Health insurance rise: how much premiums will rise and when

Four million health fund members spared April 1 premium hikes will soon pay more. See the list of looming rises.

Health insurance premiums at big funds will increase soon. Picture: iStock

Almost four million Australians will see their private health insurance premiums increase in two weeks, amid a trend of policy increases outside their traditional April 1 date.

The nation’s biggest health insurer, Medibank, and its subsidiary AHM will lift premiums by an average 2.96 per cent on June 1, with other funds following in the months ahead. The increase is less than the current annual rate of inflation, which is 7 per cent.

It’s the second rise this year for Medibank, which also moved on January 16, but it is the result of the fund delaying premium rises during the pandemic. The two month deferral from April 1 cost Medibank about $59m.

Health Minister Mark Butler waved through premium hikes in early February, with the average policy rising 2.9 per cent. Since then, the Reserve Bank has raised interest rates three times, placing households under what governor Philip Lowe has branded a “painful squeeze”.

Health insurance is often the second biggest bill households face after their mortgage, with top cover costing families about $6000 a year.

Mr Butler allowed health funds - which made a combined profit of $1.2bn last year - to jack up their costs from April 1. But many have delayed implementing the increase as part of their commitment not to profit from Covid-19.

Medibank‘s Milosh Milisavljevic says the rise is the lowest in 22 years. Supplied.

Compare The Market head of health insurance Lana Hambilton said multiple insurers were lifting prices at different times of the year “away from the traditional April 1 that was standard prior to the Covid pandemic”.

The pandemic forced the deferral and cancellation of many elective surgeries - with the private hospital operators such as Ramsay Health Care still struggling to clear the backlog. Meanwhile, many Australians skipped dental checkups, eye examinations and other consultations covered in their extras policies.

This has resulted in health insurer premium revenue outstripping claims growth.

The year to December, the collective revenue of Australia’s health insurers jumped 1.8 per cent to $26.9bn. This compared with $22.2bn in total claims paid - an increase of 1.6 per cent, according to the latest figures from the Australian Prudential Regulation Authority.

Overall, the sector generated a net profit of $1.2bn last year - a 33.6 per cent on 2021’s $1.8bn. The Australian Competition and Consumer Commission has warned insurers against banking pandemic savings, and many funds have returned surplus cash to members via premium deferrals, rebates and other financial support.

AIA Health has delayed its 2023 increase until July 1, while Bupa said it froze premium rises until October 1 “as part of a $75 million support package”.

“NIB will increase their premiums on September 1 of this year while HCF has said that they won’t be increasing their premiums any earlier than September 1, however, there has been no date 100 per cent locked in,” Ms Hambilton said.

“Australian Unity members will see a rise come through on the first of November.”

Ms Hambilton said Compare the Market expected insurers to return to their traditional April 1 increases from 2024, “as the impacts of the Covid-19 pandemic take their time to wash through and we return to some normality in the private health insurance premium increase cycle”.

She said premium rises varied between households based on locations, ages, policies and loadings. “For example, one Medibank customer on a Silver Plus Assured Hospital and Top Extras 75 policy received a letter explaining that their monthly premium will increase from $475.45 a month to $491.21 from 1 June – an increase of 3.31 per cent and an annual increase of $189.12.”

The impending premium rises has fuelled concerns about a return to pre-pandemic trends when scores of Australians - mainly the young and healthy - withdrew from private insurance.

Former Australian Prudential Regulatory Authority executive Geoff Summerhayes warned in early 2020 that only three private health insurers would have a sustainable business model by 2022. But that prediction did not eventuate as the pandemic cast a greater spotlight on healthcare and Australians returned to health insurance in droves to avoid public waiting lists.

But former Bupa Australia boss Hisham El-Ansary said mid last year that if Australians perceived a “diminishing value proposition” in private healthcare, it would spark a decline in health insurance participation and heap pressure on an already overburdened public sector.

Medibank group executive Milosh Milisavljevic said the company knew household budgets were under pressure, “which is why we recently announced our lowest premium rise in 22 years”.

“We made a commitment at the start of the pandemic not to profit from Covid-19, and we’ve stuck to that promise by giving back more than $1 billion to our customers – this has been via cash give-backs, premium increase deferrals and extras rollovers,” he said.

Health insurance funds have been signing up record numbers of Australians as households focused more on health during the pandemic.

Medibank chief executive David Koczkar told a conference this month that the industry had grown for 10 consecutive quarters.

“The value proposition for health insurance remains strong – with the community continuing to prioritise their health and wellbeing and increasing waiting lists in the public health system driving greater interest in private health cover,” he said.

Ms Hambilton said people were comparing policies more than before as a result of the cost-of-living crisis.

She said cost-of-living pressures should prompt people to put their policy under the microscope.

“While any price increase can put a strain on the budget amid the cost-of-living crisis, it’s a better idea to switch policies than ditch altogether.”