Last Updated on 12 April 2021

2021’s health insurance premium increase explained


Small child with father getting a medical checkup

Every year, the government approves an average rate increase for health insurance premiums. Funds increase their premiums on 1 April each year – although many can, and do, put their premiums up by more than the industry average.

In 2021, it’s a little different. Premiums did go up on 1 April 2021, but that was only six months since the last rate rise. It’s because in 2020, the health funds delayed their annual increase until October, due to the uncertainty around COVID-19.

If you haven’t switched health funds recently, this has meant you’ll could have faced combined average increase of 5.66% since October 2020.

In addition, the big four funds – who make up 78% of the market – all put their prices up by more than the health insurance industry’s average rate rise.

So what does this mean for you? This guide covers how the health insurance rate rises work, the average increase in 2021, and how to get value for money if you’re thinking about switching funds. You can also use our calculator to work out how much more you could be paying.

Key points
  • On 1 April 2021, health insurance premiums increased by an average of 2.74%
  • Some health funds put up premiums by more than 2021’s average amount.
  • In 2020, most health funds deferred their 2020 rate increase from April until October as a result of COVID-19.

Why do health insurance premiums increase each year?

Before we get into what you can do about the rate rise, here’s a bit more information on why you see your premiums go up every year. The most common reasons why private health insurance funds increase their premiums annually include:

  • More people are accessing our health services each year.
  • An ageing population and higher rates of conditions like cancer or heart attacks places a bigger strain on our health services.
  • Improved treatments are often more expensive for our healthcare system.

These factors help explain why health funds increase their premiums – the cost of providing insurance to us gets more expensive each year.

They don’t always pass on the additional costs to us, their customers, but this is generally why you can expect your premiums to go up.

Rate rises aren’t ideal but in theory they should allow health funds to continue to be competitive in what they offer their customers, such as additional services and benefits.

Who approves health insurance premium increases?

The federal government is responsible for health insurance premium increases. Although the Department of Health is responsible for approving rate rises each year, it doesn’t directly dictate how high or low the increase should be.

This means rate increases can vary from health fund to health fund, and from policy to policy.

How much are the health insurance rate increases in 2021?

The average premium increase at the start of April 2021 was 2.74%. According to the Department of Health, this was the lowest increase in 20 years.

But that’s not the whole story, and we’ll go into more detail about this later on in this guide.

How much will 2021’s health insurance premium increase cost me?

If you normally pay $100 a month for private health insurance, a 2.74% rate rise would see your monthly premium increase to $102.74.

That might not sound like much, but when you add up the costs over the course of a year, it can make a huge difference to how much of your income you’re spending on health insurance.

And if you haven’t switched policies for several years, you could be paying hundreds of dollars more for the same policy.

Not only that, but some funds are increased their premiums by more than 4% – having already done the same in 2020. For some customers, this could mean an increase of 8% or more in just six months.

That’s why it’s important to check your policy costs if your health fund tells you that your premiums are going up. You could actually be at the top end of their rate rise.

You can use our private health insurance rate rise calculator below to check your fund’s expected average premium increase for 2021.

Check your estimated premium increase.

?
Your premium is likely to rise by
9.4%

For instance, you can expect an annual premium of $1,000 to increase to $1,178. That's an average increase of X for singles, Y for couples and Z for families. Don't want to be stuck paying for more health cover? Save money now.

How do I know if my health fund is increasing premiums?

Your health fund will let you know about your premiums increasing by letter, email or SMS. You can also use our private health insurance rate rise calculator (above) to check how much your fund is expected to increase their average premiums by.

When are premiums increasing in 2021?

Health funds are increased premiums on 1 April 2021. For many people this was a second increase in six months, because last year’s rate rise was deferred until October due to COVID-19.

Are health insurers doing anything to help customers affected by COVID-19?

Some health funds took extra steps to help customers affected by COVID-19 by forgoing the premium increase in 2020 altogether, or waiving it for customers on JobSeeker or JobKeeper. Others, such as ahm, let you roll over any unused extras benefits in 2020.

But all health funds  increased their premiums on 1 April 2021. So even if you’ve been impacted by COVID-19 or you’re on JobKeeper or JobSeeker, premiums increased.

Can I claim health insurance premiums on my tax return?

Possibly. If you have private health insurance, you may be eligible for a rebate on premiums. If you haven’t claimed the rebate through reduced premiums throughout the year, you may be able to claim it as a tax offset.

In these cases the rebate is calculated as a percentage of the cost of your premiums and claimed as a tax offset by reducing the amount of tax payable on your taxable income.

The rebate amount is calculated based on your age and household income.

Table detailing government rebates available on private health insurance.
Table detailing government rebates available on private health insurance.

 

You can also use our private health insurance rebate calculator to calculate your rebate for 2021.

Can I avoid the premium increase?

The short answer is yes, if you switch to a different, lower cost fund, even after 1 April 2021. Our team at Health Insurance Comparison can help with this.

We can compare policies and provide you with options that fit within your budget, saving you time jumping from insurer to insurer and compare policies yourself

How do I know if I’m paying too much?

If you haven’t changed funds or policies in a few years, there’s a good chance you could be paying more than you need to.

One of the fastest and easiest ways to see how your costs stack up – and how much you could save by switching – is to compare health insurance quotes.

Will I have to re-serve waiting periods if I switch policies?

No. You can switch to an equivalent or lower level of cover without re-serving new waiting periods on your health insurance.

You will only be required to serve waiting periods if you have upgraded to a higher level of cover.

Also, remember that your unserved waiting periods will transfer to your new health fund. So if you end up switching health insurance on an equivalent cover, you may need to finish these waiting periods before you can make a claim.

Is it worth switching policies?

Switching health insurance funds and avoiding the impact of the rate rise can be a good way to save money, especially if you’ve been with the same fund for several years.

People who spend a bit of time reviewing their cover every few years are likely to save hundreds or even thousands of dollars in the long run.

Last year, for example, we saved our customers an average of $312 on their health insurance* when they compared and switched with us. In some cases, that was enough to cancel out the extra cost of the rate rise.

Insurers also change their products or introduce new hospital and extras policies, meaning there may be a better option for you since you last compared.

Everybody’s situation is different, and comparing your options can help you find competitive health insurance rates with a policy that suits your circumstances.

 

If you have private health insurance, your fund should tell you how much your increase will be. It’s worth comparing policies as switching to a new health fund could save you money.

There are lots of options to consider when choosing or switching private health insurance – but fortunately, you don’t have to go it alone.

You can talk to one of our health insurance specialists by clicking on the live chat button on this page or compare health insurance quotes to see what you could save on your health insurance premiums.

This guide is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.

*Based on 25,311 customers in 2020.
Department of Health, Lowest private health insurance premium change in two decades, December 2020
Department of Health, Average annual increases in private health insurance premiums, December 2020.


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