More than 15 million Australians face the highest annual rise in private health insurance premiums in seven years after the Albanese government approved an above-inflation increase that pollsters warn will damage Labor heading into a cost-of-living election.

Health Minister Mark Butler said on Wednesday the average cost of private health insurance would rise by 3.73 per cent from April 1, about half of what some health funds lobbied for but the biggest annual hike since 2019. Last year’s average increase was 3.03 per cent.