Health insurance price rises: Everything you need to know

Health insurance premium increases are – for better or worse – a regular part of life for millions of Aussies. Even though premium adjustments have to be approved by the government, many policyholders are paying more than they might expect. So why are your premiums increasing, and how can you manage those costs?

We’ve pored over the data so you don’t have to. Read on to find out more about why health insurance premiums rise, when to expect these increases, and how you can avoid being caught off-guard by unexpected premium hikes.

The main reason you’ll experience a private health insurance price rise is that insurers need to keep up with surging healthcare costs. A few of the factors driving these costs include:

• Ageing population: Older Australians usually need more complex – and especially more frequent – healthcare, which translates to higher claims.
• New medical treatments: More advanced technologies, surgeries and treatments – such as joint replacements and weight-loss surgeries – are more effective but also expensive.
• Hospital and operational expenses: Health insurers need to account for growing wages, recruitment costs, energy prices and a range of other expenses that hospitals have to cover just to operate.
• Inflation pressures: Like the majority of all sectors, healthcare providers are impacted by inflation, which trickles down to consumers through premium increases.

While many providers try to balance these factors, the rising costs can sometimes force them to increase their premiums beyond the government benchmarks. Some gold-tier policies saw increases of up to 15–17%, well above the 3.03% annual average approved by the government in 2024.

This is no April Fool’s Day joke – premiums go up every year, on 1 April. Sometimes, like in 2020–21, you can get hit with back-to-back premium hikes in the space of six months, if the insurers decide to delay their increase until 1 October. This is when the federal government allows insurers to adjust their prices, based on thorough assessments of the costs involved in delivering services.

The good news is that the process to approve these rate changes is rigorous – it’s not just letting the insurers run free with whatever premium hike they want to implement:

1. Insurers submit proposed increases to the Australian Prudential Regulation Authority (APRA).
2. The Department of Health reviews the proposals to make sure they align with both operating costs and public interest.
3. In some cases, insurers are required to resubmit their applications multiple times so that their reasoning behind the premium hikes is fair.

However, the reality is that individual policyholders will experience price increases at differing rates – sometimes far beyond the government-approved average. It’ll all depend on the type of cover you have (e.g. Gold hospital cover), where you are located and a few other factors.

Historically, health insurance premiums have risen annually, though the rate of increase varies from year to year. Here’s an overview of recent trends:

• 2024: 3.03% government-approved average increase, with some policies increasing by as much as 17%.
• 2023: 2.9% average increase.
• 2022: 2.7% average increase.
• 2021: 2.74% average increase.

While these figures represent averages, many policyholders are paying more than expected. For example, the government denied insurers’ original requests of up to 6% increases in 2024, citing the ongoing struggles with cost-of-living pressures for many Australians. Despite this cap, individual gold-tier policies still saw steep increases, with Australian Unity’s Gold Complete Hospital policy rising by more than 17% in Western Australia.

The fact of the matter is that rising premiums are taking a big toll, with one in seven households struggling to keep up with payments. In 2023, approximately 354,000 Australians cancelled their health cover, and another 590,000 switched providers to find better deals.

While premium increases are largely unavoidable, here are a few strategies to help you save money on your health insurance:

1. Prepay your premiums

Many insurers allow policyholders to lock in their current premium rate by prepaying for 12 months before the annual increase takes effect. In other words, you’ll avoid price rises for at least one year.

2. Shop around and switch providers

If your insurer raises premiums beyond your comfort level, start comparing other health insurance policies and think about switching to a different provider. Online comparison tools will help find you policies with better value or lower premiums.

3. Review your cover

Are you actually on the right level of cover for your needs? If your circumstances have changed, you might be able to downgrade from Gold-tier hospital cover to a more affordable Silver or Bronze policy. Be cautious, though, as switching tiers could affect the range of services you’ll get covered for.

4. Increase your excess

Choosing a higher excess can reduce your monthly premiums. This means you’ll pay more out-of-pocket when you make a claim, but your ongoing premium costs will be lower.

5. Explore corporate or group discounts

Some employers or industry associations will have group health insurance discounts available. Check with your workplace or professional network to see if there are any discounts on offer.

6. Use health funds’ loyalty rewards

Some insurers give rewards or discounts to policyholders who stay with them for a certain number of years. Check if there are any benefits if you’ve been with the same fund for a long time.

The bottom line is that health insurance premiums in Australia are on an upward trend, and there’s no end in sight. Driven by rising healthcare costs and inflation, you’ll be footing the bill every year.

However, understanding the reasons behind these increases and being proactive with your health insurance decisions can help mitigate the impact. Whether it’s by prepaying your premiums or switching providers, there are ways you can take control of the situation.