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

Premiums are rising again — and this year’s increase is the biggest in nearly a decade

From April 1, around 15 million Australians with private health insurance will pay higher premiums after the federal government approved an average increase of 4.41%. It is the largest annual rise in nine years, and for many households it will translate into several hundred dollars more each year for a typical family policy.

The timing also matters. The increase arrives as many households are already managing higher costs for essentials such as rent, energy and groceries. Against that backdrop, the premium rise has attracted particular scrutiny — not only because of its size, but because it once again exceeds general inflation. Inflation rose to 3.8% in the 12 months to December 2025, meaning the average premium increase is higher than the broader rise in consumer prices.

That gap between premium growth and inflation is one reason the decision has prompted a familiar question: if insurers are making strong profits, is a rise of this size justified?

How premium increases are set: applications, assessment and ministerial approval

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

Before the minister makes a decision, the Australian Prudential Regulation Authority (APRA) assesses the applications. Insurers must provide information about projected changes in revenue and claims costs, along with data on their financial performance. The intent of this step is to test whether the requested premium changes align with the insurer’s expected outlays and financial position.

After APRA’s assessment, the applications go to the Minister for Health for approval. The legal framework is set out in the Private Health Insurance Act 2007. Under that act, the minister must approve the change unless it is against the public interest.

This year, Health Minister Mark Butler said he asked insurers to resubmit their applications multiple times before reaching a final decision. Even so, the approved average increase of 4.41% still ended up being the highest since 2017.

Not every insurer received the same approval: the range of increases

Although the headline figure is an industry-wide average, individual funds were approved for different increases. Some of the largest insurers were approved for rises above the average:

• NIB: 5.5%
• Medibank: 5.1%
• Bupa: 4.8%

Other funds were approved for much smaller increases. HBF, for example, was approved at 2.1%.

These differences reflect each insurer’s own financial circumstances. The factors that can shape an insurer’s approved increase include:

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

In other words, the average rise is a useful headline, but it does not capture the variation in what different members will face depending on their insurer.

To judge the increase, it helps to look at “benefits” — what insurers pay back to members

One of the clearest ways to understand pressure on premiums is to examine what insurers are paying out. In industry language, “benefits” refers to the money paid back to members to cover medical costs — such as hospital stays and dental appointments.

When benefits rise faster than premiums, insurers’ margins can be squeezed. That relationship matters because insurers typically base their premium requests on forecasts of benefit payouts in the coming year. But forecasts do not always align with what ultimately happens, and requested increases may not be approved at the level insurers seek.

Recent data points to a period in which benefit payouts have been growing quickly. Total benefits paid — covering both hospital treatments and general treatments such as dental and physiotherapy — grew by 10.2% in 2023 and a further 7.6% in 2024.

Over those same years, approved premium increases were much smaller: 2.9% and 3.0%. In effect, insurer payouts were growing at roughly double the rate of what they were collecting through premiums.

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

To make sense of why benefits have recently outpaced premiums, it helps to revisit the early COVID years and what followed.

In 2020, elective surgeries were cancelled and many people avoided medical appointments. Total benefits paid dropped by 5.5% even as premiums continued to be collected. That combination allowed insurers to build up large surpluses.

From 2021, however, the pattern reversed. The pent-up demand for care returned. Benefits jumped 8.3% in 2021, while the premium increase that year was just 2.7%, which was the lowest on record at the time.

Before the pandemic, the system was closer to balance. In 2019, benefits grew 3.1%, broadly in line with the 3.25% premium increase.

Against that longer arc, the escalating premium increases approved for 2025 (3.7%) and 2026 (4.4%) can be read as insurers trying to restore a balance between what they collect and what they pay out, after a period in which benefit growth has been particularly strong.

Is the 4.41% increase justified on claims costs alone?

On pure claims-cost grounds, there appears to be a case that premiums would need to rise. Benefits have grown at roughly double the rate of premiums for two years. If that pattern continued without adjustment, insurers would face ongoing pressure on margins.

There is also a broader demographic reality within the system. As Australia’s population ages and undergoes elective surgery at a greater rate, it is likely to contribute to rising benefits paid in the coming years. That trend, in turn, can increase the pressure for higher premiums — regardless of whether households feel able to absorb them.

Still, claims costs are only one part of the public debate. The other part is profitability — and whether strong profits should temper the case for premium rises.

Profits and margins: why the financial picture complicates the argument

The industry’s profit figures make the premium increase harder to assess at a glance. 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. Even at that lower level, it remained well above pre-pandemic results.

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.

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

These numbers suggest insurers are not in financial trouble. Profits remain large, even if the most profitable period appears to have passed and margins are tightening as claims rise faster than premiums.

Put together, this creates a more nuanced picture. A 4.41% 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 two years in which benefits rose much faster than premiums. But it also lands in an environment where profits are still substantial, which fuels questions about how much of the increase is necessary and how much reflects broader financial strategy.

How much of each premium dollar goes back to members?

Another way to consider the balance between premiums, claims and profits is to look at how much of each premium dollar is returned to members as benefits.

In the United States, 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.

In Australia, insurers briefly fell short of that benchmark. In 2022, they returned only 81 cents per dollar, and in 2023 they returned 83 cents per dollar.

Those figures do not, by themselves, settle the question of whether a specific premium increase is justified. But they do help explain why some policy observers argue that consumers would benefit from a clearer requirement about how much premium revenue must be directed to care.

A possible policy option: a minimum benefits return requirement

One policy idea raised in response to these trends is to impose a requirement that insurers return a set percentage of premiums as benefits. The argument is that such a rule could give consumers greater peace of mind that premium dollars are being used primarily for care rather than boosting profits.

Supporters of this approach suggest it would bring Australian regulation closer to international best practice, given the existence of a comparable benchmark in the United States.

Any such change would sit alongside — rather than replace — the existing annual approval process for premium increases. The current system focuses on assessing insurers’ projections and financial performance, then requires the minister to approve changes unless they are against the public interest. A minimum benefits return requirement would add another lens through which to judge whether the overall balance of the system is acceptable to the community.

What the 2026 premium rise signals about the system

The 4.41% average increase is significant not just for what it means for April bills, but for what it indicates about the direction of travel. After a period when premiums rose slowly while benefits surged, insurers appear to be seeking higher increases to restore alignment between revenue and claims costs.

At the same time, the industry’s profitability remains a central part of the public conversation. Even with margins easing from their peak, profits are still large by recent historical standards. For consumers, that can make it difficult to reconcile higher premiums with the sense that insurers have enjoyed “bumper years” and are not under immediate financial strain.

Ultimately, the debate is likely to remain focused on two questions that can both be true at once: whether rising benefits justify higher premiums, and whether the system provides enough assurance that premium dollars are being returned to members in the form of care.