Why are health cover costs on the rise?

We give some straight answers to some pointed questions about the cost of private cover.

Written by Medibank
Shot of an affectionate young couple looking over some paperwork at home

We know that the affordability of private health cover is a huge concern for many Australians, and it’s a concern for us too. Let’s take a look under the hood to understand the factors that lead to these cost pressures, and what we’re doing to take some of the pressure off.

Why does the cost of health cover go up every year?

Put simply; private health insurers help to pay the bills for their members’ health-related treatments, and these bills are going up each year. In 2017, Medibank paid a record $5.2 billion in benefits to our members.

A few things contribute:

  • We’re living longer. Generally, the older we get, the more we rely on the health system to keep us going.
  • More chronic diseases. While we’re living longer, Australians are also being admitted to hospital in increasing numbers. Chronic conditions such as heart disease and diabetes are increasing year by year.
  • New medical technology. New and improving technologies mean better treatment, but they can come at a price. These technologies are often expensive to implement, and contribute to higher overall costs in the health sector.
  • Decreasing government rebate. The Australian Government Rebate on private health insurance has been steadily decreasing each year, which means those entitled to the rebate may pay a higher proportion of the premium themselves.

We work hard to strike the right balance between affordability and rising health costs. The cost of your cover needs to keep pace with the costs of the healthcare system if we’re to maintain the quality of cover and to continue to cover members' healthcare needs.

The government is well aware of this balancing act, which is why government approval is required for each Australian private health insurer’s average increase each year.

How do you work out what premiums should be?

We calculate premiums by looking at the benefits we’ve paid for our membership base in the past as well as what we think we’ll pay in the future. The rate this is increasing by is known as benefit inflation. Benefit inflation typically runs at around 5% each year and is driven by the rising costs of healthcare, such as increased use and cost of health services, new medical technologies, the ageing of our population, and the increase in chronic conditions.

How does Medibank’s increase compare to other health insurers?

Our average increase of 3.88% in 2018 is our lowest in 17 years and is also below the industry average of 3.95%. This is the second year running we’ve been below the industry average increase.

Wait a minute, why is my increase above or below the average?

The increase we announced is the average increase across all of our health covers – some will be above this while some will be below. We contact customers to let them know exactly what their individual change will be.

Not all covers cost the same to begin with, so not all increases will be the same. There are several factors that influence the premium changes across our range of cover options, like which state you live in, the kind of cover you have, the excess you’ve chosen, and the general claiming pattern of membership. Your premium could also be impacted by the Australian Government Rebate on private health insurance and the Lifetime Health Cover loading.

I haven’t made a claim in the past year, so why do I still get an increase? Shouldn’t I pay less?

Private health insurance isn’t ‘risk rated’ or based on past claiming behaviour like other types of insurance. All insurers abide by the Private Health Insurance Community Rating System which means we can’t charge you more or less based on how much you claim, or how sick or healthy you are.

Is Medibank doing anything to keep health cover costs down?

On top of paying your claims with the premiums we collect, we’re investing more money than ever into health programs to support the health and wellbeing of our customers and help take some pressure off the health system. This includes:

  • Spending around $25 million a year on member health programs including CareComplete, a program that (where available) supports members living with chronic conditions.
  • Investing $1 million into the Medibank Mental Health & Wellbeing Fund, in recognition of the critical role mental health plays in our overall wellbeing.
  • Sponsoring free exercise activities through our Free + Active program to help keep everyone fit and healthy.
  • Funding, translating and disseminating health research through the Medibank Better Health Foundation to promote healthy behaviours, inform policy and improve clinical practice.

What about giving members more value?

Our Members’ Choice network allows us to negotiate the best rates possible for you at a wide range extras providers.

And when it comes to looking after your pearly whites, there’s even better value to be found at Members’ Choice Advantage dentists, where all Medibank members with extras cover for two months or more get 100% back on up to two dental check-ups every year, including x-rays.^

Plus our partner team is dedicated to sourcing discounts, deals and exclusive member offers from big name brands. See what’s on offer.

^ Limited to two dental check-ups on all extras annually. Maximum two bitewing x-rays per check-up, where clinically needed. Not available in all areas.

With costs going up, is having private health cover really worth it?

This is a popular question at this time of year and a good one to ask. Let’s break it down into hospital and extras:


There’s no doubt that we have a great public health system but the private system gives people peace of mind and choice.

Shorter wait times: For in-hospital procedures considered non-life-threatening or elective, having private hospital cover means you’re likely to be treated sooner. If it’s a condition affecting your work or causing pain this becomes really important.

In the public system one in 10 people experience wait times that are far too long – 344 days for a hip replacement, 358 days for a knee replacement, 347 days to have tonsils out, and 364 days for corrective nasal surgery.*

Choice over your specialist: There’s a lot to be said for being able to choose your preferred specialist; if you’re embarking on a journey like pregnancy and you want to build a rapport with your specialist, or if it’s a serious illness and your life is quite literally in their hands.

A private room: Whether it’s in a public or private hospital, you are more likely to get the calm and comfort of a private room if you hold private hospital cover (provided one is available and is appropriate for your clinical needs).


Your extras cover is there to help with your day-to-day health and could even prevent smaller issues from becoming bigger ones. But you do need to know what’s included in your cover to make the most of it. You can check this through the Medibank mobile app or by logging into My Medibank.

I’m pretty healthy so I don’t think I need health cover. Why should I keep my cover?

A lot of people get caught out thinking they’re too young or too healthy to end up in hospital. Take a look at our new interactive tool that reveals the common procedures that members like you are going to hospital for and the possible costs involved. The results are based on our past claims data and they might surprise you.

Are you on the right cover?

It’s also important to make sure you’re on the right type of cover for where you’re at in life; and that’s why we’re encouraging all our members to take another look at their cover. Give us a call on 132 331 and we’ll take you through a cover review.

# Average cost at Members’ Choice providers based on 2015 Medibank data. Must hold Medibank extras. 2 month waiting period applies. Excludes x-rays.

* Australian Institute of Health and Welfare 2017. Elective surgery waiting times 2016–17: Australian hospital statistics. Health services series no. 82. Cat. no. HSE 197. Canberra: AIHW.

Written by Medibank

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