Aussie consumers are facing a tough reality: private health insurance is becoming increasingly unaffordable, and the benefits they receive are shrinking. This is a concerning trend that has been highlighted in a recent report by the Australian Medical Association (AMA).
The Cost of Private Healthcare: A Growing Concern
The AMA's Private Health Insurance Report Card reveals a stark contrast between rising premiums and diminishing returns for policyholders. Since 2008, insurance premiums have consistently outpaced inflation, health sector inflation, and even the growth in average weekly earnings. Over the same period, the indexation of the Medicare Benefits Schedule (MBS) has lagged far behind, increasing by less than 20% compared to the over 100% premium hike.
But here's where it gets controversial: while consumers are paying more, insurers are reaping significant profits. The report card shows that between 2008 and 2024, insurer profits grew by nearly 50%, while benefits paid for in-hospital medical treatment increased by a mere 18.1%. In 2024-2025, insurers returned only 84.2% of premiums as benefits, a drop from the 2019 level of 88%.
And this is the part most people miss: the AMA is advocating for a 90% return minimum for insurers. Dr. Danielle McMullen, President of the AMA, emphasizes that while insurers need to be sustainable, they are currently holding out on Australians, recording substantial profits year after year.
"These insurers have the capacity to increase the benefits paid to patients," McMullen said. "It's clear that the current system is not serving the best interests of consumers."
The report also sheds light on the decline of gold-tier policies. Despite an overall growth in policy numbers, the number of gold-tier policies has dropped by 360,000 since the start of the COVID-19 pandemic in March 2020. This trend is a direct result of rising premiums and cost-of-living pressures, making these policies less accessible to many Australians.
"The effects of this trend are already drastic," McMullen added. "We've seen at least 14 private maternity units close over the past five years, which is a direct consequence of the declining affordability of private health insurance."
The AMA believes that the establishment of a Private Health System Authority is crucial to better regulate the sector and drive much-needed reforms. With multiple bodies currently involved in the regulation of private health, a single, independent authority would provide a unified and coherent approach, ensuring a fairer and more sustainable system for all Australians.
So, what do you think? Is the current state of private health insurance in Australia fair? Should there be stricter regulations to ensure consumers get a better deal? We'd love to hear your thoughts in the comments below!
