From 1 April 2017, private health insurance has increased by an industry weighted average of 4.84%. That means the average cost of an Australian family’s insurance policy will be approximately $208 more. 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 increases below:
The cost of hospital, medical and healthcare-related expenses rises. For example, hospitals are witnessing a surge in patients due to our ageing population, an increase in staff wages, and purchasing innovative technology that requires constant updating.
Australians increase their reliance on these services and equipment. As our population increases, so does our dependence on top quality healthcare. This growing dependence comes at a cost.
More Aussies are claiming.
As of 2017, more than 2 million Australians
have some form of private health cover. The more benefits given back to members, means the more funds have to charge to cover those costs.
Reduced government contributions.
For a majority of Aussies, our Federal Government helps cover the cost of our premiums through the Australian Government Rebate
(AGR) on private health insurance. Each year, government contributions are adjusted accordingly to the AGR which has decreased since 1 April, meaning the government will contribute less to overall premiums while members contribute more.
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.
How much has the cost of health insurance risen?
Private funds paid a whopping $19.83 billion in benefits on behalf of their members during 2016-17. As health fund premium revenue increased by 4.6%, so did the fund benefits by 4.5%, highlighting an almost even ratio of private health insurance profit to member expenditure.
In 2015-16, total spending on health in Australia was $170.4 billion, a $6 billion increase from the previous year.
|Private health insurance industry average by year
||Average premium increase (%)
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 nationwide?
Rest assured, the Commonwealth Minister for Health ensures all premium increases are justified, necessary, and fair. A health fund must submit the details of their potential premium rises to the Federal Government under section 66-10 of the Private Health Insurance Act 2007. If a fund can’t demonstrate why it needs to increase its prices, then the increase will be rejected.
Price rises come into effect on the 1st of April each year, but you should keep in mind that not all health funds raise their premiums by the same amount. Some will raise their price up more than the average increase and some may actually decrease theirs, that’s why it’s always a great idea to compare health insurance.
Learn more about the health insurance rate rise here.
What to do if your fund’s premiums have increased?