But it’s still not as big as the 5% rise in the cost of delivering medical and hospital services, says the insurers’ peak body. Boo-bloody-hoo, say consumers.
The increasing cost of providing medical and hospital services has been blamed for the highest annual health premium increase since 2017.
Federal health minister Mark Butler has approved an average 4.41% increase from 1 April 2026.
He said it’s moderately higher than last year’s increase of 3.73%. It was coupled with a warning for insurers, saying the sector should do its part in supporting private hospitals facing rising costs and significant challenges.
“This year’s decision reinforces that premium increases must be backed by clear evidence and contribute to system-wide improvements, not just insurer balance sheets.
“I expect private health insurers and hospitals to work hard to bring down costs and keep future price increases to a minimum,” he said.
Insurers defend the increase
Industry reaction was swift.
Medibank announcing a 5.10% increase. Chief customer officer Milosh Milisavljevic said the rise reflected the growing cost of care while maintaining affordability.
“Our private hospital partners have faced significant challenges in recent years, and we’ve continued to support them, including partnering with them on the health transition. As a result, our hospital payout ratio remains above the industry average,” he said.
Members Health Fund Alliance, the national peak body representing more than 20 Australian not-for-profit and member-owned health insurers said its average premium change would be 3.62% “which is below the current CPI rate, and well below the Big 3 for-profit insurers’ average increase of 5.12%,” it said.
Members Health CEO Matthew Koce highlighted the pressures placed on insurers and hospitals alike.
“As the minister has acknowledged, Members Health funds have paid out billions in benefits over the past year while supporting private hospitals facing higher operating costs, rising wages and workforce challenges,” he said.
At 1.98%, GMHBA’s premium increase was the lowest of all health insurers. CEO David Greig said the company was focused on making health insurance affordable and removing barriers to care.
“As a not-for-profit health insurer, every decision GMHBA makes is guided by the best interests of our members and the communities we serve, not shareholders,” he said.
Private Healthcare Australia CEO Dr Rachel David noted 4.41% increase was still lower than the 5% rise in the cost of delivering medical and hospital services last financial year.
“More people are using their health insurance for high-cost hospital care such as joint replacements and cancer treatment, and the cost of delivering care continues to rise. This premium increase reflects those realities,” Dr David said.
“If health funds could keep premiums the same without jeopardising their ability to pay claims, they would. The industry is acutely aware of how tough many Australians are doing it right now.”
Private hospitals are not convinced
The Australian Private Hospitals Association said that higher premiums do not automatically translate into meeting the rising costs of treatment and care.
“There is nothing compelling insurers to pass on premium hikes to meet rising health costs,” APHA CEO Brett Heffernan said.
“Both Medibank and Bupa’s average premium increases in 2024 and 2025 were above the industry figure. Medibank scored 3.31% and 3.99% increases, while BUPA was granted 3.61% and 5.1% hikes.
“They both saw their profits explode. Medibank’s take surged by $21.7 million to bank $573.7 million in after-tax profits last year. Bupa had a field day with after-tax profits up a staggering $182.1 million to $593.9 million over the same 12 months.
“Despite these massive windfalls, Medibank barely shifted the dial on the benefits ratio paid to private hospitals – up just 1.3% on 2024 to come in at 87.1% for the year.
“Meanwhile, BUPA actually went backwards, paying out even less than 2024, down -0.45% for a paltry 83.3%.
“Clearly the system is broken and open to rampant abuse by insurance companies,” he said.
Consumers losing confidence
Consumer groups warned the tension between insurers and hospitals is already affecting public trust.
Consumers Health Forum CEO Dr Elizabeth Deveny said premiums continue to outpace wages.
“Premiums keep rising faster than wages. Trust is falling even faster,” she said.
She cited a recent ABC News investigation that highlighted some long-time policyholders who discovered last minute that their policies excluded crucial medical procedures, leaving them with bills of $20,000–$40,000 to pay upfront.
“People are doing the right thing. They pay their premiums. And they’re still hit with $20,000 bills. That’s unacceptable.
“A policy that only works when nothing goes wrong isn’t doing its job,” she said.
She warned that the increasing prevalence of exclusions, paired with premium rises, was posing a direct risk to public confidence in the private health system.
“Exclusions keep creeping up. At some point you ask: what am I paying for? People feel ripped off,” she said.
Market data shows that’s exactly what’s happening. Finder’s Consumer Sentiment Tracker has found that 14% of Australians (equivalent to 2.1 million people) say they won’t be renewing their private health insurance this year.
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Sarah Megginson, personal finance expert at Finder, told Health Services Daily that dropping health insurance was an ongoing trend.
“We’ve seen private health participation has just decreased year on year because, not only is it expensive and going up every year, but our private health system, the way the government has set it up, is so incredibly complicated.
“You almost need a degree in Health Sciences to figure out what your actual premium costs and what the rebates are,” she said.
Calls for stronger regulation
With confidence wavering, pressure is building for structural reform.
CHF is calling for urgent national action to strengthen consumer protections, improve transparency, and ensure that accident-related care, including joint replacements, is covered in a clear, consistent, and consumer friendly way across all policy tiers.
“Ultimately, the least powerful person in this transaction must be the most protected. Right now, they’re not,” said Dr Deveny.
Mr Heffernan pointed out that it’s almost been 12 months since Mr Butler’s ultimatum to the insurers to dramatically lift their payments to private hospitals, or he’d make them.
“After a year of being on notice, the insurers appear to have thumbed their noses at the Minister,” he said.
He called on the federal government to force insurers to pass on the premiums they receive “to those actually providing healthcare for insured patients. Otherwise, this year’s premium increases will, yet again, simply line the pockets of insurers”.
“It is imperative that a mandatory code of conduct for contracting between hospitals and insurers accompany the 90% benefit ratio guarantee.
“Such a code, with an arbitration model and price transparency overseen by the ACCC, will shed light on, and put a stop to, the rogue behaviour of insurers that undermines the future of private healthcare.
“The soaring profit-take and exorbitant annual management expenses charged by insurers cannot continue unchecked. With an industry-wide $2.1 billion in after-tax profits and $3.4 billion in murky management fees in 2025, the insurers can deliver the 90% ratio without added pressure on premiums.
“If health insurers stand by their contracting tactics, they should have no issue with being accountable to the ACCC for their conduct.”