Private health costs to rise for 15th year in a row

Minister for Health Sussan Ley during Question Time at Parliament House in Canberra on Monday, Feb. 29, 2016. (AAP Image/Mick Tsikas)
Minister for Health Sussan Ley during Question Time at Parliament House in Canberra on Monday, Feb. 29, 2016. (AAP Image/Mick Tsikas) MICK TSIKAS

PRIVATE health insurance premiums are set to rise for the 15th year in a row.

Federal Minister for Health Sussan Ley today announced a weighted industry average increase of 5.59% effective from April 1, compared to the annual average of 6.1% since 2002.

Ms Ley spruiked the fact the increase was the lowest in four years, confirming that 20 health funds had resubmitted a lower premium increase, meaning lower-than-expected price rises for more than 93 per cent of Australia's 13 million private health customers.

"Overall, consumers will be $125 million better off as a direct result of our request for insurers to resubmit lower premiums, saving an average family with combined hospital and general health cover as much as $166 per year," Ms Ley said.

"Hopefully today's announcement has helped reinvigorate some competition between health funds and make it a little easier for consumers to shop around for the best deal while the Government undertakes broader reform."

However, the rate of increase raises questions over the relative consumer affordability of private health cover when compared to the 1.7% yearly inflation rate in Australia for the final quarter of 2015.

According to, the 15 years of increases equates to a 142% cumulative increase in health insurance prices over the same period.

It estimates Australian families could pay an additional $298 per year for the same level of cover when the rise takes place on April 1.


However, in spite of the disproportionate increases for the consumer, a survey conducted by the health insurance comparison service suggested private cover is ingrained in the Australian psyche.

It found one third of policy holders said they would continue to have health insurance no matter how much the price went up.

"Nearly two-thirds of respondents have seen the price of their policy double over the last 10 years," spokerpserson Abigail Koch said.

"Household budgets are tight and there is no reward for loyalty, so it is astonishing so many people pay hand over fist for policies they never use."

51.9% of those most determined to hold onto private health insurance regardless of cost were over 65 years old and 40.1% between 55 and 64. The over 65s were also the most loyal with 60.7% saying they had never changed funds.

  • Total benefits paid to private health insurance members grew by $1 billion - or 5.7 per cent - from about $17.2 billion to $18.3 billion in the 12 months to December 2015.

The younger generations - presumably less reliant on their health insurance and with a wider range of household budget pressures - were much less likely to keep their health insurance in light of rising costs.

"Older people with more health needs are reluctant to switch their health insurance for fear of being without cover when they need it most," Koch said.


Ms Ley said the show of "good faith" from private health insurers was just the first step in broader structural overhauls to deliver significant, lasting savings for consumers on their premiums.

She acknowledged the current premium approvals process wasn't providing the right checks and balances to ensure consumers get the best deal every year.

"I know every health insurance premium increase is hard on the household budget," Ms Ley said.

"For example, it's easy to see the negative impact on premiums when a pacemaker for a private patient currently costs their insurer $43,000, despite the same device only costing $17,000 if they were treated as a public patient.

"We're committed to taking the pressure off price rises for consumers through sensible and balanced reforms.

"That's why we're also currently working with the entire medical devices supply chain to take pressure off premiums and we expect any savings to begin flowing through to consumers as early as next year.

"Private health insurance is a fundamental element of our health system that offers consumers greater choice while taking pressure off of Medicare so that its universality remains sustainable."

The full list of average premium increases for individual health funds is available here.

Click here for independent advice free of commissions.

Topics:  private health private health insurance

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