The optics of private health insurance single parent premium rates

There has been industry debate surrounding the optics of Single Parent premium rates, such as from Choice and more recently from the Department of Health, Disability and Ageing (the Department) in its PHI Health Reforms – Consultation Paper 1 . 

The question asked is why single parents pay substantially more to cover their children compared to two-adult families.

This article explores the current state of this issue by comparing the relative premium rates between Single Parent (SP) and Single (S) policies, and between Family (F) and Couple (C) policies. It is important to note that we are only measuring the differences in premium rates and not cost relativities.

It is important to note that just because premium rates are higher does not make the product unfair and highlights the importance of further studies using claims data, which is the crucial missing piece of information. Nevertheless, we hypothesise potential reasons for and against the current state.  

How much more do single parents pay for their children's cover?  

Although to a policyholder, it is the dollar difference in their premiums that matter, for a product-standardised comparison, we measure the relative premium rates of Single Parent versus Single, and Family versus Couple, expressed in terms of the Single price, because this represents the marginal price of adding children to adult-only covers ^[1] .   

National industry relatives

The table below summarises the industry relativities by scale in Australia for open and non-corporate products. The industry averages are simple averages of the premium rates of products in the market i.e., not revenue or exposure weighted, due to data limitations of privatehealth.gov.au data. Furthermore, to improve the consistency of the comparison we have excluded non-student dependent or disability versions of a product where there are multiple versions. The calculation methodology is further explained in the appendix below.

Table 1: Industry Premium Relativities by Scale

Source:  Australia, all funds, open non-corporate products, August 2026 privatehealth.gov.au data.

When interpreting these figures, the relative premium rates of Single Parent versus Single, and Family versus Couple, expressed in terms of the Single price are compared, because this represents the marginal price of adding children to adult-only covers.

From an optics perspective, the relativities appear to support DOHDA’s comments on fairness. On average, Single Parent policies pay a premium of 63% and 84% to cover their children for Hospital and General Treatment (GT), respectively, compared with Families, who pay 1% to 7% above the Couple price. Furthermore, Single Parent hospital policies face an even greater margin for choosing the nil excess option (73%), an additional margin not incurred by Families, noting that there are few funds offering nil excess hospital, and so some volatility is to be expected.

The GT marginal cost is higher than hospital, which is generally to be expected because children are more likely to claim under GT compared to hospital, however; this cost for Single Parents is significantly higher than for Families.

Relativities by state

At an industry average level, there does not appear to be material variation by state.

Table 2: Industry Single Parent Premiums Rates Relative to Single

Source:  All funds, open non-corporate products, August 2026 privatehealth.gov.au data

Do all funds treat single parents similarly?

Relativities by fund size

This section explores the variance by fund. The chart below plots the Single Parent relativities by fund and by product type. Each dot represents a fund.

Figure 1: Single Parent premium rate relativities by type by size (relative to Single)

Source:  Australia, all funds, open non-corporate products, August 2026 privatehealth.gov.au data

Key observations include:

• Although there is a wide range of relativities by fund, the high Single Parent relativity is observed across all funds.
• Smaller funds tend to charge lower Single Parent relativity for hospital products, but the opposite for GT. This could reflect greater cross-subsidisation of hospital products among the smaller not-for-profit funds.

Only one fund did not apply a Single Parent relativity to all its products, and that is Westfund’s packages, as illustrated below.

SIS Links

Table 3: Case Study of Westfund Silver+ Hospital, NSW Single Parent to Single Premium Relativity, August 2026
Note: Premium rates exclude loadings/rebates

From an optics perspective, there is potential for the fairness of Single Parent pricing to be questioned by the consumer. In the absence of publicly available claims data, the following explores potential reasons for the observed relativities.

