Private health insurance premiums are set to increase an average of 6 per cent from April, but the Federal Government says the costs to patients could have been much higher.

Key points: Health insurance premiums rising will rise an average of just under 6 per cent from April

Health insurance premiums rising will rise an average of just under 6 per cent from April 500,000 Australians dropped or downgraded insurance in last financial year

500,000 Australians dropped or downgraded insurance in last financial year Health Department ordered funds to reduce fee hikes or explain increases

Health Minister Sussan Ley asked private health insurers to provide more information to justify premium rises earlier this year.

She said 20 of the Australian funds subsequently lowered their premium increase requests.

"Overall, consumers will be $125 million better off as a direct result of our request for insurers to resubmit lower premiums, saving an average family with combined hospital and general health cover as much as $166 per year," she said.

Half a million Australians dropped or downgraded their private health insurance in the last financial year.

In response, the Minister last year launched an online survey asking consumers for their views on what services should be covered by policies and how they could deliver better value for money.

Do you know more? Email investigations@abc.net.au

Ms Ley said 40,000 Australians responded to the survey, with "the majority raising concerns about the affordability of their premiums and the value for money they received from their policies".

"Private health insurance is a fundamental element of our health system," she said.

"It's therefore important we act now to ensure it continues to deliver value for money for consumers both short and long term."

Private health funds are likely to face much more scrutiny about just what insurance policy holders are paying for.

The Government wants greater transparency around private health insurance policies, including reviewing so-called "junk" products, confusing terminology and hidden payments for consumers.

Medical devices in the spotlight

The cost of medical devices are also review, with Ms Ley setting up a working group of doctors, patients and industry members.

The review will examine the prices paid for devices such as hip and knee replacement devices and pacemakers.

Ms Ley said the cost of devices were impacting premiums.

"It's easy to see the negative impact on premiums when a pacemaker for a private patient currently costs their insurer $43,000, despite the same device only costing $17,000 if they were treated as a public patient," she said.

How much will you pay for your private health insurance?

