The 1 April 2024 Private Health Insurance (PHI) premium increase represents a return to norms with all Funds increasing rates on the same day, the first time this has occurred in five years. In this blog, we examine this premium round and investigate the noteworthy trends, product dynamics, competitive intensity and scale pricing strategies in the market.
Trends in premium changes
The following figures are average premium increases on products that cover singles across all states and excess levels. Unless otherwise stated, open and closed products are included and corporate products are excluded.
Hospital and Combined
- Gold Hospital saw the greatest average increase at 6.4%, reiterating the claim cost pressures at this high level of cover. Combined Gold products fared slightly better, averaging 4.2% across the industry.
- Silver Plus products that cover pregnancy and/or joint replacements (shown as ‘Silver+ high’ in the graph below) saw average increases around 3.9% for standalone hospital and 2.9% for combined policies.
- Lower cover Silver, Basic/Basic+ and Bronze/Bronze+ tier products saw increases around 3% for standalone hospital and between 2.1% – 2.6% for combined products
Extras
- Percentage back extras products (products with at least one percentage back modality) increased by 2.8%, compared to 2.1% for extras products with set benefits. This differential can be explained by the ‘automatic’ indexation of benefits on these products.
Big 5 Funds
- The Big 5 Funds increased premiums at a greater rate than smaller players in the market.
- The smallest average increases were implemented by smaller Funds with open membership
Product changes
Number of product changes:
Compared to the previous year, the landscape of Private Health Insurance (PHI) product changes has been relatively calm. The total number of Private Health Insurance (PHI) products in the market has remained mostly stable, with 106 new products introduced and 109 discontinued. Only 14% of Private Health Insurance (PHI) products experienced changes in coverage, were closed, or had modifications in benefits. This means approximately 86% of Private Health Insurance (PHI) products had minimal changes, marking the second-highest proportion of stability in the past five years.
*Figures exclude corporate, are based on singles policies, each excess variant is counted as a separate product, state variants are combined and regarded as one product
^Only counts products where there has been a change of clinical categories or modalities covered.
New products
Hospital
- Several highly competitive Bronze Plus and Silver Plus – low products have been launched, making an already very competitive market segment even more competitive. This is detailed later in this blog.
- The Silver plus – high and Gold tier products launched generally sit above the market average for the level of benefits, reflecting the higher claims risk Funds are facing in these tiers.
Extras
- There is a trend developing for extremely low coverage extras. nib launched its ‘DentalPass’ product, which costs around $3 a month and provides a small fixed benefit to the customer when visiting their provider network. Priced at under $20 per month, Medibank has launched ‘Healthy Living Extras’, offering a vaccination and just one dental check per year.
- The majority of the Extras products launched in the last 12 months offer good value for money and are priced below the market average for each level of benefits. This suggests the Extras market is also increasingly price competitive.
Closed products
- There were 42 closures in the last year (3% annualised of all products). This is the second lowest rate of closures in the past five years.
- The majority of hospital closures were concentrated in the Gold and Silver Plus tiers, likely reflecting adverse selection challenges.
- Extras products that were closed were primarily grouped in the top half of the market in terms of coverage and were priced very competitively. Therefore, the closures were possibly driven by profitability challenges.
Terminated products
- There were 109 terminations (and consequent forced migrations) in the year to 1 April 2024 – about 8% of all products.
- About 80% of the terminated hospital and combined products were in the Silver plus – high and Gold tiers. Of these, the majority were open for sale directly prior to the termination of the product, highlighting the claims cost challenges in these tiers.
Products with changes in benefits
- 157 products had changes in benefits (11% of products).
- The majority of benefit changes involved the addition or subtraction of one or two coverage items, leading to a relatively minor change in value. 23 products saw a significant increase in coverage, while six saw a significant reduction.
Competitive intensity
We analyzed segments within the Private Health Insurance (PHI) hospital market that show the highest levels of ‘competitive intensity’. This refers to areas where insurers are most actively targeting customers. The graph below illustrates the count of $750 excess products across different tiers in NSW over the past five years (excluding corporate products). Similar trends are observed in other states as described for NSW.
The Basic, Bronze, and Silver Plus – lower tiers have seen increasing competitive pressure over the last five years. Insurers are rapidly introducing new products to cater more closely to customer needs and preferences. These market segments also benefit from lower claims risk, avoiding high-cost medical categories such as joint replacements, pregnancy, and psychiatric hospitalizations. The Silver Plus – higher tier has also expanded, though to a lesser extent compared to the lower tiers.
In contrast, the Gold cover tier is the only segment where the number of available products has decreased. Insurers offering Gold products have had to raise premiums significantly to maintain these offerings, as highlighted earlier.
Scale pricing
Here we analyze changes in the Private Health Insurance (PHI) market over the past year.
The graphs below depict the number of insurers applying each scale of relative charges for various types of products. We focus on scales that have experienced notable adjustments.
Specifically, we’ll examine the scale for One adult and dependents (Single Parent Family).
In total, five Funds made some modifications to their Single Parent Family relativity. The main call out here being that Medibank reduced its Extras relativity from 2.0 to 1.9.
Two adults and non-student dependants (Extended Family)
The distribution of extended families’ relative charges has shifted upward, with these groups now facing higher multiples compared to single-person rates. This adjustment may reflect trends in claims experience, as insurers respond to evolving market dynamics, including broader coverage for non-student dependents up to age 31.
Interestingly, there were minimal changes observed in family-scale products overall. HCF was notable for a slight increase in its Extras relativity, moving from 2.0 to 2.02 times the singles price. Apart from a few insurers charging between 2.0 to 2.2 times for extras cover, most of the industry maintains a consistent pricing structure for family products at double the singles rate.
Charting the future: navigating the dynamics of the health Insurance market
We’ve observed heightened competition in the lower segments of the hospital and extras market, where insurers are focusing their efforts on launching new products while keeping premiums stable. Meanwhile, the Gold hospital segment remains challenging, seeing significantly higher average premium increases compared to other market segments. Insurers are frequently replacing and updating their Gold tier offerings to address concerns about profitability.
Looking ahead, as political scrutiny increases to keep premium hikes in check relative to rising claims costs, insurers must adopt more sophisticated strategies to manage their product portfolios effectively. Despite these challenges, there are opportunities for innovation, growth, and differentiation within the private health insurance industry. Contact CheckYourBill today to switch your Health Fund.
Related Blog
The hospital “Gap” refers to the difference between what your private health insurance pays for a specific surgery and the total charges by the private doctor or anaesthetists. Private health insurance covers up to 100% of the Medicare Benefit Schedule fee for a procedure, but doctors can charge above this fee, creating a gap that the member must pay. When doctors participate in “gap cover” with the insurance company, the fund will pay more if the doctor agrees to a lower fee, resulting in no gap or a reduced gap for the patient.
Understanding how gap cover works is crucial for minimizing out-of-pocket expenses. The best private health insurance funds for gap cover ensure that members face little to no additional costs for surgeries. Here are the top five funds that excelled in providing no-gap cover last year.
Top 5 Private Health Funds for Best No-Gap Cover Last Year
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