The Australian Medical Association (AMA) has raised alarms about the declining value of private health insurance in Australia. Recent findings reveal that many Australians are facing increasing premiums while experiencing a reduction in coverage options, leading to concerns over the sustainability of the nation’s health system.
According to the AMA’s annual Private Health Insurance Report Card, private health insurance premiums have become increasingly unaffordable, prompting many individuals to downgrade their coverage or abandon it altogether. AMA President Danielle McMullen emphasized the troubling trend during a press conference on Friday, stating, “Private health insurance premiums are becoming less affordable for everyday Australians.” This shift has intensified pressure on the public hospital system, which is already strained, as private hospitals navigate significant cost increases in the aftermath of the COVID-19 pandemic.
The report indicates that nearly 70 percent of hospital policies now include exclusions—specific treatments or conditions that insurers will not cover. Dr. McMullen noted that the current landscape features fewer policies offering comprehensive coverage, with exclusions at record levels. “This combination of rising costs, shrinking coverage, and mounting financial pressure is placing the entire private health system under strain,” she added.
Calls for Government Intervention
To address these issues, the AMA is urging the government to mandate that insurance companies allocate at least 90 percent of premiums collected back to consumers in the form of benefits. They also seek the establishment of an independent oversight authority to monitor the private health system. Federal Health Minister Mark Butler acknowledged the report as a wake-up call to insurance providers, many of whom have reported substantial profit increases.
In the 2024/25 financial year, insurers returned just 84.2 percent of premiums to consumers as benefits, a decline from 88 percent in 2019. When questioned about the possibility of legal measures to enforce higher returns, Mr. Butler expressed his commitment to increasing pressure on insurers. “I said if it didn’t jump to a level I thought was appropriate, I would look at legal options to force it,” he stated during an interview with ABC Radio.
Dr. McMullen highlighted concerning practices within the industry, such as “product phoenixing,” where insurers close existing policies only to reintroduce similar products at higher prices. This tactic circumvents the regulatory premium increase approval process, allowing insurers to raise costs without oversight and leaving consumers, particularly those seeking top-tier hospital coverage, with higher expenses.
Rising Premiums Outpace Inflation
The AMA’s report underscores a troubling trend: private health insurance premiums have escalated significantly, outpacing inflation, average weekly earnings, and the indexation of the Medicare Benefits Schedule (MBS). Between 2008 and 2024, premiums surged by more than 100 percent, while MBS indexation increased by less than 20 percent.
“They (private health insurers) are holding out on Australians while recording significant profits each year,” Dr. McMullen remarked. “These insurers have ample capacity to increase the benefits paid to patients.” As the situation unfolds, the AMA’s advocacy for reform may shape the future of private health insurance in Australia, highlighting the urgent need for a more equitable system that prioritizes consumer protection.
