Health insurance is highly valued by employees and is increasingly becoming a valuable negotiation tool for New Zealand businesses.

That’s according to Willie Moala, National Insurance Lead at Advice First, who sees it as an ideal way for businesses to support wellbeing, attract talent and maintain productivity.

“It only takes one significant claim for people to see what their health insurance is worth, and then they want to hold onto it with two hands,” says Moala. “Businesses use it as part of their broader offering to attract and retain staff. We’re often seeing this become part of negotiation discussions when recruiting, particularly in sectors with strong competition for talent like IT, law and accounting.”

Recent research shows average health insurance premiums have jumped 20–30% over the past year, yet only around a quarter of New Zealanders have their cover fully funded by an employer.

An often-overlooked cost of living issue for employees 

Corporate health insurance is usually a much-appreciated benefit that alleviates financial pressure and stress for New Zealand workers.

The cost of living increased by 23% between March 2020 and March 2025, putting considerable financial pressure on Kiwi households. Consumers have been looking for ways to cut back, and reducing insurance cover is one option.

According to the Financial Services Council (FSC), 54% of those with health insurance have either considered cancelling their policy, reduced add-ons or downgraded their plan.

However, the proportion of New Zealanders with private health insurance rose from 32% to 37% between 2022 and 2024, reflecting the value people place on ready access to premium healthcare, says Moala. “People value this highly. It’s one of the few insurances that’s truly tangible. Someone who makes a claim experiences that value instantly. It’s one of the stickiest products, because there’s huge reluctance to let it go.”

Health insurance helps businesses take care of their people

“If you’re waiting a long time for a diagnosis or treatment, at some point you may not be able to work and that drags on until you get treatment,” says Moala. “The most obvious example is something like a joint replacement, where there’s a long queue.”

In January 2025, average knee replacement waitlist times were more than a year at four major hospitals, and more than 300 days at four more. The shortest average waitlist time was 107 days.

“Health insurance means you’ll get diagnosed and treated faster, which means you’re less likely to have time off work. Plus, being unwell is generally stressful, so being treated quickly can really help with the mental health side of things.”

Businesses can use their size to buy health insurance across the payroll at a lower per-person cost and with wider-ranging cover than an individual employee could secure.  

“Also, as a staff member, you don’t have to go through medical checks and you are typically covered for most pre-existing conditions,” Moala explains. “That can be especially meaningful for someone with a chronic condition like diabetes, for instance.”

Should health insurance be exempt from FBT?

With our rapidly ageing population, pressure on our public health system is only increasing. Private health insurance helps alleviate some of that pressure, as well as some of the cost to the taxpayer. Private health insurance funds nearly 70% of all elective surgeries, according to RNZ.

Corporate health insurance currently attracts fringe benefit tax (FBT) at either 49.25% or 63.93%, a considerable additional cost for New Zealand’s small- to medium-sized businesses.

“It is my view that charging FBT is a disincentive for businesses to provide a product that ultimately benefits everybody,” Moala says. “It does good for business, individuals, taxpayers and the public health system. It seems bizarre to apply a tax; my view is that New Zealand should incentivise employers to do this.”

Get the most out of your health insurance, whoever pays for it

Moala says employers should ensure their workers are educated on the full value of their health insurance and how to take advantage of every benefit. That education also extends to individuals who have health insurance: be aware of what you can claim and any bonuses you might be able to access.

“I was on holiday recently and needed a prescription, and my insurer has a free online doctor’s service,” he says. “I got an appointment the next day at no cost, compared to a two-week wait to see my doctor. I don’t know if people utilise these services to their full extent. I don’t even think most policyholders know it exists. If you’re paying for health insurance, you might as well get the full benefits.”

To learn how to support your team’s financial wellbeing, visit moneyfit.me

[Sources: 37% private health insurance, reason for cancellation: FSC; how insurance is funded: FSC; cost of living increase, Infometrics; 70% elective surgeries: RNZ, knee replacement wait times: RNZ]