Australians are facing increased pressure from rising private health insurance premiums, narrowing coverage, and questionable practices by insurers, according to a report from the Australian Medical Association (AMA). The annual Private Health Insurance Report Card highlights a troubling trend where more consumers pay higher premiums while receiving fewer benefits.
Danielle McMullen, president of the AMA, expressed concern during a press briefing on Friday, stating, “Private health insurance premiums are becoming less affordable for everyday Australians.” The report indicates that many Australians are either opting for lower coverage plans or abandoning private health insurance altogether. This trend is exacerbating the strain on the nation’s public hospital system, which is already under pressure.
Declining Value of Private Health Insurance
Dr. McMullen pointed out that the overall value of private health insurance is deteriorating. She noted, “Fewer policies now offer top-level coverage, exclusions are at record levels.” Currently, nearly 70 percent of hospital policies contain exclusions, which detail the specific treatments insurers will not cover. Simultaneously, hospitals are warning that existing contracts with insurers often fail to cover the rising costs of care.
“This combination of rising costs, shrinking coverage, and mounting financial pressure is placing the entire private health system under strain,” Dr. McMullen added. The AMA is advocating for the government to require insurance companies to return at least 90 percent of the premiums collected to consumers as benefits. They also propose the establishment of an independent authority to oversee the private health insurance sector.
Federal Health Minister Mark Butler acknowledged the report as a wake-up call for insurers, many of which are reporting significant profit increases. In the fiscal year 2024/25, insurers returned only 84.2 percent of premiums to consumers, a noticeable decline from the 88 percent returned in 2019. Butler stated, “If it didn’t jump to a level I thought was appropriate, I would look at legal options to force it.”
Shady Tactics Under Scrutiny
Dr. McMullen highlighted concerning practices by insurers, specifically mentioning “product phoenixing” and confusing tiered product systems that demand independent scrutiny. The practice of phoenixing involves terminating an existing policy and then reinstating it under a similar name but at a significantly higher cost. This loophole allows insurers to bypass the regulated premium increase approval process, resulting in higher costs for consumers, especially those seeking top-tier hospital coverage.
The AMA report reveals that the growth of private health insurance premiums has far outpaced inflation, average weekly earnings, and the indexation of the Medicare Benefits Schedule (MBS). Between 2008 and 2024, premiums surged over 100 percent, while MBS indexation increased by less than 20 percent.
Dr. McMullen asserted, “These insurers have ample capacity to increase the benefits paid to patients,” underscoring the disparity between rising costs for consumers and the healthy profits recorded by insurers each year. As the situation unfolds, the AMA’s call for reform and increased transparency in the private health insurance sector may become a defining issue in healthcare discussions in Australia.
