FAMILIES are being hit with charges of up to $1500 to use their health insurance in a development that is likely to add to pressure on public hospital waiting lists.

Many health fund members are facing increased premiums after they were forced to upgrade their cover when April 1 reforms stripped key procedures like hip and knee replacements and pregnancy from lower levels of insurance.

An analysis of consumer behaviour by health fund broker iSelect found in order to control their annual health fund premiums thousands of health fund members are opting to pay huge new excess fees that were allowed from April 1.

This means when they go to hospital they will have to pay the first $1500 of their bill before the health fund rebate kicks in.

Australian Health and Hospitals Association chief Alison Verhoeven says these fees will be unaffordable for many and "I think there is no doubt that out of pocket costs see people move to the public system".

Consumers Health Forum chief Leanne Wells says "the trend to higher excess policies could well encourage yet more insured consumers to choose public hospital care".

Previously the maximum excess health funds could charge was $500 for singles and $1000 for families.

However, as part of health reforms introduced from April 1 the government lifted the maximum excess payments to $750 for singles and $1500 for couples and families.

ISelect spokeswoman Laura Crowden told News Corp almost seven in 10 couples and families aged between 31 and 50 opted for the higher excess as did one in three single people.

Those opting for the higher excess payments are saving between $85 and $212 on their annual premiums if they are single and $170 and $424 for family cover.

In some cases this can almost negate the 3.25 per cent premium hike that took effect on April 1.

Soaring fees mean more Aussies are finding health insurance is unaffordable. Picture: iStock.
Soaring fees mean more Aussies are finding health insurance is unaffordable. Picture: iStock.

"For younger healthier customers who feel they are unlikely to be admitted to hospital in the next few years, then the $750 excess makes good financial sense as it can reduce your annual premiums by as much as $200 a year (for a single policy)," iSelect spokeswoman Laura Crowden said.

"However, for older customers or those with known health issues, we'd recommend keeping your excess lower as any premium saving is likely to be quickly outweighed by additional excess payments," she said.

Medibank, which does not offer its products through iSelect, said its experience was different with fewer people than expected taking up higher excess payments and a good uptake of the youth discount.

Private Healthcare Australia CEO Dr Rachel David said excess payments had not risen for 15 years and were a valuable tool younger healthier people could use to reduce their premiums.

Australian Private Hospitals Association acting CEO Lucy Cheetham said demand for private hospitals was trending up and the sector was not concerned about the higher excesses affecting business.

From April 1 the government introduced a new system that categorised all health fund policies into Gold, Silver, Bronze and Basic categories to try and simplify choice.

Under the changes health funds only have to provide cover for hip and knee replacements and pregnancy and other key procedures in Gold cover and many people had to upgrade their policies.

Most people who upgraded their cover opted for a Silver or Silver plus product and this added to their premium costs Ms Crowden said.

Other reforms which allow health funds to attract younger members by offering a premium discount of up to 10 per cent don't appear to be working with the number of under 30s taking out private cover continuing to decline.

A YouGov Galaxy poll conducted for iselect found only four in 10 Australians think the new Gold, Silver, Bronze and Basic tiers make it easier to understand and compare private health insurance while 29 per cent say it won't and 28 per cent don't know.