Unemployment rate has impact on private health insurance, UC research shows

Increases in the unemployment rate reduce the number of people with private health insurance coverage with reductions more pertinent for men and for the elderly, University of Canterbury economics researchers have found.

The project conducted by UC economics and finance researcher Dr Andrea Menclova and former honours student David Chamberlain showed lower incomes during recessions and the loss of employment impacted on private health insurance.

``We received data from the Health Funds Association of New Zealand for this project and as far as we are aware, there is no previous study on the topic in New Zealand,’’ Chamberlain says.

``Private health insurance coverage for men seems more affected by changes in the unemployment rate than for women. We also found evidence that the insurance coverage of the elderly is relatively more affected by changes in the unemployment rate.

``During periods of high unemployment, the loss in income for elderly people driven by low interest rates could be worsening the impact of adverse economic conditions on their insurance coverage relative to the general population.

``Private health insurance is an effective way of diverting costs away from the public sector, reducing the strain that health expenditure can have on the Government’s budget. About a third of New Zealanders have private health insurance coverage,’’ Chamberlain says.

The New Zealand public expenditure on health is the second largest category after social security and welfare. In 2011, public healthcare expenditure accounted for 6.9 percent of the Gross Domestic Product.

With public expenditure on healthcare expected to double as a percentage of GDP by 2050, knowledge about how the unemployment rate impacts private health insurance coverage could be valuable.

``The benefits of having private health insurance are observed in a 2005 Southern Cross survey, which found that an individual with private health insurance who had a health condition requiring surgery took on average 14 days off work, compared to an uninsured individual, who was absent on average 48 days.

``In 2010, public expenditure as a share of all healthcare expenditure was 83.2 percent, ranking New Zealand sixth highest in a survey of OECD countries.

``The main way we would expect the unemployment rate to impact on private health insurance coverage in New Zealand is through the negative income effect. The demand for health and timely access to medical care goes up when incomes increase, and in New Zealand these objectives can be attained directly through the purchase of private health insurance,’’ Chamberlain says.