Non-Pharmac-funded drug insurance comes with limits
[UPDATED] Insurance advisers need to understand that most insurers will only cover non-Pharmac-funded cancer drugs if they have been approved by Medsafe and also indicated as treatment for the specific type of cancer their client develops.
Wednesday, March 19th 2025, 6:39AM 
1 Comment
by Jenny Ruth
It’s not enough for a particular drug to be Medsafe approved – for example, a drug it has approved that is indicated to treat pancreatic or bowel cancer wouldn’t be covered if that drug was used to treat another type of cancer such a brain tumor.
That was the message coming out of a Financial Advice NZ (FANZ) webinar aimed at clarifying advisers’ understanding of which drugs that aren’t funded by Pharmac but which are covered by various insurers’ policies.
Southern Cross will only cover non-Pharmac-funded drugs used in treating cancer, not for other types of conditions.
Nicola Cresswell, Southern Cross’ head of product and design, that Southern Cross’s coverage is limited to cancer drugs only and only to those drugs that Medsafe has indicated as treatment for specific cancers.
Creswell noted that about 71 New Zealanders a day are diagnosed with cancer and that is expected to double by 2040.
Southern Cross provides coverage up to specified amounts ranging from $8,000 to $300,000, with premium costs rising proportionately, and that about 94% of claims are being covered within those limits.
Further, the insurer’s chemotherapy coverage is limited to when it is performed by an affiliated provider.
Travis Higgins, head of claims at AIA, noted that cancer treatment is his company’s second-most claimed for diagnosis behind musculoskeletal/orthopedic conditions.
AIA accepts about 92% of all claims and that rate is “pretty consistent across all our products,” he said.
AIA also covers only drugs that Medsafe has indicated as treatments for specified cancers.- he cited the case of a person prescribed a drug called Nivolumab to treat oesophageal cancer.
While that drug was approved and indicated by Medsafe to treat other types of cancer, that didn’t extend to treatment of oesophageal cancer and so that claim wasn’t covered.
Higgins noted that chemotherapy costs have risen about 17% year-on-year and that health expenses generally are rising by about 10% to 15% each year.
“We have seen increases across the board and that has been challenging for all insurers to keep cover affordable.”
Chair of FANZ’s risk member advisory committee, Chris Boon, who hosted the webinar, commented that New Zealand health insurance premiums are still half that of Australia’s.
Time limits on coverage
nib’s adviser partner manager, Arishma Singh, said nib provides non-Pharmac-funded drug cover under three different policies and covers both cancer and other unfunded drugs but the drugs have to have been indicated by Medsafe to treat the policyholder’s specific condition.
Singh noted that insurers “don’t want to contribute to the issue of health inflation with unnecessary and unproven interventions.”
The most recent data showed nib had funded 352 non-Pharmac drugs for 76 members in 2023 in amounts ranging from $69,000 to $136,519.50.
Some of those drugs are now funded by Pharmac, she said.
She cited a drug costing $10,000 a month that nib has covered for a policyholder with stage 4 lung cancer who will need to take the drug for the rest of his life.
Some of the non-cancer conditions that nib will provide cover for include ulcerative colitis and multiple sclerosis.
Partners Life’s James Thomson told the webinar that the company has just one policy that covers non-subsidised drugs with annual benefits of up to $600,000 for conditions requiring surgery and up to $500,000 for non-surgical conditions – most of the non-subsidised drugs it covers fall into the latter category.
Partners Life has a number of yardsticks that decide whether it pays claims including that it has to life threatening, it has to be medically necessary and recommended by a specialist, and the treatment has to be aimed at either arresting or curing the condition.
But the treatment required can’t be indefinite. An example was used of a rare chronic blood disorder where treatment would be required for the rest of the insured person’s lifetime.
The following line should be removed as it related to a question at the end of the presentation and is not related to this scenario - “Five to 10 years – we still consider that to be a threat to life,” Thomson said.”While Partners Life does check whether Medsafe has indicated a drug to treat a specified condition, if it doesn’t indicate a drug’s use, the company will consider what health authorities in other countries, such as Australia and the US, have recommended and may use that as grounds to grant a claim.
It was the only one of the four to provide coverage for drugs not indicated by Medsafe.
All four panelists emphasised that only a small number of claims have been declined because they don’t fit the insurer’s criteria.
Boon noted that he wouldn’t want to see advisers ceasing to offer coverage for non-Pharmac funded drugs because of the limits on coverage. “It’s a great product.”
This article was updated to clarify comments around Partners Life.
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The challenge with the comment "only a small number of claims have been declined" is that this area doesn't have many claims, but the value of the claims is significant.
The coalface feedback is that this is causing significant challenges for the clients impacted. It may not be a lot of people against all medical claims, but it is pretty damn important to that person.
In terms of the market, Southern Cross has something like 69% of all medical policies. My ancient stats on unfunded cancer claims for Southern Cross were that 15% of people needed the cover, and 6% were over the $10k policy maximum at the time. That was when we had maybe three unfunded medicines...
The reality here is Southern Cross does have some cover, and they have the vast majority of policyholders,
This means that the number of unfunded medicine claims for the rest against total medical claims is a rounding error. This makes it easy for insurers to dismiss the issue as only a small number of people are being declined.
It's not insignificant when colleagues managing claims are ALL telling me this is giving them worms. It says that the insurers don't have this right, and we advisers don't have enough knowledge to avoid the pitfalls identified and help clients effectively.
I'm trying hard not to sound like this is a Southern Cross issue; it's not. It is at the feet of AIA and nib with my investigations on the subject. I haven't come across an Accuro or Partners Life claim that has been impacted by this issue so far.
Southern Cross does have some challenges in this area, but that has less to do with claim declines than with the level of cover with the $10k policy limit.
Most Southern Cross clients do not have an adviser; therefore, unless policyholders have a reason to, they have not actively looked at adding the Cancer Cover Plus option, increasing their premiums.