Could the Australians teach us something about making health insurance more sustainable?

Health insurance policyholders over the age of 65 would see their premiums slashed to an average of around $1300, if New Zealand followed the Australian example of "community rating", where young and old paid the same for their health insurance.

But, according to Australian insurance specialist James Reid, the move would lift premiums for people under 65 by an average of around $550.

Older health insurance policyholders are finding it hard to maintain their cover when they retire, and with premiums rising in double digits every year, ASX-listed health insurer NIB has begun to lobby for politicians to intervene.

NIB paid Reid to model what would happen to premiums should Australian-style community rating laws be passed in New Zealand, replacing the current model of calculating individual policyholders' premiums based on factors including their age.

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As older policyholders make more, and more costly, claims, the current New Zealand pricing model results in premiums that get harder and harder for older people to afford.

Just how painful the premium rises become as people get older is shown by the example of John Griffin.

"When you start getting 26 per cent increases per annum, it pretty quickly gets beyond the realms of even the pretty well off to pay," Griffin says, whose in his mid-60s, and is paying around $9000 a year in combined premiums for himself and his wife.

He recalled his early days as a Southern Cross policyholder, when the insurer had a community rating model.

"The reality is I have already contributed to the insurance pool from when I was 26."

Southern Cross was forced to move away from community rating, however, when private insurers like Sovereign (now owned by AIA) and Tower (now owned by NIB) entered the market and started offering lower premiums to young people to win market share.

He expected to have to cancel his insurance, if the premium increases continued.

Griffin has written to Health Minister David Clark asking him to bring back community rating, but Clark said he had passed his letter on to Commerce Minister Kris Faafoi.

That frustrated Griffin.

"It's not a commercial issue. It's a health care issue," he said.

"It's about enabling your citizens to maintain a reasonable level of healthcare, and not block the state system up with old codgers when they get to retirement age."

As Griffin's case shows, older people are paying significantly more than $1300 Reid calculated as the possible average community rated premium, but market dynamics mean making the young pay more to subsidise the old again could only happen with Australian-style government intervention.

"If you have big decreases in premiums for older people, and big increases for younger people, younger people would drop their cover," Reid said.

CHRIS MCKEEN/STUFF Health Minister David Clark has been asked to bring back a community rating system for health insurance.

The Australian Government did just that with "carrot and stick" tax rebates and surcharges to turn around the private health insurance in Australia, where private insurers now pay around 10 per cent of the nation's healthcare bill.

In New Zealand, private health insurance foots around 5 per cent of healthcare costs, Reid said.

Not all Australians liked the country's health insurance laws, especially the extra tax higher-income Australians have to pay, if they choose not to have private health insurance.

But Reid said there was no debate about their fairness of community rating.

"Everybody gets old and sick eventually," he said.

New Zealand did not necessarily need to follow Australia exactly, he said.

The community rating system in Australia doesn't even allow higher premiums people for who were overweight, or smoked.

SUPPLIED Robert Hennin, chief executive of NIB New Zealand, has begun lobbying for "community rating" of health insurance premiums to make policies more affordable for older people.

Reid said community rating was not unknown in New Zealand, as it was used by ACC, which does not base levies on people's ages.

NIB chief executive Rob Hennin said "community-rated premiums mean that all individuals on the same product pay the same price, regardless of their age or previous medical history".

"This means that older people are more likely to maintain their cover and in turn, encourages them to finance a greater share of their own health costs."

"Encouraging individuals to take greater responsibility for their health will in turn help reduce the ever increasing health cost burden on the Government, which means less of a burden on everyone."