Private health insurance premiums to rise 4.41% from April: how increases are approved and what the numbers suggest

A bigger annual increase, landing on stretched household budgets

From April 1, around 15 million Australians with private health insurance will face higher premiums after the federal government approved an average increase of 4.41%. It is the largest rise in nine years, and for many households it will translate into several hundred dollars more each year. The timing also matters: families are already navigating higher living costs, including rents, energy prices and grocery bills.

The increase has also reignited a familiar concern: why do private health insurance premiums often rise faster than broader price measures? In this case, the approved average outpaces general inflation, which rose to 3.8% in the 12 months to December 2025. When premiums climb above inflation, policyholders can feel they are losing ground, paying more for cover even as other costs are also rising.

At the same time, the industry has reported strong profits in recent years. That combination—premiums rising faster than inflation while profits remain large—has led many people to ask whether the latest increase is justified, and what checks exist to ensure premium changes reflect genuine costs rather than simply boosting margins.

How premium rises are set and approved

Australia’s private health insurance premium changes follow a formal annual process. Each year, insurers apply to the federal health minister for approval to raise premiums, with the changes typically taking effect in April.

Before the decision reaches the minister, the Australian Prudential Regulation Authority (APRA), Australia’s financial regulator, assesses the applications. Insurers are required to present information including projected changes in revenue and projected claims costs, as well as data on their financial performance. This step is designed to test whether the requested premium changes are supported by the insurer’s financial outlook and claims expectations.

After APRA’s assessment, the application goes to the Minister for Health for approval. The legal framework is set out in the Private Health Insurance Act 2007, which states the minister must approve the change unless it is against the public interest. That wording is important: it suggests the default position is approval, with the public interest test acting as the key hurdle.

This year, Health Minister Mark Butler said he asked insurers to resubmit their applications multiple times before reaching a final decision. Even so, the final approved average still came in at 4.41%, the highest since 2017. The resubmission detail indicates there was negotiation and scrutiny, but it also underlines that the end result can still be a sizeable increase.

Not all funds were treated the same: variations across insurers

Although the headline figure is an industry average, individual funds were approved for quite different increases. Among the larger funds, NIB was approved at 5.5%, Medibank at 5.1% and Bupa at 4.8%—all above the industry average. At the other end, HBF was approved at 2.1%.

These differences reflect the way premium approvals are tied to each insurer’s circumstances rather than a single across-the-board rate. The approved increase for any given fund can depend on several factors, including:

• how much the insurer is paying out in claims
• the age and health profile of its members
• the size of its financial reserves
• how efficiently it is run

In practice, this means two insurers operating in the same market can be approved for materially different premium changes, depending on who they insure and how their claims experience is trending.

What “benefits” tell us about the cost pressures inside private health insurance

To understand why premiums are rising, it helps to look at the relationship between what insurers collect in premiums and what they pay out. In the industry, the term “benefits” refers to the money paid back to members to cover medical costs—such as hospital stays and dental appointments.

When benefits grow faster than premiums, insurer margins are squeezed. That is a central point in the current debate: if payouts are accelerating while premium increases are relatively restrained, insurers can argue that higher premiums are needed to keep revenue aligned with claims costs.

Insurers request premium increases each year based on forecasts of benefit payouts in the coming year. However, forecasts do not always match what actually happens, and requested increases may not always be approved at the level insurers seek. Over time, those gaps between expected and actual claims, and between requested and approved premium rises, can accumulate and affect profitability and reserves.

Recent years show benefits rising much faster than premiums

The recent claims data cited in the public discussion points to a sharp rise in benefits paid. Total benefits—covering both hospital treatments and general treatments such as dental and physiotherapy—grew 10.2% in 2023 and a further 7.6% in 2024.

Over the same years, approved premium increases were much lower: 2.9% in 2023 and 3.0% in 2024. Put simply, insurer payouts were increasing at roughly double the rate of the premiums they were allowed to collect.

This mismatch is one of the strongest arguments insurers can point to when explaining why premiums need to rise. If benefits keep growing substantially faster than premiums, insurers can face tightening margins and pressure on their financial position, even if they remain profitable.

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

To see why benefits growth has been so strong in recent years, it is necessary to revisit the early COVID period. In 2020, elective surgeries were cancelled and many people avoided medical appointments. As a result, total benefits paid dropped by 5.5%, even though premiums continued to be collected. That created a period in which insurers built up large surpluses.

