For 73-year-old Sandra*, balancing her budget has become increasingly difficult as the cost of health insurance continues to climb.
Over the past year, her monthly premium has surged from $522 to $715, a sharp increase for a widowed pensioner living on a sole monthly income of $2153. With little financial flexibility, she is now facing the difficult decision of whether to cancel her health insurance at a time when her need for medical care may only increase, as reported by Stuff.
After more than three decades with her insurer and very few claims, Sandra feels frustrated that the system no longer works in her favour. “Health insurance is now a luxury I can’t afford,” she says, as quoted by Damien Venuto of Stuff.
Her experience reflects a broader concern across New Zealand, where health insurance premiums have risen well above the current inflation rate of 3%. Many households are questioning how sustainable these costs will be in the years ahead, particularly as public healthcare wait times continue to lengthen, as reported by Stuff.
Experts say health insurance costs do not rise uniformly with inflation, as each sector faces unique pressures. According to Steve Gregory, national manager of employee benefits and health at Aon New Zealand, ageing is one factor, as insurers adjust premiums to reflect higher risk over time. However, this accounts for only a small portion of recent increases.
The primary driver, Gregory says, is medical inflation, the rapid rise in the cost of delivering healthcare.
“Medical inflation, which tracks the rate at which healthcare costs rise, jumped from 10% in 2024 to 17% in 2025,” says Gregory, as quoted by Damien Venuto of Stuff.
This far exceeds the global average of 9.8% and the Asia-Pacific average of 11.3%. Rising hospital costs, more advanced and expensive diagnostic tools, higher wages for healthcare professionals, and growing demand for services are all contributing to the trend.
Even those who rarely make claims are affected, as insurers factor in the higher cost of treatments they may need to cover. With Aon forecasting medical inflation to reach 18% in 2026, Gregory says most of this increase is likely to be passed directly on to consumers.
A policy costing $500 a month at the beginning of 2024 could rise to nearly $760 by the end of 2026, a trajectory already reflected in Sandra’s experience.
The rising cost of private health insurance is closely tied to wider challenges in New Zealand’s healthcare system. An ageing population is driving demand for treatment of chronic conditions such as cardiovascular disease, cancer and diabetes, while long wait times in the public system are pushing more patients toward private care.
“In the last couple of years, we’ve seen more and more people making claims for things that would have previously used the public health system for,” says Gregory, as reported by Damien Venuto of Stuff.
Advances in medical technology have also increased costs, with more frequent and detailed diagnostic testing becoming standard practice. While these tools improve patient outcomes, they add to overall healthcare spending.
Gregory says easing pressure on private insurance premiums will depend largely on restoring confidence in the public health system. Research from a 2024 OECD study shows satisfaction with New Zealand’s healthcare system has dropped to 46%, below the OECD average of 52%, Damien Venuto of Stuff has reported.
Financial advisers stress that health insurance is designed to provide protection rather than returns. For retirees like Sandra, the decision to keep or cancel cover often comes down to peace of mind versus affordability.
"You can wait six months or six years for a hip replacement, or you can do it privately within six weeks or six days," says Chris Walsh, founder of Moneyhub, as Damien Venuto of Stuff has reported.
Walsh advises those struggling with premiums to review their policies carefully, consider higher excesses, and compare offers from multiple providers. Tailoring cover to focus on major medical events, rather than comprehensive protection, can also help reduce costs.
“You're not going to save any money, and you’re not going to find answers by just talking to the person that sold the policy to you," he says, according to Damien Venuto of Stuff.
For many New Zealanders, the rising cost of health insurance is forcing difficult conversations and decisions about how much they can afford to pay for certainty in an increasingly stretched healthcare system.
*Name changed to protect privacy.