On 1 April 2016, the average cost of an Australian family’s private health insurance policy increased by an average of $293 compared to the previous year*. Prices are reviewed yearly and typically go up rather than down. Here’s why…

The Private Health Insurance Ombudsman narrows down the reasons for annual price rises below:

  1. The cost of hospital, medical and healthcare-related expenses rises. For example, hospitals become more frequently visited by an ageing population, staff wages increase, innovative technology needs to be purchased.
  2. Australians increase their reliance on these services and equipment. As our population increases so does our reliance on top quality healthcare. This growing reliance has a cost.

If premiums never increase, then health funds may struggle to offer great value insurance to their customers. By raising rates each year, they can stay “financially viable”, according to the Private Health Insurance Ombudsman.

Still sceptical? Keep in mind that 8.7% of all healthcare funding in this country comes from private health insurance, according to the Australian Institute of Health & Welfare. That’s $14 billion dollars in 2014-15. Although this figure is partially comprised of premiums that Australians pay each month, as well as the money handed out by the Australian Government (e.g. rebates), that’s still a significant expense to insurers – and a growing one.

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Amount (billions) $9.1 $9.8 $10.5 $11.8 $12.9 $14.0

Source: AIHW, Health expenditure Australia 2014–15, pg 37

Who approves health insurance premium increases?

So the claim checks out: health insurers are contributing more and more to our growing national healthcare expenses. It now becomes an issue of ‘how much’ rates have to rise in order to absorb this cost. Who decides what is fair to Aussies everywhere?

Rest assured, the Commonwealth Minister for Health makes sure all premium increases are justified, necessary and fair. A health fund must submit the details of their potential premium rises to the Federal Government. If a fund can’t demonstrate why it needs to increase its prices, then the increase will be rejected.

Which is exactly what happened in 2001.

Prices rises come into effect on the April 1 each year, but you should keep in mind that not all health funds raise their premiums by the same amount. Some will put prices up by a lot more than the average increase and some by a little less.

Learn more about the the health insurance rate rise.

* Calculation based on the average national price of combined (hospital and extras) family health insurance policies listed on privatehealth.gov.au.

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