How to negotiate a better private health insurance deal as premiums rise
Premiums are rising, but cancelling isn’t the only lever
Household budgets are being squeezed across essentials, and private health insurance has become another pressure point. From April 1, the average premium rose by 4.41%. Consumer advocates have also noted that average premiums for some gold hospital cover policies have risen in a much wider range—about 7.89% to 25%.
When premiums jump, many people do one of two things: they absorb the increase without question, or they consider cancelling their policy altogether. Yet there is a third path that often gets overlooked—negotiating with your insurer and adjusting your cover so you pay for what you actually need.
It’s worth acknowledging a reality upfront: health funds typically have set prices for specific products, which can make it difficult to negotiate the headline premium in a direct, haggling sense. But you can often negotiate the parts around the edges—how your policy is structured, whether your cover still matches your life, and whether there are promotions or alternative products that reduce your costs.
Why so many people “set and forget” their policy
Private health insurance decisions are rarely revisited, even when premiums rise. That isn’t simply laziness; there are well-known behavioural reasons many people renew the same cover year after year.
Loss aversion: Many people fear making the “wrong” change more than they value the potential savings from making a “right” one. In practice, this can look like a reluctance to remove items from cover—even if they could be replaced with something more suitable.
Bounded rationality: Health insurance policies can be complex and hard to interpret. When decisions feel technical and high-stakes, people often rely on simplified rules of thumb rather than deep comparisons.
Too many options: Policies often include multiple choices and variations that can require significant legal and health literacy to interpret. Research examining older consumers suggests decisions may improve when policies contain fewer options.
Status quo bias: Once people choose a policy they consider “good enough,” they tend to stick with it and rarely reopen the decision—even when their circumstances change.
Understanding these tendencies matters because negotiating a better deal is partly about pushing through the friction that keeps you in the same product by default.
The hidden costs of cancelling cover
If reviewing and negotiating feels daunting, cancelling can appear like the simplest solution. Whether that makes financial sense depends on your age, health and income. But it’s important to understand the potential downsides before you drop hospital cover.
Medicare Levy Surcharge: If you cancel hospital cover, you may face the Medicare Levy Surcharge, which can be up to 1.5% of your income.
Lifetime Health Cover loading: If you cancel and rejoin later, you may need to pay the Lifetime Health Cover loading. This adds 2% to your hospital cover premium for every year you are aged over 30. The penalty lasts for a decade.
Waiting periods: If you leave and later rejoin, you may need to serve waiting periods again for certain conditions.
These features mean that, for many people, the decision isn’t simply “pay more” versus “pay nothing.” It can be “pay more now” versus “pay differently later,” sometimes with penalties attached.
Why insurers may be willing to keep you
From the insurer’s perspective, there is a strong incentive to retain customers—particularly healthier members. When healthier people cancel, the insured pool becomes older and sicker on average. That dynamic can force premiums higher, which can push even more people to leave. Economists describe this feedback loop as a “death spiral.”
This doesn’t mean every insurer will offer the same flexibility, and it doesn’t guarantee you’ll get the outcome you want. But it does explain why it can be worth making the call rather than assuming the price rise is non-negotiable.
Before you call: do targeted homework
Because plan prices are generally fixed, the most productive negotiation is often about choosing a product structure that fits your needs and using competitor information as leverage. That requires some preparation.
Start by taking stock of what you have now: hospital cover, extras cover, your excess, and any add-ons that may have made sense in the past but no longer reflect your situation.
Then gather information on comparable alternatives. Comparison sites can help you identify products that appear similar to yours and meet your needs. If you plan to use a competitor product as a bargaining tool, be ready: your insurer may ask for details and may challenge whether it is truly comparable.
Tip 1: Optimise your excess to balance premium and out-of-pocket costs
One of the most direct ways to reduce your premium is to reconsider your excess—the amount you pay before your policy pays out on a claim. In general terms, a higher excess usually means a cheaper premium.
This is not a one-size-fits-all move. The point is to decide what level of up-front cost you would be willing to carry in exchange for a lower ongoing premium. If you can tolerate a higher excess, it may be a straightforward way to bring the annual cost down without giving up the broader structure of cover.
