Australian families will be slugged with yet another hit to their budget as private health insurance premium increases come into effect today.

Key points: Labor's modelling suggests $1 billion extra in costs shared by the 13 million with private health insurance

Labor's modelling suggests $1 billion extra in costs shared by the 13 million with private health insurance Government says annual hike is "far lower than every year under the Rudd and Gillard governments"

Government says annual hike is "far lower than every year under the Rudd and Gillard governments" ALP says a Shorten government would cap premiums to a 2-per-cent rise for its first two years

The Federal Opposition has done modelling which suggests the average premium increase of 3.95 per cent will cost families and older Australians an extra $200 per year.

That equates to about $1 billion extra in costs for the 13 million people across the country with private health insurance.

"I don't think it's a good outcome when you've got Australian families who are already doing it tough with wages stagnating, with increases in utilities and other energy bills, really struggling with out-of-pocket costs, for them now having to find almost $1 billion more out of their pockets in this next year alone," shadow health minister Catherine King told reporters in Melbourne.

The Federal Government has argued the 3.95 per cent increase is the smallest yearly price hike in 17 years, under both Liberal and Labor governments, and below the 4 per cent rate at which healthcare costs are rising.

"It's far lower than every year under the Rudd and Gillard governments," Health Minister Greg Hunt said in a statement.

"In comparison Labor's policy is nothing more than a recipe for higher prices, bigger out-of-pockets and policies with less coverage.

"We understand every single dollar matters, that's why our policies are focused on lower premiums."

The Opposition continues to spruik its policy of capping private health premiums to 2 per cent for the first two years of a Shorten Labor government.

"The Government wants to have a great big pat on the back, it wanted the champagne corks popping when it announced the private health insurance increases for 2018," Ms King said.

"I couldn't believe it when they were doing that, it is incredibly out of touch."

The Coalition has roundly criticised the capping proposal, saying it was "policy on the run" and would not help insurers meet the cost of providing healthcare.

Private Healthcare Australia, the industry group representing the sector, suggested price hikes were out of its control.

"There is only one reason premiums increase and that is because health funds are paying for more health care," chief executive Rachel David said.

"In addition, a range of government budget settings introduced over the last seven years have had a significant detrimental impact on the affordability of [private health insurance] for many Australians.

"Health funds are not hiding a pot of gold."