From 2021, however, that pattern reversed. Pent-up demand returned as people resumed delayed care. Benefits jumped 8.3% in 2021, while the premium increase that year was just 2.7%, noted as the lowest on record at the time. In other words, the system moved quickly from a year of unusually low claims to a period of catch-up, with benefits rising faster than premiums.

Before COVID, the system was described as roughly in balance. For example, benefits grew 3.1% in 2019, broadly in line with the 3.25% premium increase that year. The contrast between that pre-pandemic alignment and the post-pandemic divergence helps explain why the current premium rise is being debated so intensely.

Why the 4.41% increase is being framed as a “catch-up”

The escalating premium increases approved for 2025 (3.7%) and 2026 (4.4%) suggest insurers are now trying to claw back balance after multiple years in which benefits growth outpaced premium growth. Viewed purely through the lens of claims costs, there is a case that higher premiums are needed: benefits have grown at roughly double the rate of premiums for two years.

There is also an expectation of ongoing pressure on benefit payouts. As Australia’s population ages and undergoes elective surgery at a greater rate, benefits paid are likely to rise in coming years. That demographic reality is often cited as a structural factor pushing claims higher over time.

From this perspective, a 4.41% average increase can be interpreted as an attempt to bring revenue back into line with the real and rising cost of what members are claiming—particularly after the post-COVID rebound in hospital and general treatment activity.

Profits and margins complicate the justification

Even if claims costs are rising quickly, the industry’s profitability shapes how the public interprets premium increases. The profit figures cited in the discussion show strong results over several years. 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, still well above pre-pandemic levels.

Over the five years to June 2024, net industry profits rose by 48%. One insurer, Medibank, posted an operating profit of $741.5 million in 2024–25. Numbers like these can make premium rises harder to accept for consumers, particularly when household budgets are under pressure.

Gross margin, a measure of how much revenue is left after paying claims, tells a similar story. Margins were around 14% and 13% in 2019 and 2020, then surged to 18.8% in 2022. By 2023, margins had begun to ease downward, sitting at 17%.

These figures support two ideas at once. First, insurers are not in immediate financial trouble: profits remain large. Second, the trend suggests the “bumper years” have passed and that claims are rising faster than premiums, tightening margins. That tightening can be used to argue that premium increases are needed to prevent further erosion of margins and to maintain reserves.

Are insurers in trouble, or simply protecting margins?

The data presented indicates insurers remain profitable, but it also points to emerging pressure. Claims have been growing faster than premiums, and margins have been easing from their 2022 peak. In that context, the 4.41% average increase can be seen less as a sign of crisis and more as an attempt to restore a longer-run balance between what insurers collect and what they pay out.

However, the presence of large profits means the debate is not purely technical. Consumers may reasonably ask why premium increases need to exceed inflation when the industry is still generating substantial profits, and why the burden of adjusting back to “balance” should fall primarily on policyholders.

A consumer-focused benchmark: how much of each premium dollar goes back to members

One way to assess whether premiums are being used primarily for care is to look at how much of each premium dollar is returned to members as benefits. An international comparison often raised is the United States, where health insurers are legally required to return at least 85 cents in every premium dollar to members in large group markets. This rule was introduced under the Affordable Care Act.

By that benchmark, the Australian industry briefly fell short. In 2022, Australian insurers returned only 81 cents per dollar, and in 2023 they returned 83 cents per dollar. Those figures suggest that, at least in those years, a smaller share of premium revenue was flowing back to members as benefits than the US large-group minimum standard.

The idea of imposing a requirement that insurers return a set percentage of premiums as benefits has been raised as a way to give consumers greater peace of mind that premium dollars are being used for care rather than profits. Such a rule would bring Australian regulation closer to what is described as international best practice in this area.

What to take away from the 2026 premium rise

The approved average premium increase of 4.41% is significant, and it arrives at a time when many households are already under financial strain. It also exceeds the most recently cited inflation figure of 3.8% for the year to December 2025, which is why it is likely to feel especially sharp.

At the same time, the claims-cost story is real. Benefits paid have been rising rapidly—up 10.2% in 2023 and 7.6% in 2024—while premium increases in those years were around 3%. That gap helps explain why insurers argue higher premiums are needed now.

The complication is that insurers have also recorded large profits and elevated margins in recent years, even if margins have started to ease. That makes it harder to view premium rises as purely a response to financial stress. The policy question, then, is not only whether claims costs justify higher premiums, but also whether the regulatory framework should include clearer consumer-facing standards—such as a minimum proportion of premiums returned as benefits—to strengthen confidence in how premium dollars are used.