Health insurance premiums to hike as much as 25 per cent, CHOICE analysis shows

Millions of Australians could see their private health insurance premiums rise by as much as 25 per cent next month, according to analysis from the country's leading consumer advocacy group.

Health Minister Mark Butler recently approved a 4.41 per cent average increase in premium health insurance from next month, the highest rise in almost a decade.

However, new analysis by consumer group CHOICE of the big five health funds — Bupa, HCF, HBF, Medibank and NIB — found some policyholders would pay up to five times more than that.

"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."

Insurance policies are priced based on a system of tiers, including basic, bronze, silver and gold, with the highest tiers — gold and silver — offering the most comprehensive coverage but costing the most money.

Roughly 15 million Australians have some level of private health insurance, with health department figures showing more than 3.5 million hold gold-level hospital cover.

CHOICE found those with gold-level cover with the big five would feel the sting the most, with an average rise of 13.3 per cent.

But HCF's Hospital Optimal Gold cover trumped that with a 25 per cent premium increase on their policy, which does not include extras.

"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 said.

CHOICE looked at policies currently for sale and did not include "closed" policies, which are held by existing customers but no longer for sale.

It found those with basic, bronze or silver policies would see much lower increases next month between 2.6 per cent and 3.3 per cent on average.

Mr Blades said some people with basic cover, sometimes referred to as "junk" cover — often taken out by people wanting to avoid the Medicare levy surcharge — would not see any increase at all.

"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?"

Gold policies have become less sustainable: insurers

Gold-tier policies cover the widest range of services and are often the only option for people who need coverage for pregnancy, birth and psychiatric services. 

CHOICE found the price of gold cover has increased by more than 70 per cent over the last five years, forcing many people to downgrade their cover to silver or bronze policies, which have far more exclusions.

But at the same time, the number of people covered by gold-tier hospital policies has dropped significantly, according to health department statistics, by more than 20 per cent in just under six years.

Private Healthcare Australia (PHA), which represents the majority of private health funds, including the big five, said the higher increases for gold policies were because they covered the most complex and expensive medical treatments, and were used by a small portion of people.

CEO Rachel David said those treatments had become more expensive to deliver each year, due to health inflation and an aging population that required more care.

"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," she said.

A recent report by the Australian Medical Association found private health insurance was increasingly failing to deliver value for Australians, with almost 70 per cent of policies now containing exclusions. 

Dr David dismissed suggestions insurers were offering "junk" policies, arguing they were "entry-level" policies necessary to keep the entire system running.

"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 said.

PHA has called for a review of the gold, silver and bronze tiering process, arguing it would allow insurers to design products that are better tailored to different 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 said.

Mr Butler said the latest premium increase was guided by balancing a commitment to make sure private health insurance was valuable while also supporting private hospitals facing rising 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 said.

"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 try to mitigate the impact of the premium rises, Mr Blades said that, where possible, people should pre-pay for 12 months of cover before the premium rise kicks in on April 1.

He said it was also a good time to switch to another policy, noting smaller or member funds sometimes had services such as birth and pregnancy included in silver cover and could offer better value for money.