Health insurance premiums rise ‘the lowest in 19 years’

Health Minister Greg Hunt said on Saturday he had approved a 2.92 per cent increase in prices from April 2020.

Minister for Health Greg Hunt has approved a 2.92 per cent increase in prices from April, which will be the lowest average premium increase in 19 years. Picture: AAP

Relief from the lowest annual increase in health insurance premiums in almost two decades may be only fleeting, with the lower than expected rise setting the stage for a bigger jump in the years ahead.

Health Minister Greg Hunt said on Saturday he had approved a 2.92 per cent increase in prices from April, which will be the lowest average premium increase in 19 years.

Stephen Duckett, the health program director at the Grattan Institute, said while the increase was a win for consumers — given insurers had been pushing for a bigger rise — it was still well ahead of inflation and would put pressure on household budgets.

He also noted that the price increase was below the rate of increased costs borne by insurers, which had grown by almost 4 per cent in the past year.

It meant insurance companies would have to dip into their reserves over the coming year, which would increase the likelihood of bigger premium increases in the year ahead.

He said while the government had “really screwed the insurers down” this year, it would be difficult to maintain that rate in coming years. “We will see future increases going back to levels much higher than this, especially if they’re running down their reserves,” he said. “They can’t do that every year.”

Mr Hunt had been insistent he wanted price rises to stay under 3 per cent. The minister sent the insurers back to the drawing board on calculating their level of premium increases last month when the average figure presented by insurers was deemed too high. Last year’s premium increase was 3.25 per cent, significantly lower than the recent trend. Next year’s premium increase is lower than the 3.8 per cent inflation rate for medical and hospital services this year but still above the CPI.

Private Healthcare Australia said funds had found efficiencies and used retained capital to keep the average premium rise for 2020 low.

The announcement of next year’s premium increase comes as the government continues to look for ways to make private health insurance more affordable and attractive to young people, who are dumping cover in droves.

Allowing insurers to fund more services outside the hospital system is being considered, and Mr Hunt this year pushed through a gold, silver and bronze system for classifying health insurance designed to make the system easier to understand.

It also introduced a new 10 per cent discount for young people aged between 18 and 29 who took out cover. More than 380,000 young people have received these discounts since April this year.

There’s also been reforms to the cost of medical devices, and waiting periods for those seeking mental healthcare have been waived. From April 1, a single person will pay an average of 68c extra a week and a family on average will pay $1.99 more a week.

Private Healthcare Australia chief executive Rachel David said the increase was necessary to ensure funds remained financially viable and met statutory prudential requirements.