The ACCC says more Australians are leaving private health insurance or downgrading to lower-cost, lower-benefit policies in response to premium increases.
The regulator has issued its annual report into the private health insurance industry. The Senate has required the report since 2003.
This year's report reflects many of the concerns consistently raised by stakeholder groups, including the industry, such as affordability and out-of-pocket costs.
The report does acknowledge the reforms announced by health minister Greg Hunt and in the process of being implemented.
It says private health insurance premium increases over the past five years have outstripped healthcare inflation - 27 per cent compared to 21 per cent - but acknowledges "the rate of the average yearly increases in premiums has been decreasing each year over the past five years, and was 3.95 per cent in 2017–18."
In a statement, Private Healthcare Australia said, "The only reason premiums increase is because health funds are paying for more healthcare.
"Health funds have limited control over input costs therefore stakeholders must work together to bring costs down. The regulator APRA has repeatedly said that premiums reflect increasing health care costs.
"PHI reforms such as reducing inflated medical device benefits to be more consistent with real market value have already had a positive impact on premiums and delivered benefits to consumers."
In a recent speech to the Private Healthcare Australia conference, APRA's Peter Kohlhagen said, "The fundamental driver of premiums is changes in the claims costs experienced by insurers, in turn driven by changes in the costs and utilisation of health care."
The ACCC report also acknowledges a 21 per cent reduction in complaints about private health insurance to the Private Health Insurance Ombudsman (PHIO).
"The PHIO reported that last year’s decrease was partly attributable to its work in assisting insurers to improve their complaint handling processes, improvements in the complaint handling processes of the larger insurers, and smaller premium increases in 2018 compared to recent years," said the ACCC.
"In the September quarter, total benefits paid increased by 3.62% while premium revenue increased by 3.31%," said Private Healthcare Australia.
"Net margin has decreased from 5.52% to 5.18% and net profit for the year to September 2018 was $1.41 billion, down 1.4% compared to same time in the previous year."
The association continued, "Private Healthcare Australia will continue to work cooperatively with Government, policy developers and health sector stakeholders to address the economic challenge of rising health costs, but this should be done in a considered way, with affordability for consumers and private health sector sustainability at the forefront. Keeping private health sustainable ultimately benefits all Australians by keeping pressure off the public hospital system."