The Australian Medical Association (AMA) has renewed its call for structural reform of Australia’s private health system as health insurance premiums are scheduled to rise on April 1 and more Australians reconsider their cover in response to cost pressures.
AMA president Dr Danielle McMullen has said that current policy and funding settings are contributing to higher out-of-pocket costs and a growing reliance on the private system as public hospitals face sustained demand. “We have seen what happens when the system is not in balance. Our public hospitals are already overwhelmed, and governments cannot keep up with demand for public specialist appointments and essential surgery, forcing more Australians to rely on the private system for timely care. Patients are being squeezed from every direction, and the system simply isn’t keeping up. We need to stop patching around the edges and start addressing the structural issues that are driving up costs and limiting access,” McMullen said.
The AMA’s near-term proposals include:
The association is also advocating for the creation of a Private Health System Authority, which it says would support long-term reform and greater transparency, together with wider measures such as expanding hospital-in-the-home services, reviewing product tiers, and reassessing financial incentives for private cover.
Insurers attribute the 2026 average premium increase of 4.41% to higher claims costs and increased use of privately funded care. From April 1, the average premium adjustment will apply across the market, with actual changes differing by product and fund. Private Healthcare Australia chief executive Dr Rachel David said health funds are working to balance premium affordability with the cost of providing hospital and medical services to an ageing membership base with more complex chronic conditions. “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,” David said.
David said the 4.41% average increase is below the 5% rise in the cost of providing medical and hospital services recorded last financial year. According to David, funds are increasing the availability of no-gap and known-gap arrangements and supporting care-at-home models for services such as chemotherapy, drug and alcohol rehabilitation, and post-surgical care, as well as health management and prevention programs. She said these initiatives are intended to reduce future demand for higher-cost treatment. Industry groups also say the premium increase will provide additional revenue to private hospitals that are facing higher operating costs and changes in occupancy patterns since the pandemic.
Survey data indicate that many policyholders are reassessing their private health arrangements ahead of the April premium change. Research from Money.com.au found that 46% of Australians with private health insurance intend to respond to the 4.41% average increase by cancelling, downgrading, switching funds, or altering excess and benefit settings. Within that group, 19% said they plan to cancel their extras cover, hospital cover, or both. A further 18% said they expect to move to a different health fund during 2026, 13% anticipate increasing their policy excess, and 12% are considering downgrading their product tier, such as moving from Gold to Silver. A slim majority of respondents, 54%, indicated they plan to stay on their current policy when the new premiums take effect.
The findings also point to age-based differences in stated behaviour. Among Generation Z respondents, 30% reported they plan to cancel their health insurance, compared with 29% of Millennials. By contrast, 11% of Generation X and 8% of Baby Boomers said they intend to cancel. Switching intentions remain present across working-age cohorts, with 23% of Gen Z policyholders and 18% of Millennials planning to change funds this year, compared with 20% of Gen X and 15% of Baby Boomers.
Separate research from Finder suggests that about 8 million Australians – 53% of health fund members – have already taken steps to manage the premium impact. Reported changes include moving to more basic policies (21%), changing insurers (16%), and paying a full year’s premium in advance to retain current rates before the 4.4% average rise begins (about one in eight respondents). Others have adjusted the structure of their cover by dropping extras (about 11%), keeping extras while removing hospital cover (8%), moving to a couples policy instead of two single policies (8%), or splitting hospital and extras products between different providers (3%). The research indicates these strategies are more frequently reported in Victoria than in Queensland.
The premium increase is expected to affect product tiers and benefit structures in different ways. Estimates indicate that for a family on a combined hospital and extras policy with an average annual premium of $4,908, the 4.41% rise will add about $216 a year. A single on a combined product with an average premium of $3,264 is expected to pay about $144 more annually. For hospital-only cover, a Gold family policy is projected to increase by about $342 a year, from $7,752 to $8,094, and a Gold single policy by around $143, from $3,240 to $3,383. Silver hospital family cover is estimated to rise by about $140 a year (from $3,180 to $3,320), while Silver single hospital cover is expected to increase by about $99 (from $2,244 to $2,343).
On the policy front, the AMA has linked premium movements and benefit design to broader funding and regulatory settings. McMullen has argued that the federal government should address the impact of the long Medicare rebate freeze and use the forthcoming National Health Reform Agreement to shorten outpatient waiting times in public hospitals. “Without action, Medicare becomes a promise unfulfilled. If we want change, if we want improvement, then we need real policy reform. In this economy, it is clear health costs are not going down. Sustainability for providers and access for patients are both at risk unless government acts,” McMullen said.
