A significant number of Australians are facing the prospect of substantial hikes in their private health insurance premiums, with some policyholders potentially seeing increases of up to a quarter of their current costs. This comes after the government approved an average premium rise of 4.41 per cent, the largest in nearly a decade, effective from April. However, new analysis by consumer advocacy group CHOICE reveals that this average figure masks a more dramatic reality for many, particularly those with comprehensive gold-level cover.
The Discrepancy in Premium Increases
While the headline figure of 4.41 per cent might seem manageable, CHOICE’s in-depth review of policies offered by the five largest health funds – Bupa, HCF, HBF, Medibank, and NIB – indicates that some individuals could be hit with increases five times higher than this average. Mark Blades, CHOICE’s health insurance expert, cautions consumers not to accept the official average at face value, stating, “There’s a deep structural problem with comprehensive healthcare overall and this has just been creeping and creeping along for decades and now we are seeing astronomical figures.”
The pricing structure of private health insurance is tiered, typically ranging from basic to bronze, silver, and gold. The gold and silver tiers offer the most extensive coverage but consequently come with the highest price tags. With approximately 15 million Australians holding some form of private health insurance, and over 3.5 million opting for gold-level hospital cover, these individuals are likely to bear the brunt of the upcoming premium adjustments.
CHOICE’s analysis found that policyholders with gold-level cover from the major health funds can expect an average increase of 13.3 per cent. However, this figure is dwarfed by specific instances, such as HCF’s Hospital Optimal Gold cover, which is slated for a staggering 25 per cent premium increase, even without including extras. This has led to calls for consumers to actively reassess their policies. “We would hope that consumers would actually look at it and think, ‘actually, this is quite a substantial increase, maybe I should shop around’,” Mr Blades advised.
It is important to note that CHOICE’s analysis focused on policies currently available on the market, excluding “closed” policies that are no longer offered to new customers but are still held by existing members.
The Impact on Different Policy Tiers
The impact of the premium increases varies significantly across different policy tiers. Those with basic, bronze, or silver policies are set to experience much more modest rises, averaging between 2.6 per cent and 3.3 per cent. In some cases, individuals with basic cover, sometimes labelled as “junk” cover and often purchased to avoid the Medicare Levy Surcharge, may see no increase in their premiums at all.
Mr Blades highlighted a concerning trend: “We constantly see there’s a race to the bottom for the cheapest level of cover from the health funds for something that doesn’t provide much coverage at all. You have to ask, what’s the point of all these tax incentives to get people to get health cover but the only cover that’s affordable is ‘junk’ level?”
The Sustainability of Gold Policies
Gold-tier policies, which provide the broadest spectrum of coverage and are often the only option for essential services like pregnancy, childbirth, and psychiatric care, are becoming increasingly difficult for insurers to sustain. Over the past five years, the cost of gold cover has surged by over 70 per cent. This escalating expense has compelled many Australians to downgrade to silver or bronze policies, which typically come with a greater number of exclusions.
Paradoxically, while the cost of gold cover has soared, the number of people holding these comprehensive gold-tier hospital policies has seen a notable decline. Health department statistics reveal a drop of more than 20 per cent in gold policyholders in under six years.
Insurers’ Perspective on Rising Costs
Private Healthcare Australia (PHA), the peak body representing the major health funds, attributes the higher increases for gold policies to their coverage of the most complex and expensive medical treatments. CEO Rachel David explained that these treatments, while utilised by a smaller segment of the population, are becoming progressively more costly to deliver. Factors such as health inflation and an ageing population requiring more intensive care contribute to this trend.
“Gold policies have now become a catch-all for a very wide range of treatments, many that are used by a relatively small proportion of members. That makes these policies more expensive and less sustainable over time for insurers and consumers,” Dr David stated. She further elaborated, “In a nutshell, gold hospital cover is now predominantly used by a group of people who know they are going to claim for high-cost services, which is highly inflationary.”
A recent Australian Medical Association report indicated that private health insurance is increasingly failing to provide good value, with nearly 70 per cent of policies now incorporating exclusions.
Dr David refuted the notion of “junk” policies, instead characterising them as “entry-level” products crucial for maintaining the overall health system’s participation. “We need to have entry levels available. If we were to take those policies out of the market it would have a catastrophic impact on participation, and we’d be back into a spiral of only high claimers and the price going back higher,” she argued.
PHA is advocating for a review of the gold, silver, and bronze tiering system, suggesting that reforms could enable insurers to develop products more precisely aligned with diverse health needs. “Without reform, comprehensive cover will continue to become less affordable, and fewer Australians will be able to access the highest level of choice in their healthcare,” Dr David warned.
Government Response and Consumer Advice
Health Minister Mark Butler acknowledged the pressure premium changes place on Australians, stating that decisions are guided by a commitment to ensuring private health insurance remains valuable while also supporting private hospitals facing escalating costs and significant challenges. “The government understands the pressure health insurance premium changes put on Australians and decisions about private health insurance premiums must put consumers first,” Mr Butler commented.
He emphasised the need for transparency, fair pricing, and confidence that premiums are being used effectively. “Australians deserve transparency, fair pricing and confidence their premiums are being directed where they are needed most. I expect private health insurers and hospitals to work hard to bring down costs and keep future price increases to a minimum.”
To help mitigate the financial impact of these premium rises, Mr Blades offered practical advice. Where feasible, he suggested that individuals consider pre-paying their annual health insurance premiums before the April 1 increase takes effect. Additionally, he recommended this as an opportune moment to explore alternative policies. He pointed out that some smaller or member-owned funds may include services like birth and pregnancy in their silver-tier cover, potentially offering better value for money.
