Time to read : 5 Minutes
The wait is finally over. We now know that Australians are set to be slugged with an average health insurance premium increase of 3.73% in 2025.
That’s the biggest average increase since 2018 and, according to our analysis of over 289,000 policies, it’ll cost Aussies an average of $146 extra on top of what they’re currently paying.
But that doesn’t tell the whole story.
Below I’ll break down exactly what this means for your health insurance premiums and why the headline figure of 3.73% is a bit misleading.
What does an “average” health insurance increase actually mean? It’s not what you think
The 3.73% average figure is just that - it’s an average. Some funds will put their premiums up by a lot more, some by a lot less. Police Health has the highest average increase of a whopping 9.56%, while HIF has the lowest average increase of 1.91%. That doesn’t mean these are the most expensive or cheapest funds, it just means their policies are either going up or down by more or less than the average.
In the case of Police Health, they’ve had some of the lowest increases in recent years, so this suggests that they’re bringing their premiums in line with where they would have been had this increase been more evenly applied over the past 2-3 years.
But the first figures I look for whenever the federal government releases the annual premium increase information is the average increases of Australia’s “Big Five” health funds.
The Big Five – Bupa, Medibank, nib, HCF and HBF – hold around 80% of all health insurance policies in Australia.
That means the average increase for most Australians is likely to be closer to the average of these five funds, rather than all funds.
In this case, the combined average of the Big Five is 4.52%, which comes out closer to an average of $177.
Ok, so that’s an extra $31. It’s hardly earth shattering, but at a time when every cent counts, any extra costs will add up.
But the real differences kick in when you start looking at the average premium increase by age and life stage.
Who will be paying more come 1 April?
A few simple facts at this stage.
Couples and Families policies are more expensive than Singles policies because there are more people covered.
Older Australians tend to pay more for health insurance as they need a higher level of cover than somebody in their early 30s.
This may sound obvious, but when you start looking at the average cost of these types of policies, then the premium increase starts to shoot up. Again, the numbers below are looking at the Big Five average, not the overall average.
Based on the average cost of policies sold by Compare Club over the past 13 years, Couples can expect to see an average increase of around $253.
The average increase for Families sits at $223.
The average increase for a couple over 65 sits at $270.
A family in their late 40s / early 50s can expect an average increase of around $239.
This is quite a difference from the $146 average increase we get if we just take the minister’s announcement at face value.
And here’s the final kicker – and another outing for the word ‘average’. The average increase per fund is just that – the average. Some people will get a higher than average increase, some will get a lower than average increase.
Here’s a real life example. Two years ago, Bupa surprisingly didn’t increase my premiums. But that meant somebody else would have copped an increase of around 6%.
A quick note: this isn’t a perfect methodology, but I’ve been using this approach for several years and the numbers we see once people start receiving their official increase notifications aren’t wildly different.
In the interests of transparency, so you know the limitations of this model:
This data only covers policies sold by Compare Club and we don’t sell all policies from all funds. But we do sell policies from four of the Big Five insurers, plus a few others, so it’s a good representative sample.
This is likely to be a conservative estimate. Yes, really. I’m working off the policies we’ve sold, and we typically help people move to less expensive cover. Given the
re’s a lot of Aussies who’ve not switched funds recently, the true cost of the premium increase is likely to be even higher.
Paying too much?
Australia: We saved our average customer $300* on their average annual premium! Select your age below and see how much you could save!
Just me
Me and my partner
My family
Me and my kid(s)What can you do to avoid the health insurance premium increase?
The short answer here is to switch to a better value fund, but there’s a bit more to it than shopping around.
Health funds have to legally write to inform you of any premium increase before 1 April. Use this to your advantage.
Use a tool to work out how much your insurance is actually going up by.
If it’s significantly more than your fund’s average, it could be time to switch. This is a good time to get on the phone to Compare Club.
If it’s significantly less than your fund’s average, you might be getting good value for money. Still shop around, but it’s less urgent to switch.
Really weigh up the value of your extras. If you think you’ll use most of them between now and January – when most extras reset – then you can offset your premiums. Again, this is where speaking to somebody who can really get into the detail of comparing policies can really unlock extra value.
Be aware: it can be seriously tempting to save by switching to the cheapest possible policy, especially if your main reason for holding health cover is to avoid the Medicare Levy Surcharge. But, as my colleague Jenny explains, these are junk and there’s a good chance you could be spending over a thousand dollars for nothing, when there are better value policies for a few dollars extra a week.
Be smart: don’t view health insurance as a yes or no decision. Look at it as a: what’s going to be most useful decision for me. When you start applying it to your own situation, it’s a lot easier to see where it adds – or doesn’t add – value for money.
Bottom line
There’s no getting away from it. This is a big increase at a time when Aussies really don’t need any more cost of living pressures. But it doesn’t mean you should wear it.
Equally, don’t just assume that the headline figure of 3.73% means that this is what your increase will be. Pay a lot of attention to any comms from your health fund, as it may not immediately be clear if you’re getting value for money.
Ultimately, treat this news as the same way you would your car rego. You need to take it to the garage for a once over to get the a-ok that it’s roadworthy. Do the same with your health insurance before 1 April.
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Disclaimer
Any health or financial advice is general in nature and does not take into consideration your circumstances. Always check with a financial or health professional before making any decisions.
