Find out what impacts your health insurance premium and how they have increased over the years.
Health insurance premiums are rising in 2017, with some funds planning bigger price increases than others. This is on the back of a 2016 premium hike, and a lot of Australians are wondering why the costs are rising and where the money is going.
How are health insurance premiums calculated?
Unlike other forms of cover, such as life insurance and car insurance, health insurance premiums are community rated and are not affected by age or your health. Instead, they’re set based on the following criteria:
- Your chosen level of cover. The more comprehensive the policy, the higher the cost.
- Singles, couples or family cover. Singles cover is usually the cheapest because only one person is being insured. Couples cover is usually in the middle and family cover tends to be the most expensive because kids can often be covered until the age of 25.
- Where you live. Health insurance premiums will vary between states, based on the demographics for the state.
- Lifetime Health Cover loading. This government scheme, designed to encourage people to get health insurance sooner, is where age comes in. If you take out cover after the 30th of June following your 31st birthday, your premiums will be higher. After 10 years of private health insurance, this loading is removed.
- Your income. The private health insurance rebate adjusts premiums based on your income, depending on your family, marital status, and age. This rebate can reduce premiums by more than a third.
Your choice of health insurance fund can affect how some of these influence your prices. One fund might have more competitive premiums for singles, while another might offer more value and cover with family policies.
Many health funds will also offer specific discounts, such as when you pay premiums with direct debit or make annual payments instead of monthly ones. There are generally no penalties for switching funds, and funds have to recognise waiting periods already served, which is why it’s so important to compare health insurance when your situation changes or if your premiums are rising.
How much have health insurance premiums increased since 2010?
The table below displays the cumulative average premium increase from the funds that submitted increase each year 2010 through 2017.
Average increase with rate protection (%)
|ACA Health Benefits Fund Ltd||4.89||4.88||5.47||5.89||5.78||4.96||6.19||4.7|
|Australian Health Management Group Pty Ltd||6.94||6.94||4.7||n/a||n/a||n/a||n/a||n/a|
|Australian Unity Health Ltd||6.68||4.91||4.55||5.23||6.62||6.26||5.05||4.46|
|Bupa HI Pty Ltd||5.39||5.14||4.91||5.8||6.35||5.59||5.69||4.9|
|CBHS Corporate Health Pty Ltd||NA||n/a||n/a||n/a||n/a||n/a||n/a||2.98|
|CBHS Health Fund Ltd||7.14||7.12||5.31||4.59||5.61||6.58||5.92||3.29|
|Cessnock District Health Benefits Fund Ltd||5.29||6.66||5.83||5.55||5.36||6.99||6.19||6.57|
|CUA Health Ltd||9.48||7.36||7.85||4.62||5.47||6.35||8.95||4.97|
|Defence Health Ltd||4.9||3.98||3.93||4.02||5.34||5.62||5.48||5.51|
|Doctors' Health Fund Pty Ltd, The||6.91||5.58||5.66||4.45||4.23||3.98||3.76||3.54|
|Grand United Corporate Health Ltd||2.32||2.53||3.17||3.23||3.46||4.32||4.26||4.11|
|HBF Health Ltd||4.95||5.85||5.85||3.75||3.72||5.96||4.94||5.96|
|Health Care Insurance Ltd||6.52||7.4||5.54||3.97||5.34||6.12||6.9||6.06|
|Health Insurance Fund of Australia Ltd||4.5||4.47||5.35||4.47||2.98||4.49||6.55||7.99|
|Health Partners Ltd||7.72||6.61||5.44||3.4||3.14||5.76||7.14||5.1|
|health.com.au Pty Ltd||n/a||n/a||n/a||5.76||6.13||6.81||8.81||8.53|
|Healthguard Health Benefits Fund Ltd||3.92||4.84||3.99||3.86||4.95||5.31||n/a||n/a|
