Private health insurance premiums to rise 3 per cent on average

Private health insurance premiums will rise an average 3 per cent from April – the biggest hike in five years but below inflation and the 10-year average.

Health Minister Mark Butler announced on Tuesday he had approved an average 3.03 per cent increase across the country’s 31 health insurers. He had rejected their initial request, made late last year, which would have hiked fees by up to 6 per cent for 14.7 million Australians with cover.

Health Minister Mark Butler announced on Tuesday he had approved an average 3.03 per cent increase across the country’s 31 health insurers.Credit: Glenn Hunt

With the Albanese government sensitive to Australians’ cost-of-living concerns, Butler emphasised the annual increase – which comes into effect on April 1 – was lower than the annual rise in wages (4.2 per cent) and inflation (4.1 per cent), and said he had achieved a better deal for Australians.

“This is the second year in a row that wages, as measured by the wage price index, have grown faster than health insurance premiums,” a statement said.

“The increase in health insurance premiums is much lower than the increase to the cost of other insurance products, which rose by around 17 per cent in 2023.”

NIB recorded the largest increase out of the top five insurers, with premiums rising 4.1 per cent.

Its managing director, Mark Fitzgibbon, said that figure reflected rising medical costs and the return of hospital treatment since the COVID-19 pandemic. He said health claims inflation had returned to long-term trends, and insurers needed to price for that.

“We’re doing our very best to maintain affordability yet spending is growing across healthcare, driven by an ageing population, the rise of chronic conditions and the cost of new technologies,” he said.

Medibank, the largest insurer, lifted premiums by 3.31 per cent while Bupa, the second-largest, increased them by 3.61 per cent. Fees for HCF customers will increase by 2.89 per cent and HBF policyholders will pay 3.95 per cent more.

Medibank chief customer officer Milosh Milisavljevic said the company understood households were doing it tough.

“Our focus has been to balance the impact of rising health costs with the need to keep premiums affordable for our customers,” he said.

The average premium increase has hovered below 3 per cent since 2020, as customers made fewer claims while elective surgery was paused during the COVID-19 pandemic, and some insurers deferred increases as part of their promise not to profit from the pandemic.

But the average hike for the decade between 2014 and 2023 was 4.13 per cent, with increases above 6 per cent in 2014 and 2015.

The 3.03 per cent average is also lower than insurers’ original request, which would have lifted premiums by 6 per cent on average. Butler knocked that back in December and asked them to go back to the drawing board, citing concern for household budgets.

“While we know that any increase will be hard to bear during a global cost-of-living crunch, the Albanese government has ensured that health insurance premiums will fall relative to Australians’ wages,” he said.

“Private health insurers must ensure their members are getting value for money. When costs rise, Australians want to know that higher premiums are contributing to system-wide improvements, like higher wages for nurses and other health workers and ensuring that affordable services are available.”

Private health insurance memberships have risen for 13 consecutive quarters, despite cost-of-living pressures, to their highest rate in five years. Insurers have suggested that declining confidence in the public health system and demographic factors are driving the uptick.

Just over 45 per cent of Australians had hospital insurance in the September quarter and 55 per cent had general cover for extras like dental, optical and physiotherapy. But customers are also facing rising out-of-pocket payments for common medical procedures, with some procedures increasing in cost by as much as 300 per cent in five years.

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