Part 5: Banking and insurance

Inquiry into Health Benefits Limited.

HBL provided banking and insurance services directly to DHBs and some other entities. HBL dealt with providers on behalf of DHBs to achieve savings through bulk discounts and efficiencies. We looked in detail at the banking service to assess HBL’s effectiveness in delivering services directly.

Shared banking

Shared banking refers to the arrangement where HBL acts as a centralised cash manager for the shared banking entities − the DHBs and HealthShare Limited, healthAlliance, and healthAlliance (FPSC) Limited. The objectives were to maximise investment returns and reduce administration costs.

HBL inherited shared banking from the Crown Health Funding Agency (CHFA) when it was disestablished in July 2012. CHFA had progressed the programme to the point where DHBs were committed and a bank had been chosen as preferred provider. HBL had to manage the implementation process (including transferring DHBs that were not the new bank’s customers to the new bank) and the problems arising from disestablishment of CHFA, such as formalising arrangements through new legal documents and improving the relationship with the bank. HBL was responsible for the ongoing operation of the service.

HBL moved shared banking entities’ cash balances to or from a centralised HBL account. The available balance in the centralised account attracted on-call interest at a rate negotiated with the bank. HBL also invested funds using term deposits for the shared banking entities. From 1 January 2015, HBL was able to place on-call funds with banks other than the preferred provider bank.

To provide oversight for the process, HBL set up a Chief Financial Officer Reference Group made up of a chief financial officer from each region, two DHB finance managers, and an HBL representative.

The original forecast gross savings for the programme were $3.6 million a year. The programme saved $4.6 million in 2013 and $4.5 million in 2014, at a cost for both years of $0.7 million. The net savings for these years were marginally higher than forecast.

Shared banking’s success can be attributed to:

  • having a narrow and well-defined scope;
  • affecting only a few people in each DHB;
  • having good leaders that DHBs trusted;
  • being able to show benefits from the start; and
  • the Chief Financial Officer Reference Group structure, meaning that DHBs helped make decisions, giving them a sense of ownership of the initiative.