Family health cover is expected to rise by up to $200 a year when the 4.84 per cent average premium rise kicks in from April 1.
“The cost will be on average an additional $2 a week for singles, or $4 a week for families,” Prime Minister Turnbull told 3AW radio in Melbourne.
“At a time when household budgets are tight, every additional cost hurts, there’s no question about that,” he said.
The federal government argues the premium rise is the lowest increase over the past decade but the opposition says it will likely force many families to opt out of their cover altogether.
“That’s a judgment they’ve got to form on their own situation. My counsel would be that people should stay in private health insurance but obviously people have got to make their own decisions,” Mr Turnbull said.
"This $200 increase comes on top of some of the highest premium increases on record, spiraling complaints against private health insurers and Australians increasingly discovering they are simply not covered for basic inclusions in their policies," Labor health spokeswoman Catherine King said.
The Turnbull government says an increasing cost in health services is to blame for the rise as well as high labour costs and increased technology.
“We’re spending more money on prostheses, implants, hip replacements,” Mr Turnbull said.
“It’s critically important to constrain costs. We’ve got to - it’s not a bottomless pit.”
Health Minister Greg Hunt says he plans to work with private health insurers over the next few years to find ways to deliver more value without compromising on 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," Mr Hunt said.
“I realise cost of living pressures are a major concern for Australian families. Although this is the lowest increase in a decade, I am determined that more can be done to get better value for families.”
Private Healthcare Australia chief executive Rachel David said no one liked to see premiums go up but insisted members continued to get value for money.
“By starting to address outdated regulations pushing up prices, particularly for medical devices, and focusing on better value care through the MBS Review for the first time in years, the premium increase is less than overall ‘health’ inflation but there is much more to be done,” she said.
“Health sector costs are rising faster than CPI inflation and key components of health inflation such as the cost of medical devices are beyond the control of health funds.”
Tom Godfrey from consumer group Choice said the latest price hike might be justifiable for providers but that did not mean it was affordable.
"What we're seeing at the moment is people reconsidering their coverage, people dropping out, and unfortunately people downgrading into what we call junk policies," he told ABC radio.
"Private health insurance at the moment for a lot of people is a pretty bad deal."
About 13 million Australians have private health insurance.
