Southern Cross sinks into the red on rising specialist, prescription claims
By Paul McBeth
Sept. 14 (BusinessDesk) - Not-for-profit health insurer Southern Cross Medical Care Society posted an annual deficit as a rising number of claims for specialist procedures and prescriptions outpaced higher premiums from a bigger customer base.
The Auckland-based insurer posted a deficit of $13.3 million in the year ended June 30, compared to a surplus of $6.2 million. Its net claims bill rose 9.2 percent to $906.6 million, which was spread across 3.4 million claims. Claims for specialist consultations increased 15 per cent to 489,872, and those for prescriptions rose 7.4 per cent to 699,005. Claims for GP visits fell 2.2 percent to 735,152 and surgical procedures fell 2.5 percent to 234,679.
Premium revenue rose 7 percent to $987.8 million, with membership increasing 17 percent to 867,593, or 62 percent of the local market. The insurer said increased premiums were mainly due to higher claims, inflation and new benefits.
"Like every other health insurer, we are dealing with health inflation consistently outstripping the general inflation rate," chief executive Nick Astwick said. "We know premium increases are a concern and we work hard to contain growth in costs."
Government data show annual health insurance prices rose 4.2 percent in June, outpacing a 2.2 percent increase in the cost of hospital services and the 3.7 percent rise in paramedical service prices over the same period.
Chairman Greg Gent said the board was comfortable with the shortfall given it was 1.3 percent of premium income.
Southern Cross changed its internal solvency target during the year and reduced its solvency margin to $272.3 million as at June 30 from $303.8 million a year earlier.
The health insurer's investment income slipped to $23.6 million from $25.1 million, although that was on a smaller investment portfolio worth $481.6 million compared to $516.1 million.
New Zealand health insurers paid out about $1.24 billion in claims in the June year just ended, according to their industry association. The government had budgeted $16.7 billion for public health spending in the same period.