Compare the Market is advising Australians with private health cover to prepare for higher premiums in 2026, as industry projections and government processes point to what could be the largest average increase in close to a decade. Analysis of policies sold through the comparison platform between January and November 2025 suggests that a 4% to 5% premium rise would add between $105.60 and $132 a year to an average hospital-only policy currently priced at $2,641.
For combined hospital and extras cover with an average annual premium of $3,560, that range of increases would equate to an extra $142 to $178. An extras-only policy with an average premium of $830 would rise by about $33.20 to $41.50. These figures incorporate applicable government rebates, age-based discounts, and lifetime health cover loadings. The industry’s average annual premium adjustment has not exceeded 4% since 2017, marking a change in the recent pattern of relatively contained increases against a backdrop of rising hospital and medical costs.
Compare the Market spokesperson David Koch (pictured) said recent public comments from government point to a greater likelihood of higher premium increases than those seen in the immediate post-pandemic period. “Reading between the lines, the government is (trying) to warm us up to the idea that health insurance premiums need to go up a bit more, in response to some of those system pressures. Over the past few years, we have seen Health Minister Mark Butler push back on health funds and demand lower, more affordable premium adjustments. This has led to longer negotiations, later announcements, and results that have kept average increases below the rate of inflation. This year, you get the sense of a growing consensus that health funds need a little more wind in their sails to keep things working, and make sure the system is well supported,” he said.
Koch noted that any approved industry average will translate differently across individual products and insurers. “If a 5% increase is agreed, some Australians could be forking our more than $170 more for their cover each year for a combined policy. And we know not everyone is going to be affected in the same way – some people could end up worse off because increases vary so much between funds, and between individual policies. Australians need to pay close attention to what the change really means for them. When that premium notice drops in your inbox, take that as your prompt to do some detective work and see if you’re still getting a good deal. If the increase is higher than you expected, and you’re no longer getting good value out of your cover, it might be time to compare and switch,” he said.
The 2026 premium round is unfolding alongside a federal review of private hospital funding arrangements. Reporting in the Australian Financial Review (AFR) indicates the government is consulting on moving private hospitals to a benchmark, or activity-based, pricing regime similar to the system applied in public hospitals. Under that approach, payments to private hospitals would be linked to standardised prices and activity volumes, rather than negotiated contract rates between individual health funds and hospital operators.
Private Healthcare Australia (PHA) – whose membership includes Medibank, Bupa, and NIB – has provided modelling to the Department of Health arguing that the proposed shift could increase overall private hospital costs. The association estimates the change could add between $800 million and $1.2 billion a year to expenditure, with potential consequences for premium levels and participation. “At the middle of this range, around 560,000 people would likely drop their private health insurance, putting massive pressure on private hospital and health fund viability, while overwhelming the public health system. It is surprising the Australian government has not already done this modelling before allowing the proposition to proceed, as it is clearly impractical,” PHA director of policy and research Ben Harris wrote in the submission, as reported by AFR. The Department of Health’s consultation materials have not publicly set out a cost estimate for the proposal. In parallel, Health Minister Mark Butler has requested that major funds resubmit their premium applications ahead of the April 1 rate change, with market expectations focused on average increases above 4%.
Insurers and intermediaries report that many policyholders are adjusting coverage levels as premiums and out-of-pocket costs rise. Industry survey data indicates that more than 246,000 policies were downgraded in the six months to June 30, as members moved from higher-tier to lower-tier products. In previous periods, upgrades had outnumbered downgrades. Analysts attribute this shift to the normalisation of hospital and extras claiming after COVID-19 disruptions and the end of one-off cashbacks and rebates that funds paid when elective procedures were deferred during lockdowns.
Around 15 million Australians currently hold private health insurance, funding about 70% of elective surgeries nationally. Over the past 16 years, average premiums have roughly doubled, while the cost of health products and services has increased by about 20%, according to the Australian Medical Association. Comparison site Canstar expects a continued trend toward downgrades rather than cancellations, particularly in higher-priced gold-tier products. The Medicare levy surcharge, often around $1,500 a year for higher-income earners without private hospital cover, remains a factor encouraging the retention of at least basic hospital insurance.
Recent private health insurance statistics from the Australian Prudential Regulation Authority (APRA) for 2024–25 show that hospital products continue to account for the majority of premium income across major funds and many regional insurers. Medibank reported total premium income of $7.65 billion, including $5.57 billion from hospital treatment and $2.08 billion from general treatment, against $6.55 billion in claims. Bupa recorded premium revenue of $7.97 billion, comprising $5.98 billion from hospital cover and $1.99 billion from general treatment, with $6.56 billion in claims.
HCF reported $4.12 billion in premium income, of which $3.16 billion came from hospital policies and $962 million from general treatment, and $3.62 billion in claims. HBF generated $2.27 billion in premiums, including $1.65 billion from hospital cover and $621 million from general treatment, paying $1.87 billion in claims. NIB reported $2.82 billion in premium revenue, including $1.99 billion from hospital and $829 million from general treatment, with $2.31 billion in claims. Smaller and regional funds similarly depend on hospital portfolios for most premium income, with claims ratios affected by product design, demographic mix, and utilisation patterns. Cost control and investment returns have helped some insurers absorb higher claims, which in turn shapes their approaches to pricing, product rationalisation, and benefit adjustments.
Analysis from Money.com.au indicates that the long-term relationship between private health premium growth and health-specific inflation has shifted. Between 2005 and 2020, premiums increased on average 1.1 percentage points faster than health inflation each year. Since 2021, premium adjustments have generally been below health CPI, with the gap estimated to have widened to about 2.6 percentage points in 2023 before narrowing to around 1.1 percentage points in 2025.
Australian health funds are also responding to global medical cost pressures. WTW’s 2026 Global Medical Trends report forecasts worldwide health insurance costs will rise 10.3% in 2026, following estimated increases of 10% in 2025 and 9.5% in 2024, with Asia-Pacific projected to record growth of about 14%. For local insurers and private hospital operators, these global trends, domestic funding reform proposals, APRA’s prudential data, and the anticipated 4% to 5% premium round are all influencing decisions on pricing, product structures, and risk management, with flow-on effects for participation and access to private care.