Claiming rates

• Selection: There may be a material proportion of Families where only one adult claims. In this case, even if the claims per policy of Single Parent and Family are similar, the Family policy has more residual premiums to pay for the children and therefore requires less loading above the Couple rate. Although it seems unlikely that this affects almost all products in the industry, once the larger funds set the relativities the remainder of the industry may follow.
• Adult claiming rates: The Australian Institute of Health and Welfare states that “a higher proportion of parents in two-parent families (53%) rated their health as excellent or good than parents in one-parent families (38%)”. This will increase the Single Parent rate to the extent that it correlates with higher claims.  
• Number of children: This is a less material driver because children, particularly under hospital policies, have lower claiming rates. However, from an optics perspective, single parent families have fewer children than couple families, as shown by the figure below. Although a general population statistic, it is possible that this also reflects the insured population since it is a significant part of the general population (approximately 45% for hospital and 55% for GT ^[2] ).

Figure 2: The number of dependent children by family type

Source: https://aifs.gov.au/all-research/facts-and-figures/families-and-family-composition

Historical practices and cross-subsidisation

It may be that the Single Parent pricing has been anchored based on historical pricing practices where due to its lower materiality ^[3] , its pricing was simply an assumed multiple of Singles carried forward.

The relativities may also reflect deliberate cross-subsidisation strategies, and although it is unlikely that all funds adopt the same strategy, herding could occur as smaller funds follow the relativities adopted by larger ones.

Risk Equalisation

The current Risk Equalisation scheme was introduced in 2007. Since inception, Single Parent and Single policies are treated equally when determining the amount per policy that funds need to contribute to the pool (Calculated Deficit), as well as recoveries from the pool (Gross Deficit and the High Cost Claims Pool). Therefore, for a given policyholder, the current risk equalisation system does not impose greater costs on Single Parent policies relative to Single policies and is not a reason for the Single Parent relativity.

Next steps

A potential concern for funds is that reducing the Single Parent price could create incentives for some two parent families to restructure their cover, where one adult purchases the higher cover for themselves and their children, while the other adult downgrades to a basic cover or ceases PHI coverage altogether. This is a key concern for the industry because it will result in lower industry premiums and higher premium rates for all remaining policyholders. Reform, therefore, should balance this potential effect against the community benefits of lower Single Parent rates.

Nevertheless, there appears to be opportunities for improvement:

1. Regulators could facilitate a profitability study to estimate the risk of cannibalisation to assist in policy that balances overall industry premiums, industry stability and the perceptions of fairness.
2. Smaller funds, or larger funds via separate brands, could use the opportunity to create price-leading Single Parent products and gain market share, assuming the pricing is not due to higher claiming rates.
3. Should the Department wish to incentivise lower Single Parent relativities, they could emphasise the optics or use risk equalisation as levers. The current risk equalisation scheme could simply be amended so that Single Parent policies have a less than one SEU risk equalisation weight. Although the Family SEU weight could be alternatively increased, this will increase Family premium rates and is unlikely to be a policy goal. There are also other policy levers, such as applying higher PHI rebates for Single Parent policies.  

Methodology

The calculations are performed under the following conditions.

• Products are grouped based on coverages, policy conditions and similar names. Products that are marketed as being part of the same suite but have different coverages are treated separately. Products with identical coverages but markedly different names are treated separately.
• Open, Medicare Levy Surcharge (MLS) exempt and non-corporate products only. Excludes non-student dependent or disability versions of a product where there are multiple versions.
• Only common excesses are included (0, 250, 500, 750). Other excesses and co-payments are excluded.
• Fund averages represent the simple average, giving equal weight to all products, i.e. not revenue or exposure weighted. Industry averages represent the simple average of the fund average.
• Ratios are relative to Single policies. Products without the Single scale option are excluded from the calculation.

References

^[1] This differs from Choice’s methodology, which measures the relativities of Family and Single Parent rates against the Couple and Single rates respectively. We believe that standardisation relative to the Single rate allows for a more like-for-like comparison since the Couple rates are typically double that of the Single rates. This metric is also different to the premium per policy relativities between each scale (e.g. from the APRA statistics), because the latter does not standardise for the product mixes within each scale.

^[2] Australia Prudential Regulatory Authority

^[3] June 2025 policy mix of 3.9% for hospital and 5.7% for GT, APRA Statistics