|Hospitals Contribution Fund of Australia Ltd, The||5.94||6.41||5.94||5.74||6.89||6.57||5.42||3.65|
|Latrobe Health Services Ltd||4.53||5.28||5.31||6.21||5.98||6.15||5.52||4.49|
|Manchester Unity Australia Ltd||5.58||5.38||n/a||n/a||n/a||n/a||n/a||n/a|
|Medibank Private Ltd||5.74||5.35||4.7||6.2||6.49||6.59||5.64||4.6|
|MBF Alliances Pty Ltd||4.73||n/a||n/a||n/a||n/a||n/a||n/a||n/a|
|MBF Australia Ltd||5.62||n/a||n/a||n/a||n/a||n/a||n/a||n/a|
|Mildura District Hospital Fund Ltd||4.67||4.56||2.19||5.75||3.65||6.14||6.74||5.95|
|National Health Benefits Australia Pty Ltd||6.49||5.61||5.64||5.76||4.5||6.26||5.28||5.41|
|Navy Health Ltd||3.81||3.7||3.35||4.8||4.53||4.5||5.5||4.94|
|NIB Health Funds Ltd||5.95||6.19||5.5||6.5||7.99||6.55||5.55||4.48|
|Peoplecare Health Ltd (previously Lysaght Peoplecare Ltd)||6.3||4.94||5.93||6.81||5.82||6.08||4.38||5.09|
|Phoenix Health Fund Ltd||6.07||4.43||6.99||5.47||6.52||6.48||5.72||5.93|
|Police Health Ltd (previously South Australian Police Employees’ Health Fund Inc)||15.52||5.51||4.96||4.09||4.81||4.48||4.81||4.63|
|Queensland Country Health Fund Ltd||4.49||4.89||4.38||4.59||5.85||4.77||4.91||5.15|
|Queensland Teachers’ Union Health Fund Ltd||5.97||4.94||3.96||4.5||4.5||6.36||7.15||7.3|
|Railway & Transport Health Fund Ltd||8.97||14.38||5.74||4.29||4.8||6.17||5.61||5.54|
|Reserve Bank Health Society Ltd||5||1.5||4.89||4.31||4.39||4.88||5.37||5|
|St Luke's Medical and Hospital Benefits Association Ltd||5.27||4.79||3.16||3.96||6.33||6.27||5.89||4.99|
|Teachers Federation Health Ltd||5.93||4.89||4.68||4.1||5.42||6.86||4.97||4.96|
|Transport Health Pty Ltd||6.51||6.34||7.69||6.77||5.9||4.84||6.49||4.93|
|INDUSTRY WEIGHTED AVERAGE||5.78||5.56||5.06||5.6||6.2||6.18||5.59||4.84|
*The yearly price increase listed above is only indicative and not represntative of what every consumer may experience. Certain policies may have had higher or lower premium rises.
Where does the money go?
The majority of premiums end up, indirectly, going back to health fund members by paying for hospital and ancillary health treatments. More directly, the majority of health insurance premiums paid go to doctors, hospitals and medical practitioners.
The amount of profit retained, or put towards operating costs, depends largely on the health fund. Restricted health funds, for example, are often member owned and claim to reinvest more profits back to members. This might take the form of increasing benefit limits or reducing premiums.
This rise in the cost of health insurance is partly because premiums directly pay for medical services and procedures, and Australians are claiming more on their health insurance than ever before.
According to the Australian Prudential Regulation Authority (APRA) there were 1.15 million hospital episodes claimed on private health insurance in the December 2016 quarter alone, with both private and public hospitalisations claimed on health insurance increasing throughout the year. Public hospital utilisation increased by more than 6% over 2016, with private hospital utilisation increasing by over 3% in the same period. This is a significant difference, representing thousands of treatments.
One of the reasons for this increase may be that Australians are using their health insurance more than before, with more older people having private health insurance now than they used to. For example, areas with an older population overall tend to have longer public hospital wait times for elective procedures, which may be encouraging more people to get private health insurance in order to get past the waiting list.
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