Health insurance premiums are set to rise by an average of 3.73% on 1 April. While this can be a bitter pill to swallow for consumers, it can be a good opportunity for investors.
To hedge the price hike, ASX investors could consider adding companies that stand to benefit to their portfolios.
After several rounds of negotiations between Health Minister Mark Butler and insurance companies, health insurance premiums will rise by an average of 3.73% in April.
Each year, the health minister must approve the annual premium rises of private health insurance. This directly impacts more than half of Australia's population, with an estimated 13.6 million Australians having private health insurance, according to The Department of Health and Aged Care.
This marks an acceleration from last year, when health premiums rose by an average of 3.03%. It also represents the largest increase in seven years.
Instead of simply absorbing the rise in premiums, investors can benefit from the price hike by investing in the companies themselves.
Some healthcare funds, such as the two listed below, have above-average price rises.
Medibank Private is Australia's largest private health insurance provider. Covering more than 4.2 million customers in 2024, Medibank directly benefits from higher health insurance premiums. Next month, Medibank will increase its premium by 3.99%.
Medibank has proven a fruitful investment over the past five years, with its share price increasing more than 65%. Medibank also offers a dividend yield of 3.89%.
Another health insurance company that is increasing its premiums above the average is NIB. It provides health and medical insurance to more than 1.5 million Australian and New Zealand residents. Next month, it will increase premiums by 5.79%, significantly above the average.
While not quite as attractive as Medibank Private, NIB has increased more than 30% over the past five years and offers a dividend yield of 4.02%.
With rising inflation, price hikes have been a common theme over the past few years. In this case, those impacted by health insurance price rises can hedge their expenses by getting on the other side of the transaction and investing in the health insurance companies themselves. Funds with higher increases than the average may be especially compelling.
If the next five years are anything like the last five years, investing in Medibank Private and NIB could be a wise move.
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