Private health insurance premiums to rise 4.41% from April: how increases are approved and what’s driving the gap with inflation

A 4.41% premium rise is coming — and it will be felt in household budgets

From April 1, around 15 million Australians with private health insurance will pay higher premiums after the federal government approved an average increase of 4.41%. It is the largest annual rise in nine years.

For many households, the change will not be an abstract percentage. For a typical family, it can amount to several hundred dollars more each year, landing at a time when budgets are already under pressure from rising rents, energy prices and grocery costs.

The increase also stands out because it is larger than general inflation. Inflation rose to 3.8% in the 12 months to December 2025, meaning premiums are again rising faster than the broader cost of living.

With insurers reporting strong profits, the announcement has prompted a familiar question: is a rise of this size justified?

How private health insurance premium rises are set and approved

Premium increases are not decided unilaterally by insurers and applied without oversight. Each year, private health insurers apply to the federal health minister for approval to raise premiums, with the changes typically taking effect each April.

The first step is a review by Australia’s financial regulator, the Australian Prudential Regulation Authority (APRA). The regulator assesses insurers’ applications and examines the assumptions behind them. Insurers must provide forecasts of projected changes in revenue and claims costs, and include data on their financial performance.

After this assessment, the proposed increases go to the Minister for Health for a final decision. Under the Private Health Insurance Act 2007, the minister must approve the change unless it is against the public interest.

This year, Health Minister Mark Butler said he asked insurers to resubmit their applications multiple times before a final decision was made. Even after that process, the approved average increase of 4.41% was still the highest since 2017.

Not every fund will raise premiums by the same amount

Although the approved figure is expressed as an industry-wide average, the actual premium rise differs by insurer. Some of the larger funds were approved to raise premiums above the average, while others were allowed smaller increases.

• NIB: 5.5%
• Medibank: 5.1%
• Bupa: 4.8%
• HBF: 2.1%

These differences reflect each insurer’s own financial circumstances rather than a single uniform cost shock. Factors that influence the approved increase include how much a fund is paying out in claims, the age and health profile of its members, the size of its financial reserves, and how efficiently it is run.

In practice, this means two households with similar policies but different insurers may see noticeably different price rises, even though both are part of the same regulated system and face the same broad health-care environment.

Why “benefits paid” is central to the premium debate

To understand why insurers argue for higher premiums, it helps to focus on what the industry calls “benefits” — the money paid back to members to cover medical costs. Benefits include hospital stays as well as general treatments such as dental appointments and physiotherapy.

Insurers’ financial balance depends heavily on the relationship between premiums collected and benefits paid. When benefits grow faster than premiums, insurer margins are squeezed. When premiums grow faster than benefits, margins expand.

Each year, insurers request premium increases based on their forecasts of benefit payouts in the coming year. However, forecasts do not always align with what ultimately occurs, and insurers’ requested increases may not be approved at the levels they seek.

Recent claims growth has outpaced premium growth

The recent data show a clear pattern: total benefits paid have been rising quickly, while premium increases have been relatively modest.

• Total benefits paid grew 10.2% in 2023.
• Total benefits paid grew a further 7.6% in 2024.

Over those same years, approved premium increases were much lower:

• Premium increase approved for 2023: 2.9%
• Premium increase approved for 2024: 3.0%

In other words, insurer payouts were growing at roughly double the rate of what they were collecting through premiums during that period. If sustained, that kind of mismatch puts pressure on insurers’ margins and can lead them to seek larger increases in subsequent years.

The COVID-era swing: from suppressed care to pent-up demand

Part of the explanation for today’s premium pressures lies in the unusual pattern of health-care use during and after the early COVID years.

In 2020, elective surgeries were cancelled and many people avoided medical appointments. Total benefits paid dropped by 5.5%, even as premiums continued to be collected. This created a period in which insurers built up large surpluses.

From 2021, demand returned. The earlier reduction in care did not eliminate health needs; it deferred them. Benefits jumped 8.3% in 2021, while the premium increase that year was just 2.7% — the lowest on record at the time.

