The private health insurers passing on the largest premium hikes

Millions of Australians with private health insurance will see their premiums become more expensive from next month when the latest round of annual increases kick in.

Last week the Minister for Health and Aged Care, Mark Butler, announced that he had approved an average increase of 3.73% to health insurance premiums from April 1.

The rise is the largest since 2018 and could mean that, on average, singles will see their premiums rise by around $88 each year while families see their costs increase by roughly $174, according to sales data from comparison website iSelect.

The minister, who approves the price changes every year, argued that the figure was a compromise reached with insurers after two previous proposals had been rejected.

"In December, I wrote to every single one of the 29 insurers asking that they sharpen their pencils and provide us with an increase that was more in the interests of their members.

"Based on the resubmissions, I was not prepared to tick and flick their asks and instead asked them to resubmit again."

While 3.73% is the industry average, each insurer has announced a different increase. Police Health customers will be on the end of the highest average increase to their premiums (9.56%), while those with HIF will see their premiums rise by the lowest average rate (1.91%).

Australians with private health insurance can also see how their own insurers' change compares to the wider market by visiting the Department of Health and Aged Care website.

Why are health insurance premiums going up?

It's fair to say that private health customers are unlikely to be thrilled at the prospect of any price hike, even if it's at the lower end of the scale.

But insurers argue that the increases are unavoidable given the ongoing rise in health costs.

Private Healthcare Australia, the private health insurance industry's peak body, suggests that health price inflation rose 4% in 2024, with medical and hospital service costs being the main contributors.

Rachel David, chief executive of Private Healthcare Australia, says that while health funds are acutely aware of the cost-of-living pressure many Australians are under, they have to strike a balance.

"Health funds have gone back to regulators three or more times this year to reach the lowest increase possible. But to remain viable, funds have to charge more because inflation is driving up the cost of everything health insurers pay for.

"We also need to ensure hospitals are adequately funded so they can manage the significant challenges they have experienced due to the pandemic, and the subsequent inflationary economy."

How can private health users reduce their costs?

It appears that the upcoming price rises are already getting insurance customers thinking about their options.

Almost a third of health insurance policyholders (28%) are considering changing providers in search of a cheaper policy, downgrading their level of cover or even cancelling their policy, according to research conducted by iSelect.

Sophie Ryan, iSelect comparison expert, says that rather than opting out altogether, insurance customers may want to shop around first to see if they can find better value elsewhere.

"It makes sense that many Aussies with private health insurance will be questioning whether they can afford to maintain their policy, especially when you factor in other budget pressures such as higher electricity costs and interest rate.

"Many customers may be able to switch to a similar level of cover with a different fund for a cheaper price, and there's no limit to how often you can switch."

Research suggests that many private health insurance customers haven't made the switch recently though. In fact, those involved in a survey commissioned by iSelect last year were found to have held the same policy for just under seven years, on average.

Almost three quarters of survey respondents who had switched providers within the previous 12 months had saved money though, to the tune of $1151 annually, on average.

For more tips related to saving on private health insurance and getting the most out of a policy, check out the video with Sophie Ryan at top of this page.

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