A University of Otago health policy specialist has poured cold water on the notion strengthening the private health sector through tax rebates on premiums will help the public sector cope.
Health insurer Southern Cross has blamed premium rises on the growing cost of procedures in the private system.
Associate Prof Robin Gauld said tax deductions for private insurance potentially exacerbated the "two tier" system already operating.
Leaving poorer patients, potentially the most complex and tricky cases, to the public health sector was not a recipe for a well-functioning health system, he said.
Prof Gauld said the Southern Cross moves to strengthen its network of approved healthcare providers was probably necessary.
Southern Cross chief executive Dr Ian McPherson said the relentless demand coupled with higher healthcare costs was putting enormous pressure on premiums.
"Southern Cross is paying 96c in claims to members for every $1 they pay in premiums.
"With healthy reserves we are able to absorb this cost and budget for a deficit in the current financial year."
The cost of claims had jumped 10% for the year ending December 2009, following an 8% rise the year before.
Southern Cross was looking at ways to address the problem, including strengthening its affiliated provider networks.
Some high-volume procedures, such as colonoscopies and cataract extractions, may be covered by an affiliated provider only.
United Future leader Peter Dunne has called for a "fresh look" at making health insurance premiums tax deductible to deal with the rising cost of claims.
Southern Cross figures show it has 18,181 policyholders in Otago and 17,214 in Southland.