Health insurance premiums soar, forcing Australians into tough choices

As the calendar flips to April, many Australians are bracing for a hit to their household budgets, and this time, it’s their health insurance premiums that are delivering the blow. Major health insurers, including industry giants like Bupa, Medibank, and HCF, have announced that premiums will rise on April 1, marking the steepest increase in seven years. With an average hike of 3.73 per cent, policyholders are facing a potential $1,920 annual increase in their health insurance costs—a ‘significant’ surge that’s causing millions to reconsider their coverage.

The rising cost of health insurance is not a new story, but the latest figures are particularly alarming. Research by Finder has revealed that an estimated 3.3 million Australians, which equates to 16 per cent of policyholders, are contemplating cancelling their health insurance policies this year. The burden of these costs is felt most acutely by younger generations, with a quarter of Gen Z and a fifth of Gen Y considering abandoning their cover.

Tim Bennett, a health insurance expert at Finder, points to a worrying trend: Australians are increasingly dropping their insurance policies as they struggle with escalating premiums amidst the high cost of living. The average cost of a mid-range silver-tier hospital policy currently sits at about $154 per month for a single person, or $1,848 per year. With the impending 3.73 per cent increase, this figure will jump to $1,920 annually, pushing the monthly cost to $160.

The decision to drop or downgrade coverage is not without its risks. Bennett cautions that while cancelling private health insurance might offer short-term financial relief, it can lead to significant out-of-pocket expenses, longer waiting times for medical services, and restricted access to essential treatments in the long run. This is a serious consideration for those weighing the immediate savings against potential future healthcare needs.

In response to the financial squeeze, more Australians are also opting to downgrade their coverage. Data from Private Healthcare Australia indicates that over 216,000 policies were downgraded in the first half of 2024 alone. Additionally, government figures show that more than 400,000 people relinquished their top-level gold coverage between December 2020 and 2023.

With around 15 million Australians holding private health insurance and a staggering $29.9 billion paid in premiums in the 12 months leading up to September 30, 2024, the impact of these increases is widespread. 

The ‘Big Five’ insurers are implementing premium hikes as follows:

• Bupa: 5.1 per cent 
• Medibank: 3.99 per cent 
• HCF: 4.95 per cent 
• NIB: 5.79 per cent 
• HBF: 2.8 per cent

These major insurers account for over 80 per cent of policies, and according to Compare Club analysis, the ‘true cost’ of the premium hike for couples and families could be closer to $253 and $221, respectively, based on the average increase.

Not all insurers are raising their rates equally. Not-for-profit insurer Police Health has announced the largest increase at an average of 9.56 per cent, while HIF has the smallest hike at 1.91 per cent.

Despite these daunting figures, there are strategies to mitigate the impact of the price hikes. Bennett suggests that decreasing your level of cover or increasing your excess can make premiums more manageable. For those who can afford it, paying the upcoming 12-month premium in advance can lock in current rates and offer some financial reprieve. Additionally, tailoring your extras cover to only include services you use and shopping around for better deals can also help ease the burden.

How are you planning to navigate these premium hikes? Are you considering switching providers, adjusting your cover, or sticking with your current policy? We’d love to hear your thoughts—share your experiences and insights in the comments below!

Also read: Private health insurance premiums climb: 3.73% hike kicks in this April