Health Minister Mark Butler said premiums would rise by 4.41 per cent from April 1, up from a 3.73 per cent increase the year before.
It's the largest single-year rise in premiums since 2017, when it rose by 4.84 per cent.
The health minister said the rise in premiums reflected a rising cost for medical and hospital services, such as an increase in wage bills.
"The government understands the pressure health insurance premium changes put on Australians and decisions about private health insurance premiums must put consumers first," he said in a statement on Tuesday.
"This premium round has been guided by my commitment to maintain the value of private health insurance for Australians, while making sure the sector plays its part in supporting private hospitals facing rising costs and significant challenges."
It's estimated more than 15 million people have private health insurance in Australia.
In the year to the end of September, insurers paid out more than $26 billion in health and medical costs.
Mr Butler said he had rejected previous requests by private health insurance companies for larger increases, but called for insurers to do right by their customers.
"Australians deserve transparency, fair pricing and confidence their premiums are being directed where they are needed most," he said.
"I expect private health insurers and hospitals to work hard to bring down costs and keep future price increases to a minimum."
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