Around 15 million Australians with private health insurance are facing a 4.41% average premium increase from April 1 — the largest jump in nine years. For a typical family, that works out to several hundred extra dollars annually, on top of rising rents, energy, and grocery costs. With general inflation at 3.8% over the same period, the premium rise once again outpaces the cost of living, leaving many to question whether the cover is still worth the price.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Private health insurance in Australia sits in an odd spot. You’re required to pay for it if you earn above a certain threshold — or face the Medicare Levy Surcharge — yet the premiums keep climbing faster than inflation. The question isn’t just whether you can afford it, but whether what you’re getting back justifies the cost. Here’s what you actually need to know.
How premium increases are decided — and who decides them
Each year, private health insurers submit their proposed premium increases to the federal health minister for approval. But before the minister sees them, the Australian Prudential Regulation Authority (APRA) reviews each application. APRA requires insurers to show projected changes in revenue and claims costs, along with their financial performance data. Under the Private Health Insurance Act 2007, the minister must approve the change unless it’s against the public interest.
Health Minister Mark Butler asked insurers to resubmit their applications multiple times before reaching a final decision. Yet the approved average of 4.41% was still the highest since 2017. What I tend to notice is that people assume the government has more control over these numbers than it actually does. The minister can push back, but the law doesn’t let them simply cap premiums at a lower rate — they can only reject what’s not in the public interest.
Rates, thresholds, and what they actually cost you
The 4.41% average increase masks wide variation between funds. NIB was approved for a 5.5% rise, Medibank at 5.1%, and Bupa at 4.8% — all above the industry average. HBF came in at just 2.1%. Each insurer’s approved increase reflects its own financial circumstances: how much it pays out in claims, the age and health profile of its members, its financial reserves, and how efficiently it’s run.
For a family paying $4,000 a year in premiums, a 4.41% increase adds roughly $176. But if you’re with NIB at 5.5%, that same family pays an extra $220. Over five years, the gap between a 2.1% and a 5.5% annual increase on a $4,000 policy is more than $700.
Here’s how the approved increases break down by major fund:
→ Scroll right to see all columns
| Health Fund | Approved Increase (2025) | Extra cost on $4,000 policy |
|---|---|---|
| NIB | 5.5% | $220 |
| Medibank | 5.1% | $204 |
| Bupa | 4.8% | $192 |
| Industry average | 4.41% | $176 |
| HBF | 2.1% | $84 |
If you’re on a higher income, the Medicare Levy Surcharge adds another layer. Singles earning over $93,000 or families over $186,000 (2024–25 thresholds) who don’t hold appropriate private hospital cover pay an extra 1–1.5% tax. For someone earning $120,000, that’s $1,200–$1,800 a year — often more than the cheapest hospital policy. The calculation shifts depending on your income band and which fund you’re with.
Errors and gaps that cost you money
Sticking with the same fund out of habit
Most people don’t switch funds even when their premium rises well above the average. If you’re with NIB at 5.5% and a comparable policy from HBF is available at 2.1%, the difference on a $4,000 policy is $136 a year. Switching isn’t complicated — you can compare policies on the government’s PrivateHealth.gov.au site and your new fund handles the transfer. Waiting periods for pre-existing conditions may apply if you’re downgrading cover, but switching to a like-for-like policy typically resets nothing.
Ignoring the gap between benefits growth and premium increases
Benefits paid grew 10.2% in 2023 and 7.6% in 2024, while premium increases were far lower. That means insurers are now playing catch-up. If you assume last year’s premium increase tells you what to expect next year, you’ll be caught off guard. The trend suggests larger increases may continue until the gap closes. Budget for 4–6% annual rises going forward, not the 2–3% you might have seen a few years ago.
Not checking whether your extras cover is worth it
General treatment benefits — dental, physio, optical — are where many policies lose value. If you claim less than you pay in extras premiums each year, you’re effectively donating money to the insurer. Run the numbers: total your out-of-pocket costs for the last 12 months and compare them to what you paid in extras premiums. If the premiums are higher, consider dropping extras and paying out of pocket, or switching to a cheaper basic extras plan.
Assuming the Medicare Levy Surcharge is the only penalty
If you earn above the threshold and don’t hold appropriate hospital cover, you pay the surcharge. But there’s also the Lifetime Health Cover loading: if you take out hospital cover after age 30, you pay a 2% loading on your premium for every year you were without cover. A 40-year-old taking out cover for the first time pays 20% more than a 30-year-old on the same policy. That loading stays for 10 years. The cost of waiting is real and compounding.
How to decide if your policy is worth keeping
Compare your premium increase to the fund’s claims performance
Your fund’s approved increase reflects its claims history. If your fund paid out a higher proportion of premiums in benefits than the industry average, a larger increase may be justified. If it posted strong profits and still raised prices above average, you’re funding shareholder returns, not your own healthcare. Check your fund’s annual report or the APRA data on claims ratios — anything above 85% means most of your premium is going back to members.
Match your cover to your actual healthcare use
A gold hospital policy covers things like pregnancy and hip replacements. If you’re not planning to use those services, a silver or bronze policy costs less and still covers the basics. The same logic applies to extras: if you only visit the dentist twice a year, a basic dental-only extras plan costs less than a comprehensive package that includes physio, chiro, and optical you never use. Review your claims history from the last 12 months and adjust your cover accordingly.
Factor in the Lifetime Health Cover loading timeline
If you’re under 30 and considering dropping hospital cover, the loading clock starts ticking. Each year without cover after 30 adds 2% to your future premium for 10 years. A 35-year-old who takes out cover pays 10% more for a decade. That loading can outweigh the premium savings from being uninsured in your 20s. If you’re close to 30, it’s often cheaper to keep a basic hospital policy than to pay the loading later.
What’s changing — and what’s coming
The 4.41% increase is the highest since 2017, and with benefits still growing faster than premiums, further above-inflation rises are likely. The government has limited power to cap increases under current law. If you’re planning around the current rate, build in a buffer of 5–6% annual increases for the next few years. The alternative is to switch to a fund with a lower approved increase and a strong claims ratio — that’s the one lever you can pull yourself.
Frequently asked questions
Can I switch funds right after a premium increase is announced? ▾
Does the Medicare Levy Surcharge apply if I have basic hospital cover? ▾
What happens if I drop my cover and later want to rejoin? ▾
Are premium increases the same for every policy within a fund? ▾
Can I negotiate a lower premium with my current fund? ▾
How do I find out my fund’s claims ratio? ▾
The real cost of waiting — and why the decision compounds
The 4.41% increase isn’t a one-off. With benefits growing at 7.6% in 2024 and premium increases still lagging, the pressure for further rises is baked into the system. Every year you delay reviewing your policy, you lock in a higher base for the next increase. The difference between a 2.1% fund and a 5.5% fund on a $4,000 policy is $136 this year — but over a decade, that gap widens to well over $1,500. The decision that matters most isn’t whether to have cover, but whether the cover you have is priced fairly for what you actually use.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Private hospitals vs public: is choice worth the cost in Aussie health?.
Sources and Further Reading
Is your health insurance policy actually protecting you? — A practical guide to checking whether your current policy covers what you think it does.
The Conversation (2025). Private health insurance premiums will rise 4.41% this year — but is it justified? 🔗
