Need to know
- Health minister Greg Hunt says private health insurance costs will increase by 2.92% on average
- This is the lowest price hike since 2001, but still nearly triple the rate of inflation
- Premium changes come into effect on April 1, when the government rebate will also be cut
The cost of private health insurance is set to have the lowest growth in eighteen years, but the average premium increase will still be twice the rate of inflation.
The Health Minister, Greg Hunt, has confirmed that premiums will increase by 2.92% on average, although some funds will have increases as high as 5.6%.
"However, every dollar matters for families and we will continue to improve the affordability and transparency of private health insurance," he says.
Premium changes for all health insurance customers will take effect on April 1. The government rebate will decrease on the same date.
Health insurance costs are growing faster than inflation
With a 2.92% increase, we project the average cost of a single-person top hospital policy will increase from $2637 to about $2714 before the rebate is applied. With couples and family policies typically costing twice as much, a family might find themselves spending around $154 a year more on hospital cover.
While the premium increase is low compared to inflation in the healthcare industry, this year's price hike will be higher than rate of general inflation and wage growth, raising concerns that private health insurance is being priced out of the reach of many Australians.
"This latest increase will mean Australians with private health cover have been hit by a 61% cumulative price hike since 2010, forcing many to downgrade or drop their private health insurance," says CHOICE spokesperson Jonathan Brown.
"Notwithstanding the barrage of fear-laden advertising from health insurers and for-profit switching sites, private cover is unaffordable and often unnecessary for many people."
Premiums have increased by 61% in the last decade, while the consumer price index (CPI) grew only 23%.
Rebate cuts mean you'll pay even more
Compounding the price pressure is a simultaneous cut to the government's private health insurance rebate. The rebate amount goes down if the average premium increase is greater than CPI growth – which it is every year. The rebate amount for most people will reduce from 25.1% to to about 24.8% on April 1.
With premium increases at one end and a rebate cut at the other, the cost of the average policy will actually increase by 3.3%. When the annual cuts to the rebate are factored in, the real cost of health insurance has grown 73% in the last decade.
We need an inquiry into health insurance
CHOICE continues to urge politicians to launch a public, independent inquiry into the industry. With people dealing with increasing costs and greater confusion, there is growing uncertainty around the value of private health insurance.
"Australia needs the government to establish a public and independent inquiry to take a deep look into private health cover," says Dean Price, Health Campaigner at CHOICE.
"This is a market that simply isn't working and it's having real impacts on our lives. We'd like to see the government take wide-ranging action to fix it. CHOICE has worked with 17 other expert groups and academics to call for a new inquiry and action from Federal Parliament. Australia's health system should put people first, not insurers."
Health insurance saving tips
- Consider increasing your excess to reduce your premium.
- See if your health fund offers discounts for paying by direct debit.
- Ask yourself if you really need extras cover: if the amount you claim is lower than your premium, consider dropping it.
- Check to see if you can join a restricted membership health fund.
- Pay your annual premium in March to put off the April 1 price hike until next year.
- Health funds can offer discounts up to 10% for under 30s. Check if your fund offers them.
- Take the Do I Need Health Insurance? health check to see if there's any tax benefit to paying for hospital cover.