How Private Health Insurance Premiums Work in Australia

Every year, without fail, Australians open a letter or email from their health fund telling them premiums are going up. It happens on the same date, follows the same process, and yet most people have no idea how the number is actually decided. Here’s how premiums work, why they rise annually, and what you can actually do about it.

How your premium is calculated

Your premium is set by your insurer based on several factors:

• Tier and level of cover — Gold generally costs more than Basic, and “Plus” policies cost more than the standard tier
• Excess — the amount you agree to pay upfront per hospital admission; a higher excess (up to $750 for singles or $1,500 for families/couples to remain MLS-exempt) usually means a lower premium
• Extras inclusions and annual limits — richer extras cover costs more
• Number of adults and dependants on the policy
• State — hospital costs and fund risk pools vary by state, so identical cover can cost differently depending on where you live
• Lifetime Health Cover loading — added on top of the base premium if you took out hospital cover later in life (more on this in our LHC loading guide)

Unlike car or home insurance, private health insurers in Australia cannot set premiums based on your individual health, age, or claims history for hospital cover — that’s a legal principle called community rating. Everyone on the same policy pays the same base premium regardless of health status.

Why premiums rise every 1 April

Premium increases in Australia happen once a year, effective 1 April, and every increase must be approved by the Australian Government (via the Department of Health) before it can take effect. Insurers submit proposed increases annually, and the government reviews and can push back on unjustified rises.

For 2026, the government approved an average increase of 4.41% from 1 April 2026 — the largest average rise since 2017, and up from 3.73% the year before. Insurers cited rising claims costs, with medical and hospital service costs increasing roughly 5% over the prior financial year. Importantly, that 4.41% is an industry average — actual increases by individual fund ranged from around 1.98% up to 5.98%, meaning your fund’s actual rise could be well above or below the headline number.

Why this is the best moment to compare funds

Because every fund’s increase is different, the gap between the cheapest and most expensive provider for equivalent cover tends to widen every April. A policy that was competitively priced last year can become one of the pricier options in its tier within twelve months — while a fund that held its pricing steady can suddenly become the better deal.

This is exactly the window worth using if you’re comparing or switching insurers:

• Check your increase notice against the market. If your fund’s rise is above the industry average, that’s your cue to shop around.
• Switching won’t cost you waiting periods if you move to an equivalent or lower hospital tier — portability rules mean your new insurer has to honour time you’ve already served.
• Time your switch around the increase date. Locking in a new policy just before 1 April can sometimes mean a full extra year before you face a fresh increase, depending on the insurer’s renewal cycle — but confirm this with the fund, as timing rules vary.
• Don’t just compare headline premiums. Two “Gold” policies at similar prices can differ a lot in excess, extras limits and hospital network, so compare like-for-like inclusions, not just the sticker price.

What actually offsets the cost

A few levers can reduce what you actually pay, separate from the headline premium:

• The Australian Government Rebate, which can reduce your premium by a meaningful percentage depending on your income and age (see our rebate guide for exact 2025–26 rates)
• Choosing a higher excess, which lowers your ongoing premium in exchange for paying more if you’re actually admitted to hospital
• Avoiding Lifetime Health Cover loading by taking out and maintaining hospital cover before the loading kicks in, or clearing it after 10 years of continuous cover

FAQs

Why do premiums go up every year instead of staying fixed? Health costs — hospital admissions, medical technology, an ageing population — rise faster than general inflation most years, and insurers pass a portion of that on through the annually approved premium increase.

Can I be charged more because of my health or age? No, not for the base premium. Community rating means your premium is the same as everyone else’s on that policy regardless of health status. The one age-related cost is Lifetime Health Cover loading, which is about when you joined, not your current health.

Is it worth switching funds every year to chase the best price? It can be, provided you stick to an equivalent or lower hospital tier so your waiting periods carry over, and you double-check extras waiting periods separately since those aren’t protected by portability rules.

Does a higher excess always mean lower premiums? Generally yes, but weigh it against how likely you are to actually be admitted to hospital in a given year — a high excess only saves money if you don’t end up needing to pay it.

Know the right day to switch

The annual 1 April price rise is the single best moment to churn — but only if you act on it before the increase locks in. PHI Tracker keeps a live record of your private health insurance: your fund, tier, policy start date and the waiting periods you’ve served. So when your increase notice lands, you already know whether it’s above the market and can pick the exact day to switch to a better deal or sign-up offer, without re-serving waiting periods or tripping Lifetime Health Cover loading.

Create your free PHI Tracker account and know precisely when switching is worth it.

Figures current as at July 2026, based on the Australian Government’s approved 2026 premium round. Confirm your specific fund’s increase and renewal timing directly with your insurer.