For the first time in five years, industry analysis suggests that premium increases are likely to track closely with health-related inflation. According to Money.com.au, the historical pattern from 2005 to 2020 saw premium rises outstripping health inflation by an average of 1.1 percentage points. This trend reversed after 2021, with premium adjustments falling behind health CPI, although the gap has narrowed steadily – shrinking from 2.6 percentage points in 2023 to 1.1 percentage points in 2025.
Recent data from the Australian Prudential Regulation Authority (APRA) indicates continued growth in revenue for private health insurers. In the June 2025 quarter, total revenue reached $8.2 billion, up from $8.1 billion in March and $7.8 billion in December 2024. Insurance service expenses were $7.9 billion, with an insurance service result of $293 million. The sector reported $387 million in investment income and $493 million in profit after tax. Total assets stood at $21.4 billion, and net assets at $13.0 billion, with a prescribed capital amount coverage ratio of 2.55.
Australia’s private health insurance sector is preparing for a potential shift in premium pricing as insurers finalise their submissions for 2026 rate changes. All proposals must be lodged with Federal Health Minister Mark Butler by 3pm AEST on Nov. 12, as part of the government’s annual review process. The outcome, expected between December and late January, will set the stage for new premium rates effective from April 1, 2026.
Chris Whitelaw, general manager of health insurance at Money.com.au, commented that the industry’s ability to absorb higher costs is diminishing, and the sector is expected to adjust after multiple years of holding back on premium increases. “We expect 2026 could mark the first year in half a decade where premiums and health inflation move in tandem,” he said.
According to “Australia Insurance 2026 Sector Trends: Rising Premiums Offset Claims, Support Earnings,” ongoing medical cost inflation – driven by staffing, facilities, and advanced medical procedures – continues to challenge the sector. Despite these pressures, demand for private health insurance remains strong, supported by population growth and a preference for private care. Regulatory scrutiny of premium increases is expected to persist, and while profitability may moderate due to rising claims, the sector’s capital position remains robust. The shift toward same-day and out-of-hospital care is anticipated to help insurers manage claims costs."
Whitelaw said insurers’ proposed premium adjustments will take into account forecasts for benefits, investment performance, and government subsidies. “Insurers and the government have to strike the right balance between keeping premiums affordable for consumers and ensuring the viability of the private health sector while managing rising claims and hospital costs,” he said.
Minister Butler has issued a statement to health funds, calling for “more strenuous efforts” to deliver value to policyholders and provide support to private hospitals. In 2025, the average approved premium increase was 3.73%, following the minister’s rejection of earlier proposals for higher hikes between 5% and 6%. The minister retains authority over all annual premium adjustments, and each year’s process involves a detailed review of insurer submissions.
Analysis from Canstar reveals that actual premium increases for some hospital policies have outpaced the government’s average. Gold-tier individual policies, for example, saw average increases of 13.8%, or $442 annually, while family policies at this level rose to an average of $7,207 in June, up $858 from March. Adjustments for Bronze and Silver tiers were more moderate, ranging from 1.5% to 5.2%, and Basic cover saw a slight decrease.
Whitelaw said: “The health minister has made it clear he expects funds to show good faith in their proposals, but there’s a limit to how much longer they can absorb cost growth, all while the private hospital sector is struggling.”
As the 2026 premium round approaches, insurers and policymakers will need to balance affordability for consumers with the financial sustainability of the sector, amid ongoing cost pressures and evolving healthcare demands.