Tip 2: Separate hospital and extras decisions instead of treating them as a bundle
Many people assume their hospital cover and extras cover should sit at the same level. But they don’t have to. You can mix and match based on what you actually use.
For example, you might choose basic hospital cover while keeping top-level extras cover. Or you may decide the opposite makes more sense for you. The key is to break the assumption that “more expensive overall” automatically equals “better for my situation.”
Tip 3: Remove extras you don’t use—and remember you don’t have to include everything
Extras are an area where people can pay for benefits they rarely claim. A simple question helps: why pay for extras if you never use them?
It’s also important to remember you don’t need to include every extra on offer. You can set extras to reflect what you actually use and remove those you don’t. This can reduce costs without affecting the parts of the policy you value.
This is where the “set and forget” problem often shows up. Many people choose a plan in early adulthood and then don’t review it over time, even as their medical needs change. That can lead to paying for features that no longer fit your life.
Tip 4: Update your policy as your household changes
Policies can become outdated not only because your health needs change, but because your household changes too. It is worth checking whether the people listed on your policy still reflect your current situation—and whether the types of cover you are paying for still make sense.
A practical example raised by experts is paediatric care: if you have no children, you may not need to pay for paediatric-related cover now. The point is not that you can never need it; rather, you can add it later if your circumstances change.
Similarly, you should add or remove people from your policy as the make-up of your household changes. Keeping the policy aligned to reality is one of the simplest ways to avoid paying for benefits you cannot use.
Tip 5: Use competitor pricing as leverage—and ask directly about retention offers
If you want a better deal with your current insurer, it helps to know what else is available. Once you have identified comparable products from competitors that suit your needs, you can use that information in your conversation.
Be prepared for your insurer to ask for specifics about the comparison product. They may question whether it is genuinely similar, so having the details on hand can make the discussion more productive.
Then ask a straightforward question: what deals and promotions can they offer to keep your business? Insurers may have retention offers or alternative products that are not front-of-mind when you simply renew.
Timing matters: why annual review season can work in your favour
Reviewing your policy annually is a sensible habit, and the period after premiums increase can be an especially practical time to do it. This is when providers may be most willing to negotiate and when switching deals can be more generous.
Even if you don’t switch, the act of reviewing—checking your excess, adjusting extras, and confirming your household details—can help ensure you’re not paying for cover that no longer matches your needs.
If you do switch: compare carefully, not just on price
Switching can be a valid option if you find a policy that better matches your needs and budget. But it’s important to read the new policy and compare it to your old one.
Waiting times: Watch for differences in waiting times, including for pre-existing conditions.
Coverage details: Ensure the new policy covers what you expect it to cover, rather than assuming two similarly named products are identical.
Service experience: Check provider reviews about customer support and service, because the quality of help you receive can matter when you need to claim or resolve an issue.
Price is important, but it is only one part of the value equation. A cheaper policy that doesn’t meet your needs can become expensive in other ways.
Where to get general help if you’re unsure
If you want free, general guidance on private health insurance and how to compare policies, you can contact the Commonwealth Ombudsman. This can be useful if you feel stuck between options or want a clearer sense of what questions to ask.
A practical checklist for your next call
If you want to turn these ideas into action, here is a simple way to structure your preparation and the conversation with your insurer.
List what you actually use (hospital and extras) and what you haven’t used.
Decide whether you could accept a higher excess in exchange for a lower premium.
Check whether your hospital cover level and extras cover level still make sense as a pair—or whether you should adjust them independently.
Remove extras you don’t need and confirm you are not paying for benefits that don’t match your current life stage.
Confirm your household details are current and that the people covered are correct.
Find at least one comparable alternative policy and record the details so you can discuss it confidently.
Ask your insurer what deals or promotions are available to retain you.
If considering switching, read the new policy carefully and compare waiting times and pre-existing condition rules.
In a cost-of-living crunch, it’s understandable to feel frustrated by premium increases. But before you cancel, it may be worth treating your policy as something you can actively manage. A review and a phone call can reveal options—whether that’s a better-fitting mix of cover, a different excess, streamlined extras, or a deal designed to keep you as a customer.