Health insurers battling falling membership due to affordability concerns have had to cop premium increases that are the lowest in more than a decade, which will depress their revenue.
The government has approved average premium rises of 4.84 per cent from April, costing families up to $200 extra a year.
Health Minister Greg Hunt played down the rise, saying it was the lowest in a decade.
Average increase across Medibank and ahm products will be 4.6 per cent, which Medibank Private chief executive Craig Drummond said was the lowest in 15 years.
"The challenge is to get the balance right between meeting the rising costs of healthcare in Australia and ensuring that our products remain affordable and meet the health needs of our customers," he said.
In early trading, Medibank shares rose 1.4 per cent to $2.81.
Shares in Australia's only other listed health insurance company, NIB, were up 0.6 per cent to $4.73 after it announced average premium increases of 4.48 per cent.
The slight gains suggest shareholders had anticipated premium increases to be subdued.
Bupa premiums will rise by an average of 4.9 per cent. Medibank Private and Bupa account for three in every five policies,
Prime Minister Malcolm Turnbull urged 13 million Australians with private cover to stick with it despite the growing burden.
He said the increase meant singles would pay an extra $2 a week and families $4 more.
"My counsel would be that people should stay in private health insurance," he told 3AW's Neil Mitchell on Friday.
Having more people eases pressure on the budget and there are penalties for failing to take out a policy before the age of 31.
But worryingly for the government and industry, the proportion of Australians with hospital cover dropped from 47.4 per cent to 47 per cent in the June quarter of 2016.
Health costs are rising fast because there are more people accessing services of ever-increasing sophistication and therefore expense.
Mr Hunt said he planned to work with private health insurers to find ways to deliver more value without compromising the quality of cover.
"I have already made this clear to the insurance companies and received a commitment that they will work to that end," he said.
The steepest rises will come for customers of Healthguard Health Benefits Fund, Health Insurance Fund of Australia, Queensland Teachers' Union Health Fund and Cessnock District Health Benefits Fund.