Before COVID, the system appeared closer to balance. In 2019, benefits grew 3.1%, broadly in line with the 3.25% premium increase that year. The contrast between the pre-COVID pattern and the post-COVID surge helps explain why insurers now point to claims growth as a justification for higher premiums.

Why the 2026 increase looks like a “catch-up” attempt

The approved premium increases for 2025 (3.7%) and 2026 (4.4%) suggest insurers are now trying to claw back balance between what they pay out and what they take in.

On pure claims-cost grounds, there is a case that premiums needed to rise. Benefits have grown at roughly double the rate of premiums for two years. When that happens, insurers either accept shrinking margins or seek higher premium growth to restore financial alignment.

There is also a demographic pressure embedded in the outlook. As Australia’s population ages and undergoes elective surgery at a greater rate, benefits paid are likely to rise in coming years. That expectation matters because premium applications are built on forecasts of future claims, not just last year’s results.

Profits complicate the argument — even if claims are rising

While claims growth provides one rationale for premium increases, the industry’s profit performance complicates the public debate. Many consumers see large profit figures and question why premiums need to rise faster than inflation.

Industry-wide profit after tax was A$1.39 billion in 2018. It dipped during COVID to around $951 million, then rebounded to $1.98 billion in 2022 — the highest in recent years — before settling at $1.59 billion in 2023. Even after easing from the 2022 peak, profits remained well above pre-pandemic levels.

Over the five years to June 2024, net industry profits rose by 48%. At the fund level, Medibank alone posted an operating profit of $741.5 million in 2024–25.

These figures do not necessarily prove premium rises are unjustified, but they do shape perceptions. When households are asked to pay more, they often look for evidence that increases are tied to care costs rather than simply boosting profitability.

Gross margins show how much revenue remains after paying claims

Another way to view the industry’s position is through gross margin — a measure of how much revenue is left after paying claims.

Gross margins were around 14% and 13% in 2019 and 2020, then surged to 18.8% in 2022. By 2023, margins had begun easing downward, sitting at 17%.

The pattern suggests insurers are not in immediate financial trouble: profits remain large. At the same time, the direction of travel indicates that the exceptionally strong “bumper years” have passed and that claims have been rising faster than premiums, tightening margins.

Seen in that context, a 4.41% increase can be interpreted as an attempt to bring revenue back into line with the real and rising cost of what Australians are claiming, rather than a sign that insurers are struggling to remain viable.

What members get back: the “cents in the dollar” question

One of the clearest consumer concerns is how much of each premium dollar is ultimately returned to members as benefits.

In the United States, health insurers in large group markets are legally required to return at least 85 cents in every premium dollar to members, a rule introduced under the Affordable Care Act.

Against that benchmark, Australian insurers briefly fell short in recent years. In 2022, they returned only 81 cents per premium dollar, and in 2023 they returned 83 cents per dollar.

This comparison does not, by itself, determine what the “right” premium increase should be in Australia. But it highlights a regulatory option that could influence public confidence in the system.

A possible reform: requiring a set share of premiums to be paid as benefits

One policy approach raised in the debate is to impose a requirement that insurers return a set percentage of premiums as benefits. The idea is straightforward: it could give consumers greater peace of mind that premium dollars are being used for care rather than accumulating as profits.

Such a rule would bring Australian regulation closer to international best practice, at least in the sense of adopting a clear, enforceable minimum for how premiums are translated into benefits for members.

Whether this would change the level of premium increases in any given year is a separate question. But it would change the transparency of the bargain at the heart of private health insurance: what members pay in, and what they can reasonably expect to get back in health-care coverage.

So, is the 4.41% rise justified?

The available numbers point in two directions at once.

• Claims costs (benefits paid) have been rising quickly, and for two years have grown at roughly double the rate of premium increases. That creates a credible cost-based argument for higher premiums.
• At the same time, profits have remained large and were well above pre-pandemic levels, which makes it harder to persuade consumers that above-inflation increases are unavoidable.

The result is a premium rise that can be explained by claims dynamics and post-COVID rebalancing, but which still raises legitimate questions about value for money and the share of premiums that ultimately funds care. As premiums rise again from April, scrutiny is likely to remain focused not only on the size of the increase, but on how clearly the system links what members pay to what they receive in benefits.