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A closer look at the process behind premium increases

27 November 2017 - 1:10pm

The average Australian health insurance premium has increased by between 4.8 and 6.2 per cent every year since 2010, Department of Health data shows. While the vast majority of consumers still see great value in their health insurance, it's understandable that some are put off by these continuous price increases.

With that in mind, what's the process behind premium increases? And why do they happen year after year?


What's the process behind premium increases?What's the process behind premium increases?

The process behind premium increases

Health insurance funds who want to increase their premiums are required by law to seek regulatory approval from the the Department of Health (DOH). The funds submitted their applications for premium increases in early November, as they do every year.

The DOH have the power to deny these requests during the private health insurance premium round applications if increases are deemed to:

  • Be unreasonable.
  • Breach conditions of the National Health Act.
  • Adversely affect a funds' stability.
  • Be contrary to the public interest.

If an application is denied insurers will be required to resubmit before January 15, before being notified of the outcome of the DOH's decision in mid February. On April 1 premium changes will take effect, so make sure you keep an eye out for the communication from your health insurer around the beginning of March advising you that your health insurance premiums will be increasing together with any other information about changes to your health cover. Consumers traditionally do not read these communications closely enough to ensure they fully understand any proposed changes to their cover.


Lower premium increases mean happy customers. Lower premium increases mean happy customers.

Why are private health insurance premium increases so high?

To the average person these private health insurance average premium increases may seem excessive. They may even appear to be driven by little more than a drive to increase health fund profits, however, the reality is far more complex.

These increases are in fact caused by a myriad of trends, including;

  • An aging population, who increase the costs of health funds.
  • Younger people foregoing health insurance.
  • Rising costs thanks to advances in medical technology and new treatments.
  • Provider costs rising, prosthesis costs rising and much more.

In reality, it's in each health fund's best interests to keep premiums down as much as possible. Lower premiums may encourage more young people to buy health insurance, increase overall coverage levels and improve customer satisfaction.

Luckily, the most recent increase of 4.84 per cent was the lowest since 2010, and thanks to government and industry reform the April 2018 increase could be even lower.

To find out more about how premium increases work or find an affordable health insurance policy - get in touch with an expert consultant at HICA today.