Non-Pharmac-funded drug insurance comes with limits

It’s not enough for a particular drug to be Medsafe approved – for example, a drug it has approved that is indicated to treat pancreatic or bowel cancer wouldn’t be covered if that drug was used to treat another type of cancer such a brain tumor.

That was the message coming out of a Financial Advice NZ (FANZ) webinar aimed at clarifying advisers’ understanding of which drugs that aren’t funded by Pharmac but which are covered by various insurers’ policies.

Southern Cross will only cover non-Pharmac-funded drugs used in treating cancer, not for other types of conditions.

Nicola Cresswell, Southern Cross’ head of product and design, that Southern Cross’s coverage is limited to cancer drugs only and only to those drugs that Medsafe has indicated as treatment for specific cancers.

Creswell noted that about 71 New Zealanders a day are diagnosed with cancer and that is expected to double by 2040.

Southern Cross provides coverage up to specified amounts ranging from $8,000 to $300,000, with premium costs rising proportionately, and that about 94% of claims are being covered within those limits.

Further, the insurer’s chemotherapy coverage is limited to when it is performed by an affiliated provider.

Travis Higgins, head of claims at AIA, noted that cancer treatment is his company’s second-most claimed for diagnosis behind musculoskeletal/orthopedic conditions.

AIA accepts about 92% of all claims and that rate is “pretty consistent across all our products,” he said.

AIA also covers only drugs that Medsafe has indicated as treatments for specified cancers.- he cited the case of a person prescribed a drug called Nivolumab to treat oesophageal cancer.

While that drug was approved and indicated by Medsafe to treat other types of cancer, that didn’t extend to treatment of oesophageal cancer and so that claim wasn’t covered.

Higgins noted that chemotherapy costs have risen about 17% year-on-year and that health expenses generally are rising by about 10% to 15% each year.

“We have seen increases across the board and that has been challenging for all insurers to keep cover affordable.”

Chair of FANZ’s risk member advisory committee, Chris Boon, who hosted the webinar, commented that New Zealand health insurance premiums are still half that of Australia’s.

Time limits on coverage

nib’s adviser partner manager, Arishma Singh, said nib provides non-Pharmac-funded drug cover under three different policies and covers both cancer and other unfunded drugs but the drugs have to have been indicated by Medsafe to treat the policyholder’s specific condition.

Singh noted that insurers “don’t want to contribute to the issue of health inflation with unnecessary and unproven interventions.”

The most recent data showed nib had funded 352 non-Pharmac drugs for 76 members in 2023 in amounts ranging from $69,000 to $136,519.50.

Some of those drugs are now funded by Pharmac, she said.

She cited a drug costing $10,000 a month that nib has covered for a policyholder with stage 4 lung cancer who will need to take the drug for the rest of his life.

Some of the non-cancer conditions that nib will provide cover for include ulcerative colitis and multiple sclerosis.

Partners Life’s James Thomson told the webinar that the company has just one policy that covers non-subsidised drugs with annual benefits of up to $600,000 for conditions requiring surgery and up to $500,000 for non-surgical conditions – most of the non-subsidised drugs it covers fall into the latter category.

Partners Life has a number of yardsticks that decide whether it pays claims including that it has to life threatening, it has to be medically necessary and recommended by a specialist, and the treatment has to be aimed at either arresting or curing the condition.

But the treatment required can’t be indefinite.  An example was used of a rare chronic blood disorder where treatment would be required for the rest of the insured person’s lifetime.

The following line should be removed as it related to a question at the end of the presentation and is not related to this scenario - “Five to 10 years – we still consider that to be a threat to life,” Thomson said.”While Partners Life does check whether Medsafe has indicated a drug to treat a specified condition, if it doesn’t indicate a drug’s use, the company will consider what health authorities in other countries, such as Australia and the US, have recommended and may use that as grounds to grant a claim.

It was the only one of the four to provide coverage for drugs not indicated by Medsafe.

All four panelists emphasised that only a small number of claims have been declined because they don’t fit the insurer’s criteria.

Boon noted that he wouldn’t want to see advisers ceasing to offer coverage for non-Pharmac funded drugs because of the limits on coverage. “It’s a great product.”

This article was updated to clarify comments around Partners Life.