The cost of premiums will rise an average of 4.41 per cent on Wednesday, the biggest price rise since a 4.84 per cent hike in 2017.
The federal government approved the rise in February, after the cost of providing medical and hospital services climbed five per cent last financial year.
Private Healthcare Australia chief executive Rachel David said people relied on private hospitals at every stage of life, including neonatal intensive care for newborns, mental health treatment for young adults, and joint replacements that help older Australians stay independent.
Dr David said the structure of the gold, silver, bronze and basic tiering system, introduced by the Morrison government in 2019 to make health insurance easier to understand, was contributing to affordability pressures.
Gold policy premiums across the largest five funds will rise an average of 13.3 per cent, according to consumer group CHOICE, while people on the silver, bronze and basic policies face increases from 2.6 per cent to 3.3 per cent.
The higher increases for some gold policies reflected these products covered the most complex and costly medical treatments, including inpatient mental health care, weight loss surgery, reproductive services, pregnancy and birth, Dr David said.
"Gold policies have now become a catch-all for a very wide range of treatments, many that are used by a relatively small proportion of members," she said.
"That makes these policies more expensive and less sustainable over time for insurers and consumers," she said.
"In a nutshell, gold hospital cover is now predominantly used by a group of people who know they are going to claim for high-cost services, which is highly inflationary."
Private Healthcare Australia wants a review of the tiering framework that would allow insurers to design products better tailored to different life stages and health needs, spreading the risk of high-cost care across a wider population.
In the meantime, consumers concerned about affordability could consider whether they needed a gold cover or whether a silver or bronze product could better suit their stage of life, Dr David said.
They could also adjust their excess to reduce premiums and review extras cover to remove services they were unlikely to use.
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