Be clear in explaining unfunded medicines

Jon-Paul Hale says when an adviser is talking to clients about medical insurance, they need to be very clear about how unfunded medicines are covered.

Thursday, September 26th 2024, 6:51AM

by Jon-Paul Hale

Not so long ago, I wrote a piece about the challenges of presenting unfunded medicines, particularly cancer medicines.

Following that, I've had a number of conversations across the industry, and they've been interesting.

One point I'd like to clarify is the call to change policy wording.

While I alluded to the change of policy wordings in the article, it wasn't the point of the article.

The harsh reality is that medical insurance is under pressure with rising healthcare costs, and unfunded medicines don't help medical insurance claims, putting upward pressure on premiums.

It is up to insurers to define their policies so that they are sustainable and affordable for policyholders.

I'm not so naive to suggest we should have more and pay less. The equation for medical insurance in New Zealand is:
Cost of claims plus operating costs plus profit margin / policyholders age-weighted risk.

Regardless of the provider, a prudent provider needs to apply a profit margin to ensure they are not caught out by over-budget claims.

My point in the article is that we advisers generally have a professional advice risk in how we have presented unfunded medicines.

And yes, the providers do have a significant part to play in this, but it's not a policy wording change. Insurers have a deeper knowledge of the claim issues and can better educate and inform advisers on how this area of the market works.

The reality is that for most insurance advisers, medical insurance is still a "do you want fries with that?" part of their advice model. This is demonstrated by the general lack of understanding existing holders of medical insurance have about what they are covered for.

Yes, uneducated clients with policies demonstrate that we haven't done the education we should to provide clients with the knowledge to make the best informed decisions about their coverage.

It's great that they have cover, but we need to do more to educate people at the coal face. As I have said elsewhere, providers, regulator and professional bodies have their more general part to play.

But I get off track, unfunded medicines again.

Medical insurers can help educate advisers better on their product set and better explain how claims work at a technical level.

In a regulated environment, we don't have the option of ignorance as a defence when a client calls us to account for the fact that their loved one didn't get the treatment needed because of a working technicality that we should have been able to explain.

When it comes to the market, my last article discussed policy wordings and how four out of five people wouldn't respond if MedSafe indicated criteria were not met.

Since then, I have had the opportunity to discuss the details with providers, and it's proven interesting.

For the current on-sale products:

Accuro, interestingly and despite their wording, says coverage for MedSafe is approved and provided within MedSafe guidelines.

Their response to me was that if MedSafe said the medicine was approved for use for the condition, they would pay the claim, ignoring the specifics of the MedSafe indication.

Although this is an excellent position in the context of this discussion, it still raises concerns about "guideline" being used to constrain claims using the MedSafe indication criteria in the future with attitude changes.

My response to Accuro was; that's excellent; please reflect that in your policy wording?

AIA, we know that decision; if it's not indicated, then it's a no.

nib is the same.

Partners Life, which I covered in the article, has specific secondary assessment criteria and would have paid the claim I discussed.

Southern Cross's response was also interesting. This relates to the $10,000 unfunded cancer medicines baseline benefit and the extension Chemo100/300 covers.

Officially, the answer is no; if it's not indicated, it is not covered.

However, the practical reality appears to be nuanced. Where the affiliated provider specialist has done the leg work on the claim submission and stated that the treatment is covered under the MedSafe indication, then they are likely to pay the claim.

This point is relevant as the claim I reviewed had the specialist state that the treatment was MedSafe indicated for the patient's condition.

Further in, the specialist stated the treatment was second-line, contradicting the initial report front page.

And yes, Southern Cross and the other providers received a redacted copy of this claim information with the client's permission for their opinions.

This means that when we advise on unfunded medicines coverage, we must be far clearer and more specific in our portrayal of what is and is not covered by unfunded medicines coverage.

What about the rest?

The rest being historical benefits sitting with providers that cover unfunded medicines:

AIA has MajorCare, which doesn't have the nuanced "indicated" wording in the policy wording. It does state MedSafe approved, meaning there may be an argument about getting approval, but the wording isn't specific enough to decline the claim.

nib has Major Medical Deluxe, which originated with Club Life, ING Life and OnePath Life. This policy is also guaranteed and doesn't have the criteria for indicated. It has wording any MedSafe-approved treatment.

In terms of non-adviser benefits:

UniMed has introduced some unfunded medicines coverage; I have not directly reviewed this.

The NZ Police scheme has added some provisions for unfunded medicines. However, this is neither assigned a benefit value nor criteria in the published policy wordings.

This policy assesses unfunded medicines on a case-by-case basis by the providers of the NZ Police scheme.

This means that NZ Police scheme members should consider alternative coverage for their unfunded medicines risk.

To reiterate, as an adviser talking about medical insurance, you need to be very clear about how unfunded medicines are provided for.

What are the potential criteria and pitfalls are for claims?

The client needs to talk to you if they need to access unfunded medicines before they get carried away with treatment.

And update clients on changes that impact the specifics of your original advice where the provider can change medical policy wordings because they are not guaranteed.

The potential long-term issue for us with non-guaranteed medical products is our advice now could be pursued if a provider substantially changed the policy terms that advice was based on if we have not taken measures to address these changes with clients.

The job of an adviser in this space now has some significant risks if you do not document your work and provide the review and servicing of cover for clients as expected.

Tags: Jon-Paul Hale