In December 2019, the Federal Minister for Health announced that health insurance premiums were set to increase by an industry-weighted average of 2.92% on 1 April 2020.
However, on the 29th of March 2020, Private Healthcare Australia announced that this year’s rate change would be delayed for all member health funds (i.e. insurers) in an attempt to provide relief to their customers during the COVID-19 pandemic.
What does a health insurance rate rise mean for me?
The specific amount that the price of policies change after a typical April rate rise depends on your health insurer and the type of cover you hold.
According to the Minister for Health, singles would have paid an extra $35.36 per year on average for their health insurance following a 2.92% increase to premiums, while families would have paid $103.48 more.
Your own premium might have gone up by more or less than 2.92%, or it might have decreased.
Has the rate change been affected by COVID-19?
Following the announcement in March, your policy may not have changed in price at all. In addition, some funds planned to decrease premiums on specific policies on the 1st of April; many applied the decrease to those products but not the planned increases to others.
This rate rise delay was introduced to alleviate stress on Australians struggling financially during the COVID-19 pandemic.
The decision was for member funds – not-for-profit health insurers (or roughly 27 funds) – to delay the rate change for at least six months. Later in the year, the decision will be reviewed, and it will be decided whether the delay will be extended further.
Other non-member funds also delayed their rate rise, and at least one fund independently moved to postpone the rate change by a full 12 months.
How will I know if my premium is changing?
Your health fund will notify you in writing about your premiums increasing, decreasing, or staying the same through the post, email or SMS. This way, you can check over any updated policy information and make an informed decision about what to do next.
Why did health insurance rates go up in previous years?
Before health funds can raise their premiums, they must submit their proposed increases to the Federal Government for approval. The Federal Government checks all the proposed increases to ensure they’re sustainable, fair and necessary. Some factors that lead to rate rises include:
- increased hospital costs (including doctors’ charges);
- an increase in medical equipment and changing technology;
- the growing number of complex and expensive procedures available in private hospitals; and
- the rate of private health insurance claims.
These proposed changes are reviewed, and if the insurer can’t sufficiently justify why they need to increase their premiums, the proposal will be rejected.
As the health insurance premium rate rise is a weighted average, some health funds increase their prices more than others. This weighted average is based on changes to a health fund’s entire portfolio of policies; this means the cost of some policies may go up a substantial amount, some may increase slightly, some may not go up at all, and some could even decrease.
For example, in 2020, one provider was set to raise their premiums by as much as 5.63%, whereas another would have raised theirs by as little as 1.98%.*
* Source: Department of Health, Average premium increases by insurer by year (updated 07/12/2019)