Private health insurance membership

IBISWorld forecasts private health insurance membership to increase by 1.3% in 2024-25, to average 12.29 million people. Australians are increasingly taking up private health insurance to access timely surgery as public hospitals are unable to cope with the demand. Younger Australians are also increasingly using private health cover to access mental health treatment and dental services.

Private health insurance premiums are heavily regulated by the Federal Government. Premium increases must be approved by the Minister of Health and APRA, with each insurer submitting a request to increase premiums and documents justifying the increase. The Federal Government's aim is to keep premiums as low as possible while maintaining the long-term viability of the industry. Beginning in 2010, the government moved to a transparent premium setting, releasing details of the applications it receives for premium increases.

The number of people with private health insurance is driven primarily by government policies, which are usually intended to incentivise more people to buy cover. This includes the introduction of Lifetime Health Cover (LHC) on 1 July 2000. LHC forces consumers to pay an extra 2.0% loading on top of their premium for every year after the age of 30 that they have not held private health insurance. A spike in coverage resulted from LHC's introduction in July 2000, with further growth supported by the Federal Government's rebate on private health insurance premiums, which was originally introduced on 1 January 1999. Another major change in government policy was the introduction of the Private Health Insurance Act in 2007, which presented extra incentives for people to buy hospital cover. This contributed to strong long-term growth in insured persons from the late 2000s to the mid-2010s.

Major private health insurance reforms took effect on 1 April 2019. This included a tiered system for hospital cover to allow for comparison between different health insurers, discounting for young adults, expanding coverage for mental health, options to increase excesses to lower premiums and cutting down on the types of natural therapies covered by extras policies. These reforms sought to improve the affordability of private health insurance, retain younger members and soften the rising cost of health insurance. Despite this, private health insurance membership fell in 2019-20 and a lower percentage of the population was covered. Therefore, the Government introduced a second and third wave of reforms in 2021-22, which included increasing the age of dependants from 24 to 31 years of age, transparency in out-of-pocket costs, extension to the private health insurance rebate for a further 2 years and reviewing and enhancing the rebate model, to encourage people to opt for private health insurance. Holding private health insurance also comes with tax incentives. People with private cover can skip paying the Medical Levy Surcharge. Private insurance membership grew by 2.4% in 2023-24, the strongest growth rate since 2012-13. Despite affordability issues, people have prioritised the purchase of private health insurance over the past two years to access quicker and a wider range of healthcare. Overall, IBISWorld forecasts private health insurance membership to rise at a compound annual rate of 1.3% over the five years through 2024-25.