Australian Health Insurance Premiums Rise 4.41% Amid Profit Concerns

Approximately 15 million Australians with private health insurance will face higher costs from April 1, following government approval of a 4.41% average premium increase, marking the largest rise in nine years.

For typical families, this translates to several hundred additional dollars annually, compounding existing financial pressures from rising housing, energy, and food costs. The premium increase notably exceeds general inflation, which reached 3.8% in the 12 months to December 2025.

Regulatory Framework and Approval Process

Each year, private health insurers submit applications to the federal health minister seeking premium increase approval, with changes taking effect each April. The Australian Prudential Regulation Authority conducts initial assessments, requiring insurers to demonstrate projected revenue and claims cost changes alongside financial performance data.

Health Minister Mark Butler reportedly requested multiple resubmissions before reaching the final decision. Individual fund increases varied considerably, with NIB approved at 5.5%, Medibank at 5.1%, and Bupa at 4.8%, all exceeding the industry average, while HBF received approval for just 2.1%.

Financial Performance Analysis

Total benefits paid, covering hospital treatments and general services such as dental care, grew 10.2% in 2023 and 7.6% in 2024. During the same period, approved premium increases were limited to 2.9% and 3.0% respectively, creating a significant disparity between payouts and collections.

The COVID-19 pandemic significantly disrupted this balance. In 2020, cancelled elective surgeries and reduced medical appointments led to a 5.5% decrease in total benefits paid, while premium collections continued, allowing insurers to accumulate substantial surpluses.

From 2021, pent-up medical demand returned forcefully. Benefits increased 8.3% against a record-low 2.7% premium increase. The escalating premium increases approved for 2025 (3.7%) and 2026 (4.4%) suggest insurers are attempting to restore financial equilibrium.

Industry Profitability Concerns

Industry-wide after-tax profits reached $1.39 billion in 2018, declined to approximately $951 million during COVID, then rebounded to $1.98 billion in 2022 before settling at $1.59 billion in 2023, remaining well above pre-pandemic levels.

Over five years to June 2024, net industry profits increased 48%. Medibank alone reported an operating profit of $741.5 million in 2024-25. Gross margins, measuring revenue remaining after claims payments, surged from 14% in 2019 to 18.8% in 2022, easing to 17% by 2023.

Regulatory Considerations

While claims costs provide justification for premium increases, substantial industry profits complicate the narrative. Australian insurers briefly returned only 81 cents per premium dollar to members in 2022 and 83 cents in 2023, falling short of international standards.

The United States requires health insurers to return at least 85 cents per premium dollar under the Affordable Care Act. Implementing similar requirements could enhance consumer confidence that premiums fund care rather than excessive profits, aligning Australian regulation with international best practices.