Why Do Health Insurance Premiums Go Up?

The 2026 Increase — By Fund

The 4.41% figure is a weighted industry average. Your actual increase depends entirely on which fund you are with. The five largest funds — who hold nearly 80% of all policyholders — are all increasing above the average:

Not all funds are listed. Some smaller and not-for-profit funds have approved increases well below the industry average — this is a material reason to compare. Source: Australian Government Department of Health and Aged Care, 2026 premium round approvals.

What Does That Mean in Real Dollars?

Based on average policy costs (Jan–Nov 2025 baseline data), here is what the 4.41% average increase adds to a typical policy per year:

If you're with one of the major funds (NIB, Medibank, Bupa, HCF) your increase is likely closer to 5%, meaning these figures will be higher for you.

The Gold Tier Warning

Gold hospital cover has seen the sharpest price rises over recent years. In 2025, Gold-tier premiums rose 13.8% on average — compared to Silver at 4.7% and Bronze at just 1.5%. Basic cover actually fell 0.6% in 2025.

If you hold Gold hospital cover, it is worth asking whether you are using the benefits that make Gold worth its price. Gold adds obstetrics, weight loss surgery, and assisted reproductive technology over Silver. If none of those apply to you, switching to Silver could save you hundreds per year — and you would not lose any other benefit.

Why Do Premiums Increase Each Year?

Premiums are not set arbitrarily. The key cost drivers are structural — they reflect what it actually costs to fund private hospital treatment in Australia:

• Rising hospital benefits paid — Benefits paid by insurers grew 10.2% in 2023 and 7.6% in 2024. Premium increases in those years were only 2.9% and 3.0% — meaning funds absorbed the difference by drawing on reserves. The 2026 increase in part reflects years of under-recovery.
• Hospital and specialist fees — Private hospitals charge funds more each year through negotiated rate agreements. The average gap cost per hospital episode was $426.80 in early 2024.
• Healthcare worker wages — Nurses, hospital staff, and allied health professionals have received significant wage increases.
• Medical technology — More complex procedures are now standard: advanced imaging, robotic surgery, newer implants and devices.
• Ageing population — Older Australians claim more, and the proportion of older members grows each year.

It is also worth noting that Australian health funds posted significant profits — $1.98 billion industry-wide in 2022 and $1.59 billion in 2023. This is partly why a premium increase of this size attracts scrutiny, even as genuine cost pressures are real.

How Does the Government Approve Increases?

Health funds cannot raise premiums unilaterally. The approval process is:

1. October — APRA (the prudential regulator) conducts financial analysis of all insurers, reviewing annual returns and actuarial reports.
2. Mid-November — Health funds submit formal applications to the Department of Health for premium changes effective the following 1 April.
3. Review period — The Department and APRA examine proposals. The Health Minister can and does require funds to resubmit — this happened in 2026, with multiple resubmissions before the 4.41% average was approved.
4. Approval — The Minister approves increases under section 66(10) of the Private Health Insurance Act 2007. The law requires approval unless the increase is "not in the public interest."

APRA's role is advisory — it assesses whether a proposed increase would cause an "adverse prudential outcome" (i.e., whether the fund could remain solvent and pay claims). It does not set or approve the final figure — that is the Minister's decision.

Notification requirement: Your fund must write to you before your premiums change, explaining what is changing and by how much. That letter is your trigger to review your cover.

Historical Premium Increases (2018–2026)

Source: Australian Government Department of Health and Aged Care. All figures are weighted industry averages — individual fund increases vary significantly. Over the decade to 2026, premiums have risen by approximately 35% cumulatively.

How to Use a Premium Increase to Your Advantage

The Commonwealth Ombudsman explicitly recognises the April 1 increase as a natural trigger to review cover. Most people set and forget their health insurance — but a price rise is your invitation to ask whether you're still getting value.

• Compare your fund against the market. Some funds are increasing 5%+ in 2026 while others are below 2%. If you're with a high-increase fund and your cover is equivalent, there is a real financial case to switch.
• Review your tier. Gold has been the most expensive tier to hold over the past two years. If you don't need obstetrics, weight loss surgery or assisted reproduction, Silver may be the smarter choice at meaningfully lower cost.
• Adjust your excess. Choosing a higher hospital excess (e.g., $750 instead of $250) reduces your annual premium. If you are generally healthy and unlikely to be hospitalised, this is often the right trade-off.
• Review your extras. If you haven't claimed dental, optical, or physio in years, consider a policy without those entitlements or at a lower extras tier.
• Look at smaller and not-for-profit funds. Funds like GMHBA (1.98% in 2026) and HBF (2.15% in 2026) consistently keep increases well below the industry average — and often offer competitive cover.

Can I Switch Funds Without Re-serving Waiting Periods?

Yes — in most cases. This is the most important thing to understand, and it's why switching is far less disruptive than people assume.

Under the Private Health Insurance Act 2007, if you switch to a policy at an equal or lower benefit level, you do not re-serve waiting periods already completed at your previous fund. Your history transfers.

The 2-month rule: You must join a new fund within 2 months of leaving your previous fund to retain your served waiting periods. We manage this timing for every client we switch — there is no gap in cover.

Upgrading benefits: If you upgrade to a higher tier or add new benefits not previously covered, fresh waiting periods apply to those new benefits only — not to your existing entitlements.

Mental health exception: Since 1 April 2018, members can upgrade psychiatric benefits without serving a waiting period. This exception applies once per lifetime, after the initial 2-month membership.

When you switch, your new fund will request a Transfer Certificate from your old fund. Your old fund is required by law to provide this within 14 days. It documents your previous cover level and all waiting periods you have served.

Should I Prepay Before 1 April to Beat the Increase?

Some funds allow you to prepay up to 12 months in advance at the current rate, locking it in before the April 1 increase takes effect. This delays the rise by a full year for that prepayment period.

Whether it makes sense depends on your situation:

• If you are staying with your current fund and have the cash available, prepaying before April 1 is a straightforward saving — especially if your fund's increase is above average.
• If you are considering switching, do not prepay with your current fund — you may not receive a full refund, and you would miss the benefit of starting your new policy at a potentially lower rate.
• Compare first. If a better-value policy exists at another fund, switching before April 1 means you begin your new policy before the industry-wide rises apply.