliver their role beyond simple indemnity. They would…need to [help] policyholders with guidelines and appropriate costs for individual treatments and suggesting the most cost effective means of treatment.”

The proposal would get the benefit of the economies of scale which the public sector possesses, plus the cost discipline of the private sector, the report says.

Finance Minister Michael Cullen has criticised the report as a move to user pays, and says health spending, while growing, is not out of control.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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