New Zealand's largest health insurer Southern Cross sent members an email admitting that underinvestment in public healthcare drove up private insurance claims and premiums.
The admission, shared on New Zealand's Reddit forums, provides rare corporate acknowledgment that everyone suffers when public health systems are underfunded - even those with private coverage.
The CEO's email explained that as public hospital wait times grew longer and services became harder to access, more Southern Cross members used their private insurance for procedures they might have otherwise received through the public system.
This increased claims volume, which in turn forced the company to raise premiums to cover costs. The result: members who thought private insurance protected them from public system problems ended up paying more anyway.
Mate, this is the quiet part said out loud. Private health insurance in Australia and New Zealand has always been sold as an alternative to public healthcare - a way to jump the queue and get faster access. But it only works if the public system functions reasonably well.
When public hospitals are overwhelmed and wait times balloon, everyone with private insurance starts using it for everything. That drives up premiums, which pushes more people out of private coverage, which puts more pressure on the public system. It's a doom loop, and Southern Cross just confirmed it exists.
The admission is significant because it contradicts a common political narrative: that private healthcare takes pressure off public systems and therefore saves taxpayers money. The Southern Cross email suggests the opposite - that a weak public system makes private insurance more expensive and less viable.
This has direct relevance to Australia, where the relationship between public and private healthcare has been politically contentious for decades. The federal government spends billions subsidizing private health insurance through rebates and the Medicare Levy Surcharge.
The justification is that these subsidies encourage people to buy private insurance, which allegedly reduces demand for public hospitals. But if a weakened public system drives up private insurance costs and usage, those subsidies are less effective than claimed.
New Zealand doesn't subsidize private insurance the way Australia does, but the principle is the same. Private coverage works best when it's supplementary - when people use it for elective procedures and faster access but rely on the public system for most healthcare needs.
When the public system deteriorates, private insurance becomes the primary option for anyone who can afford it. That's more expensive for everyone and creates a two-tier system where quality healthcare depends on ability to pay.
The political implications are substantial. New Zealand's government has been criticized for not investing enough in public health. The Southern Cross email gives that criticism a dollar figure - members are literally paying more because of underinvestment decisions made in Wellington.
Across the Tasman, Australia faces similar pressures. State governments run public hospitals but face budget constraints. The federal government funds Medicare but limits GP bulk-billing rates. The private sector fills gaps but can't replace a functioning public system.
Health economists have been saying this for years: universal public healthcare is the most cost-effective way to deliver good health outcomes. Private insurance has a role, but it can't substitute for adequate public investment.
The Southern Cross email is particularly notable because companies rarely admit that external policy failures affect their business. Insurers typically blame rising costs on aging populations, expensive new treatments, or increasing health consciousness - anything except underfunded public systems.
For this CEO to explicitly connect premium increases to public health underinvestment is refreshingly honest. It's also strategically smart - the company is telling members that if they want lower premiums, they should pressure government to invest more in public healthcare.
Some Reddit users who shared the email noted they'd left Southern Cross after recent premium hikes made coverage unaffordable. That's the other side of this problem: as private insurance gets more expensive, fewer people can afford it, which defeats the purpose of having a private system at all.
Looking ahead, both Australia and New Zealand need to decide what role they want private healthcare to play. If it's truly supplementary, public systems need adequate funding. If governments want private insurance to carry more of the load, they need to subsidize it heavily - which may not save money compared to just funding public healthcare properly.
The Southern Cross email suggests the current approach isn't working. Members are paying more, getting less, and watching both public and private systems struggle under pressure.
Mate, there's a whole continent and a thousand islands down here dealing with this problem. And the biggest insurer in New Zealand just told everyone what the solution is: fund public healthcare properly, and everyone pays less. Even the people who can afford private coverage.
