Health insurance premiums are rising. Here are practical ways to negotiate a better deal

Household budgets are being squeezed from multiple directions. Everyday essentials such as petrol, groceries, electricity and rent have all become more expensive, and private health insurance premiums have now joined that list. From April 1, the average premium rose by 4.41%. Consumer advocates have also pointed to much larger jumps for some policies, with average premiums for certain gold hospital cover products rising by 7.89% to 25%.

When prices rise, many people do what they have always done: they renew their policy and absorb the increase. Others consider cancelling altogether. But there is a third path that is often overlooked—calling your insurer to negotiate changes that better fit your circumstances, potentially reducing what you pay without abandoning cover entirely.

Directly negotiating the sticker price of a plan can be difficult because premiums tend to be set. The more realistic goal is to negotiate the structure of your policy: the excess you are willing to pay, the level of cover you choose for hospital and extras, and which extras you actually include. With the right preparation, a phone call can become a practical review of what you are paying for, what you genuinely use, and what you can change.

Why people stick with expensive cover even when it no longer fits

It is common for people to keep the same health insurance year after year, even as premiums rise and personal circumstances change. Economics and behavioural science offer several explanations for this “set and forget” pattern.

One is loss aversion: people are often more sensitive to the idea of losing something than they are motivated by the prospect of gaining something. In health insurance, that can translate into a reluctance to remove items from an existing policy—even if they are replaced with different benefits that better suit current needs.

Another factor is bounded rationality. Health insurance policies can be complex and difficult to interpret. When the topic feels complicated and the stakes feel high, people may rely on simplified rules of thumb rather than a detailed analysis. The sheer number of options can also be overwhelming, and research focused on older consumers suggests decisions may improve when there are fewer choices to navigate.

These pressures can lead to a “good enough” decision rather than an optimal one. Over time, this can become status quo bias: once a choice is made, people tend not to revisit it, even when their needs change or the cost rises.

Understanding these behavioural patterns matters because it highlights a simple point: if you have not reviewed your cover in years, there is a reasonable chance you are paying for features that no longer match your life.

Before cancelling, consider the potential costs of dropping cover

When premiums rise, cancelling can look like the fastest way to save money. Whether that makes financial sense depends on your age, health and income. But cancelling can come with several “stings” that are easy to overlook in the moment.

• Medicare Levy Surcharge: If you cancel hospital cover, you may face the Medicare Levy Surcharge, which can be up to 1.5% of your income.
• Lifetime Health Cover loading: If you cancel now and return later, you may need to pay the Lifetime Health Cover loading. This adds 2% to your hospital cover premium for every year you are aged over 30. The penalty lasts for a decade.
• Waiting periods: If you leave and later rejoin, you may have to serve waiting periods again for certain conditions.

These factors do not mean cancelling is never appropriate. They do mean it is worth understanding the consequences before making a decision based solely on the latest premium increase.

Why insurers may be willing to negotiate

Insurers have their own reasons to keep customers, particularly healthier members. When healthy people cancel their policies, the remaining pool of insured people becomes older and sicker on average. That can push premiums higher, which in turn encourages more people to leave. Economists refer to this dynamic as a “death spiral”.

This does not guarantee an insurer will offer you a better deal. But it does help explain why a retention-focused conversation can be productive, especially when you are prepared and clear about what you want.

A practical approach: negotiate the parts you can control

Because plan prices are generally fixed, the most effective negotiation is often about redesigning your policy so it better reflects your needs. That can mean changing your excess, adjusting hospital cover, refining extras, and ensuring the people on the policy still match your household.

Below are five structured, expert-informed steps to guide that process.

1) Reassess your excess to balance risk and premium

Your excess is the amount you pay before the policy pays out on a claim. Accepting a higher excess can reduce your premium. The key question is not whether a higher excess is “good” or “bad”, but whether it is a level you could realistically afford if you needed to make a claim.

