Non-PHARMAC medicines coverage – aiming for a data-informed evaluation

Non-PHARMAC coverage has become increasingly important to clients purchasing private health insurance, primarily due to rising public demand for treatments and medications not funded by PHARMAC (the government agency overseeing public pharmaceutical purchasing and subsidy).

Recent coverage focused on the severity of a serious illness and whether it can be cured as a potential limitation to non-Pharmac coverage. We felt it was worth clarifying that, in effect every policy with a non-PHARMAC benefit includes some limitations of this nature – though they may appear in different places and be expressed in different ways within the policy wording. Every private medical insurance contract limits access to treatment which could, in effect, last a long time and not get anywhere – geriatric care, chronic conditions, treatments that are not medically effective, exclusions, or requirements that the condition must be medically significant, no coverage for non-surgical hospital care, these are all forms of limitations (present in all the policies we review) that limit coverage around this issue.

They appear in different places – such as the exclusions, the benefit definition, and the terms. We consider the requirement for ‘significant impact’ to be equivalent to ‘serious or imminent threat to life.’ That’s based on both claim evidence and legal case findings in court cases where there was an attempt by a client to claim that ‘terminally ill’ was equivalent to a threat to life and the judge ruled in favour of the insurer. Other limitations appear by omission – for example, there being no coverage for non-surgical hospital admissions in some contracts. This is because medical insurance contracts are not intended for or priced to cover, in effect, old age. That coverage is known as long-term care insurance, and it is not currently available in New Zealand.

While we can construct possible claim scenarios and thought experiments to help us explore issues and assess them against policy wording, these are less useful as analytical tools than we would like – especially if they are non-specific and not based on actual conditions, but purely hypothetical.  When considering a scenario, we prefer to look up actual New Zealand incidence rates for disorders rather than focusing on unnamed and unquantified ones. What’s most important is a value-based measure - one that considers real conditions or disorders that are covered or not, the most common claims in the category, whether cover extends to those areas, the typical cost of treatment, and which claims are commonly accepted or declined. Although insurers are sometimes less forthcoming than we would like, partly because of historical challenges with claims data recording, much can be learned with a dedication to examining other sources of data: the ministry of health publishes extensive disease incidence and hospital admission statistics, for example.