Why removing FBT on workplace insurance stacks up

A simple tax change could help more than 200,000 New Zealanders access workplace health insurance, get treatment sooner and build stronger financial resilience before something goes wrong.

That is the key finding from new economic modelling by NZIER, commissioned by the Financial Services Council, which looks at the case for removing Fringe Benefit Tax from employer-provided life, health, trauma, disability and income protection insurance.

The numbers are pretty compelling.

NZIER found removing Fringe Benefit Tax could deliver up to $198 million in net economic benefits. For every dollar of foregone revenue, New Zealand could expect between $1.74 and $1.94 in wider economic benefits through faster access to treatment, fewer days off work, stronger productivity and less pressure on public waiting lists.

It also estimates the change could extend group health insurance coverage to around 200,000 additional Kiwis.

That's important because workplace insurance is one of the most practical ways to help more people access cover. Group schemes can pool risk and make insurance more affordable and accessible than people trying to buy cover on their own.

Right now, the tax system gets in the way.

If an employer wants to help their staff access health or life insurance, Fringe Benefit Tax adds an extra cost. That makes it harder, not easier, for workplaces to support their people.

Behind the modelling are very real human outcomes.

NZIER estimates up to 10,459 procedures could move from public waiting lists into private care, saving patients a combined 471,630 waiting days. That represents 14 per cent of the relevant Health NZ waitlist and a 52.6 per cent reduction in expected waiting days for those patients.

That is someone getting a hip replacement sooner. Someone returning to work faster. A family not having to drain savings or take on debt because illness has knocked them sideways.

Financial resilience is not just about retirement savings. It is also about what happens when life takes a turn: illness, injury, disability, time off work, or the loss of a household income.

Life, health, trauma, disability and income protection insurance all help people manage those shocks. They also support employers through fewer lost workdays, stronger productivity and better support for staff when they need it most.

Kiwis back the idea

New FSC polling shows 68% of New Zealanders support removing FBT on employer-provided health and life insurance, with improving healthcare access ranked as the top priority for strengthening long-term financial wellbeing.

This is why the FSC Election Manifesto recommends removing FBT from employer-provided life and health insurance. It also calls for expanded shared and co-funded healthcare models, and for insurers to access Pharmac-negotiated prices for medicines and medical devices.

None of this replaces the public health system.

The public system will always do the heavy lifting. But where employers are willing to help fund access to insurance for their people, we should not be taxing that support like it is a perk.

And the numbers show it stacks up.

The NZIER report was launched at FSC’s annual conference, where business and political leaders discussed whether current tax settings are holding back workplace life and health insurance - and what removing FBT could mean for workers, employers and the public health system.