Most of the seminars and talks I give are to older people and many of these people have paid for health insurance for years.

Health insurance premiums are usually manageable enough when you’re younger and employed, but as we age the likelihood of needing medical treatment increases, making the insurance companies’ costs greater. There is also an increasing array of treatments for what ails us, meaning the cost of health treatment is generally rising. Consequently, health insurance is becoming more and more expensive for everyone, but especially older people.

As you approach retirement, you might therefore be wondering what to do with your health insurance: keep it, or let it lapse?

There is no simple, easy answer to this question. First, it’s important to remember that health insurance is not essential. It allows those who have it to be diagnosed and treated in the private system, so they’re likely to be seen and treated faster. Also, in some cases, medical professionals have access to equipment that isn’t available in the public system, which could potentially lead to better outcomes.

However, even though the private system is usually faster, the public system does provide very good treatment. On the whole, if you have some kind of major health problem, you’re likely to be seen promptly and treated well. There may be exceptions (there is a lot of talk lately about the struggling public health sector), but thousands of Kiwis are still treated very well in this system every day.

Yet, some want the comfort of knowing they have a choice – and they’re prepared to pay for it. Insurance helps spread the cost of using the private system. Until we grow older. At retirement age we encounter the triple whammy of reduced income, a jump in health insurance costs, and often more acute health needs.

In other words, health insurance is less affordable at just the time that you might need it most.

There are three main options:

1. Cancel your health insurance and rely on the public system.
   
   
2. Keep paying for your health insurance (knowing that the costs will continue to rise as you age).
   
   
3. Self-insure and pay for private care out of your own pocket.

Across the whole population, on average we would be better off cancelling health insurance and paying for treatments and surgery as we need it. Insurance companies have worked out the numbers: they estimate the amount of their total claims then set premiums that cover those claims and their expenses, as well as providing profits on top.

As such, your premium pays not just for your treatment and surgery, but also the insurance company’s costs and profits, including those ads you see on TV. While it might not be the case for every individual – there would be winners and losers depending on circumstances - on average we’d all be better off saving the equivalent amount of our premiums in our own bank account (labelled “health”) and paying for healthcare out of that.