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Private Health Insurance Premium Increases in 2021

Megan Fraser
Megan Fraser Updated: 24 March 2021
Types of Health Insurance

Private health insurance premiums are set to increase by an average of 2.74% on the 1st of April 2021. For many Australians, this is the second premium increase they’ll be subject to in the past 6 months as many private insurers delayed their April increases to October of 2020. Although this is the lowest premium increase since 2001 it is significantly higher than inflation, which is likely to average at 1.4% in 2020. Combined with the cuts to the private health insurance rebate, this year’s increase may be bigger than it looks at first glance. 

According to the Melbourne Institute, 29,000 Australians ditched their private health membership from March to June 2020. As more young people are abandoning their private health cover service providers are left with older and less healthy members whose health care demands would be more significant. This could be one of the main reasons why premiums are rising faster than inflation.

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  • Australian-Unity
  • AHM
  • AIA
  • NIB
  • HIF
  • Phoenix-Health

2021 Premium increases for the top 10 health insurers

Health Insurance CompanyAverage increases for 2021
nib4.36%
CBHS Health Fund4.26%
Defence Health3.93%
Medibank3.25%
GMHBA3.24%
Bupa3.21%
HCF2.95%
Teachers Federation Health2.88%
Australian Unity Health1.99%
HBF0.94%

Source: Australian Government Department of Health (December 2020)

The average increase in health insurance premiums by year

Source: Australian Government Department of Health (December 2020)

What does the health insurance premium increase mean for me?

On average, the increases translate into an extra $1.14 a week for single people, with families paying around $2.44 more a week. The latest increases are the lowest in almost 20 years, according to the Minister of Health and Aged Care, Greg Hunt.

The Government remains committed to improving private health insurance for the benefit of all Australians as highlighted in the 2020–21 Budget. Reforms include:

Health Premium Increases

COVID-19’s effect on the increase

Private health insurers helped to support customers throughout the Covid-19 crisis with packages totalling millions of dollars and delayed premium payments for six months.

Medibank’s Chief Customer Officer, David Koczkar, says “we knew we needed to keep the 2021 premium increase as low as possible.” He says that Covid-19 “is the biggest health crisis we’ve faced in a generation.” Koczkar points out that private health insurance will continue to play an essential part in relieving pressure from the public hospital system “as we get through a backlog of elective surgeries, with wait times now exceeding 1.5 years for some common elective procedures.”

He went on to say that, because of the pandemic, Australians are now far more focused on their health and wellbeing. “They value the peace of mind that their private health insurance gives them.”

How to lower health insurance premiums

If you find you can’t afford your increased premium, there are several ways you can keep costs more affordable:

  1. Review your cover benefits and determine if you’re paying for treatments and service you don’t need.
  2. Contact your health fund and find out if they’re able to offer you a cheaper alternative. You can always upgrade to a higher level of coverage in future.
  3. Shop around and compare policies to determine which insurer offers you the cheapest premium, while including the benefits you want. You can switch health funds at any time.
  4. If you’re under the age of 30, choose a health insurance company that offers age-based discounts and save up to 10% on your premium.
  5. Avoid the April premium rise by locking in your premiums when paying annually.
  6. For Hospital policies, consider paying a higher excess or co-payment to reduce your premium.

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Why More Australians are Ditching Private Health Insurance

Despite health insurance company rhetoric, the facts speak differently. Instead of holding onto private health membership during the global viral pandemic, an increasing number of Australians are scrapping their insurance.

According to research, about two million Australians have dumped their private health insurance during the past five years. The Medical Technology Association of Australia commissioned the study. Its CEO, Ian Burgess, blamed the cost of premiums, value for money and out-of-pockets as the main reasons for the mass exodus. “Each of these two million Australians dumping their private health cover is an extra person joining our already overcrowded public hospital system,” was the gloomy warning issued by Burgess.

2021 Health Insurance Rebate

Most private health insurance holders receive an income-related rebate from the Government to ease the cost of their monthly premiums. The rebates apply to singletons and families and income scales range from $90 000 to upwards of $280 000. The refund applies only to hospital, general treatment and ambulance policies.

Family tiers are applied to single parents and couples, including de facto couples. , the income thresholds are increased by $1,500 for families with children for each child after the firstborn.

Typically, you’ll be able to claim the rebate in one of the following ways:

  • You can claim your refund as a reduced premium. To do so, contact your insurer.
  • You can claim your rebate as a tax offset when lodging your annual return. For more information, contact the Australian Taxation Office.

Rebates become effective on the same date as the increases in private medical insurance come into effect
– April 1, 2021.

Frequently Asked Questions and Answers

  • Why do health insurance premiums increase?

    Health costs are driven by increases in the delivery and treatment of new and expensive medical procedures. Advances in medical care have increased the average lifespan. Still, it is the ageing members of society who add to the pressure on the health system to deliver an ongoing service.
  • What is the average monthly premium for health insurance?

    The average monthly premium cost for health insurance for an individual is around $166 or $2,000 annually. “Extras” add in the region of $70 monthly or $850 annually. However, premiums vary from between $43 to $1,150 a month, depending on your needs and where you live.
  • How do you know if your premium is going to increase?

    Private health insurance providers contact members by post to inform them of annual premium increases. The pending April 1 increase will be confirmed in documentation to insurance holders in February 2021.
  • How do you keep your premiums affordable?

    There are three main plans of action you can adopt to keep your premiums at a reasonable level.
    1. 1. Research all the private health insurance policies available in your state.
    2. 2. Shop around and compare costs from some of the significant health funds and select the one that best suits your needs and budget.
    3. 3. Consider paying a higher Excess that will reduce your monthly premiums.
  • Is the 2021 health premium increase on par with inflation?

    Core inflation, which excludes the cost of food and energy, is projected at about 2% for 2021. Health insurance premiums will increase by an average of 2.74%. The fact that this is significantly higher than the cost of inflation, yet it represents the smallest increase in health insurance premiums in two decades, indicates just how expensive a commodity private health insurance has become.

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