Why does health insurance cost so much? 

When you look at your bank statement, health insurance is probably one of the higher costs appearing in the ‘money out’ column. Private Health Insurance can certainly comprise a large chunk of most Aussie household budgets, especially when you consider premiums usually increase every year. Here are some of the reasons health insurance costs so much.  

Why do health insurers charge so much? 

Health insurance is there to give you access to health services that you might not otherwise be able to afford, including treatment in private hospitals. As a result, private health insurers pay out huge amounts of money every year to customers – more than $23.3 billion in 2023, according to industry body Private Healthcare Australia, which says the costs of healthcare are rising. And as the Commonwealth Ombudsman explains, when the costs of healthcare increase beyond the reserves that insurers have available, they need to increase their premiums to stay financially viable. 

Here are some of the reasons the cost of health insurance keeps going up: 

• Increasing claims. With an ageing population and increasing numbers of people living with chronic illnesses, more and more of us are needing to claim on health insurance. According to Private Healthcare Australia, there was a 10% increase in the amount insurers paid for member claims in 2023. 
• Increasing costs of running hospitals. This includes the costs of certain procedures and medical staff wages. 
• Expensive medical devices and equipment. This includes the costs of devices such as insulin pumps for people with diabetes, and IT upgrades for healthcare providers to protect your information from cyber attacks.  

Despite all of these factors that influence the cost of health insurance, insurers vary significantly in what they charge for policies within each tier of Hospital Cover, as well as Extras Cover. For example, using the healthslips.com.au Calculator, we found that a Silver tier Hospital and Extras policy for a Queensland family could be priced as low as $377.18 per month, or as high as $1,239.95 per month – which adds up to a difference of $10,353.24 per year. So if you’re not happy with the cost of your health insurance, looking for a cheaper deal could really pay off. 

Basic, Bronze, Silver or Gold – what tier of health insurance do I need?

How can I save money on health insurance? 

There are lots of ways you can reduce how much you pay for your health cover. Here are our top tips: 

• Boost your excess 

The higher your excess (which is the amount you pay for a claim), the lower your premiums. Be aware that if you want to avoid paying the Medicare Levy Surcharge, your excess can’t be higher than $750 for a Singles policy, or more than $1,500 for Couples, Single Parent and Family policies. 
Do I have to pay the Medicare Levy Surcharge?

• Move to a lower tier of Hospital Cover 
  Do you really need all the healthcare services and treatments you’re paying for? Choosing a policy with lower coverage will save you money. Check out the healthcare services under each tier of Hospital Cover and see if you can switch to a lower tier. 
• Reduce or drop Extras Cover 
  Hospital Cover covers you for big healthcare expenses, including private hospital procedures, so it’s the type of health insurance that you might consider more essential (it’s also the type you need to have to avoid paying the Medicare Levy Surcharge). You might consider reducing your level of Extras Cover (which applies to non-hospital health costs such as dental, optical and physiotherapy) or ditching it entirely.
  What’s the difference between Hospital and Extras Cover? Do I need both?
• Check out corporate plans or restricted policies 
  Does your employer offer health insurance at a reduced cost? Or are you eligible for cover with a restricted insurer, which offers policies to certain industries or groups? “Restricted insurers are actually more accessible than they used to be, and sometimes their premiums can be lower,” says health economist Professor Luke Connelly from the University of Queensland. “For example, with Teachers Union Health, you don’t actually need to be a teacher, you can be teaching at a university or have a relative who was a teacher.” 
• Change the way you pay 
  Paying for health insurance by direct debit usually reduces the cost of your premiums, and many insurers also offer discounts if you pay for a whole year in advance.  
• Look for a cheaper policy 
  Why pay more for health insurance if you don’t have to? At healthslips.com.au, we’re committed to helping Australians find the best health insurance based on their unique circumstances. Unlike other comparison sites, our Calculator searches every single insurer and every single policy available to offer you the best deals so you can make an informed choice. It’s free to use and you don’t have to enter any contact details.
  Compare health insurance policies to find your best price.

Trudie McConnochie

Writer and Researcher

Knowledge is power – that’s the guiding principle behind everything Trudie writes, and it’s a philosophy she brings to her work at healthslips.com.au. By breaking down complex information into easy-to-understand blogs and stories, she aims to empower Australians to make the best choices and an informed decision around private health insurance.

Trudie understands firsthand some of the complexity of private health insurance having moved to Australia from New Zealand and having to navigate a vastly different public healthcare system and health insurance structure.

Trudie holds a Bachelor of Communication Studies (journalism major) from the Auckland University of Technology.

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