In a negotiation call, this is one of the most straightforward levers to discuss. If you are trying to lower your premium, ask what premium changes would apply at different excess levels, then consider what trade-off you are comfortable with.

2) Optimise hospital cover and extras separately

Many people assume their hospital cover and extras cover must be at the same level. They do not. You can choose different levels for each. For example, it is possible to have basic hospital cover while maintaining top-level extras cover, depending on what you value and use.

This is where a review can quickly reveal mismatches. If you are paying for a high level of hospital cover but rarely use the services it supports, or if you are paying for extras you do not claim, your policy may be out of alignment with your actual needs.

3) Remove extras you do not use—and tailor what remains

Extras can be a quiet driver of cost because they often bundle multiple services together. A simple question can be powerful: why pay for extras if you never use them?

You do not have to include every extra offered. You can set extras to reflect what you actually use and remove those you do not. This is particularly relevant for people who chose a policy in early adulthood and have not revisited it since. Medical needs can change over time, and a policy that once made sense may now include benefits that are irrelevant.

One example raised by experts is paediatric care. If you have no children, paying for paediatric-related benefits may not make sense. The point is not that you can never need them—it is that you can add certain features later if your circumstances change.

4) Make sure your policy reflects your household today

It is easy to overlook administrative details, but they can matter. As the make-up of your household changes, you should add or remove people from your policy accordingly. If you have not reviewed your policy in years, confirming who is covered—and whether that still matches your situation—should be part of the conversation with your insurer.

This step also reinforces a broader principle: health insurance is not a one-time decision. It is a product that should be periodically adjusted as your life changes.

5) Use competitor pricing as leverage—after doing your homework

If you want to negotiate effectively, it helps to know what comparable policies cost elsewhere. Comparison sites can help you find a product that is similar to what you have now (or similar to what you want after you make changes). This information can become a bargaining tool when speaking with your current insurer.

However, it is important to do the homework properly. Your insurer may ask for details of the comparison product and may question whether it is genuinely comparable. Be prepared to explain why you think it matches your needs and how you have compared it.

During the call, you can also ask directly what deals or promotions are available to keep your business. Even if the base price is fixed, insurers may have retention offers, policy adjustments, or alternative configurations that reduce your premium.

When to review—and why timing matters

Experts recommend reviewing your policy annually. Right after premium increases can be an especially useful time to do it. This is when the cost change is most visible, motivation to review is highest, and insurers may be more willing to negotiate. It is also a time when deals for switching providers can be more generous.

Annual reviews can also help counteract the behavioural pull of status quo bias. Instead of letting the policy roll over by default, you create a routine checkpoint to confirm the cover still fits.

If you do switch, read the new policy carefully

Switching can be a valid option, but it should be done carefully. Before you move to a new provider, take time to read the new policy and compare it with your old one. Pay close attention to differences that can affect you later, including waiting times and cover for pre-existing conditions.

Service quality also matters. Consider looking at reviews that discuss customer support and service, especially if you anticipate needing help understanding the policy or making claims.

Where to get free, general guidance

If you want help understanding private health insurance or comparing policies, you can contact the Commonwealth Ombudsman for free, general advice. This can be a useful step if you feel stuck, if the policy language is difficult to interpret, or if you want an independent explanation of how comparisons work.

A negotiation mindset that can save money without unnecessary risk

Rising premiums can make private health insurance feel like a fixed cost you either accept or cancel. In reality, there is often room to reshape what you are paying for. The most productive approach is to treat the policy as a flexible package: adjust your excess, tailor hospital and extras cover to your actual needs, remove benefits you do not use, and ensure the policy matches your household.

Then, go into the call prepared. Know what alternatives cost, be ready to discuss why those alternatives are comparable, and ask what retention offers are available. Even if you cannot negotiate the headline price directly, you may be able to negotiate a better fit—and a lower premium—by changing the parts of the policy that are within your control.