Jump in private health insurance hits seniors
It’s time to “look under the hood” and make private health insurance more affordable.
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From 1 April, private health insurance (PHI) premiums will increase 3.73%, on average. While that’s below health inflation of 4%, it’s well above overall CPI of 2.4%. That begs the question: what is driving up health so much more than other living costs? We’ll look at that a little later.
It’s the biggest average increase since 2018 and follows a 2024 increase of 3.03% and a 2023 increase of 2.9%.
How big of an increase you face, depends on your fund and the type of policy you have.
How to avoid health insurance premium hikes
- Prepay your annual premium before 31 March to 'lock in' your current premium
Some funds offer direct debit and pre-pay discounts
Review your policy, know what you are paying for, and compare with other offers.
Use the government website – www.privatehealth.gov.au – to compare the range of products and prices on offer from all insurers.
In general, policies that provide more cover (e.g., Gold) will increase more than policies with more exclusions (e.g., Bronze). So, it’s important you look at your specific policy if you are considering switching insurer.
That’s not all folks – the PHI rebate is also changing.
The Private Health Insurance Rebate was introduced in January 1999 to enable people on lower incomes to maintain cover and avoid being forced onto the public health system.
Based on the formula used by the Government to calculate the rebate, when premiums increase on 1 April by more than CPI it also results in a reduction in the PHI rebate.
But it’s not all bad news. Even though the rebate is declining as a percentage of your premium, it does still reduce the premium increase overall (just not as much as we would like).
Confused? Let’s look at some examples to illustrate what this means in dollar terms.
Betty is a single pensioner aged 68 in Queensland. She receives the full PHI rebate because her income is less than $97,000 and has Gold hospital and equivalent extras with a large insurer.
From 1 April, Betty’s premium will increase by $323 from $6,336 (excluding the rebate) to $6,659 (this is based on the average increase for this insurer, 5.10%, but the amount may differ depending on the specific policy).
As a result of the change in the PHI rebate, from 28.71% to 28.34%, Betty’s premium will increase from $4,517 to $4,772, an increase of $255.
(N.B. If the PHI rebate rate hadn’t changed, the PHI rebate would have been $1,912 and her premium would have been $4,747, an increase of only $230.)
Trish and Kumar are part-pensioners aged 67 and 69 in New South Wales. They receive the full PHI rebate and have Silver hospital and equivalent extras cover.
From 1 April, their premium will increase by $410 from $7,084 to $7,494 (excluding the PHI rebate) based on the average increase for this insurer of 5.79% (N.B. This amount of increase may differ for depending on the specific policy).
As their rebate drops from 28.71% to 28.34%, the net annual cost of their premium will increase from $5,050 to $5,370 on 1 April, an increase of $320.
(N.B. If the PHI rebate rate hadn’t changed, the PHI rebate would have been $2,152, their net premium would have been $5,342, an increase of only $292.)
According to a survey conducted by National Seniors Australia (NSA), the cost of PHI was one of the most important issues for our members and supporters. This finding is supported by our recent research report which showed older people really value PHI but are frustrated at its declining value to policy holders.
NSA CEO, Chris Grice, says rising PHI premiums significantly affect older people. Many are caught in a health/price squeeze – they need more health interventions as they age yet their wealth and income often declines.
“While most people need private health, rising premiums and out-of-pocket costs significantly undermine its value. As insurers and specialists point the finger at each other, seniors are left caught in the crossfire,” Mr Grice said.
Our research shows older people who are single, on the Age Pension, or with limited savings are less likely to hold health insurance. While older people want to maintain private health insurance, they do so begrudgingly.
The risk for government is older people drop their insurance, placing pressure on the public system
NSA research finds seniors love to hate PHI
What you told us about PHI:
96% of survey respondents with cover said it is important to them, 76% said it was very important.
95% said it was likely they would maintain their current level of cover over the next 12 months.
53% said they needed cost-saving strategies to help maintain cover – a third of these (37%) chose shopping around as the main strategy but, worryingly, one-fifth (22%) said they would reduce other spending to keep PHI.
45% of full pensioners had no PHI, compared to only 16% of respondents with other income.
35% of older people with a mortgage or renting had no PHI, compared to only 14% of homeowners without a mortgage.
People with poorer health were much less likely to have PHI.
You can read more about what seniors think about PHI here.
It’s time for surgical-like intervention. Election candidates from all sides should support our call for an in-depth independent inquiry into the private health system, with the focus on making private health care more accessible and affordable for older Australians.
To find out more about why the Productivity Commission should investigate the private health sector, click here.
Aside from a review of private health, NSA also wants the PHI rebate increased (not decreased) for people on low incomes, including older people, to ensure those most likely to vacate PHI are maintained within in the system and those most likely to take it up, do just that.
More information about our PHI rebate policy is available here.
To support our work, please consider joining our Health Costs campaign.
Related reading: NSA, NSA Media Release, NSA Policy Recommendations, Health Department, Canstar
