Health insurer pays for holding premiums

Medical insurer Southern Cross Health Society has reported a deficit of $1.1 million for the 2014 financial year to June 30.

Southern Cross is a not-for-profit operation owned by its policyholders.

Chairman Graeme Hawkins said that for every $1 received in premiums, Southern Cross returned 90.4 cents in claims.

That represented a record $694.5m, up 8.7 per cent on the previous year, and included more than 155,000 surgical operations, 370,000 specialist consultations, 784,000 GP visits and 680,000 prescription medicines. Premium income for the year was $768.4m, up 5.9 per cent on 2013.

Southern Cross said it planned to break even but there was a spike in orthopaedic procedures and specialist consultations.

Hawkins said small deficits could be absorbed but Southern Cross had to aim for a small annual surplus for long-term viability. The society’s reserves were $394.3m, the equivalent of about seven months of claims, and generated $18.5m in income. Chief executive Peter Tynan said the small loss was the result of a decision to keep premium rises down as reserves rose to the higher end of the society’s solvency needs.

Tynan said Southern Cross continued to build its ‘‘affiliated provider’’ programme to keep premium rises in check.

Tynan said: ‘‘Contracting with providers is part of a long-term strategy to keep premium increases lower than they otherwise would be by dampening down medical inflation. We believe if provider pricing goes unchecked, access to private healthcare options will become increasingly difficult for many New Zealanders.’’

But he said there was a widespread understanding now that premium rises had knocked membership numbers.