State health ministers are demanding a hefty increase to the fee charged to health funds when patients elect to be admitted privately in single rooms at public hospitals, which receive more than $1 billion a year from insurers.

NSW health minister Brad Hazzard took a proposal to last week's COAG health council meeting to set a "minimum rate" more than 70 per cent higher than the current average $432 funds pay for private patients in single rooms, but insurers warn it will drive up the cost of premiums.

The states want an increase to the amount private health insurers pay for single-room patients in public hospitals. Credit:Louise Kennerley

Private Healthcare Australia chief executive Rachel David said the funds could not afford to pay a higher rate and that any increase would make it impossible to meet federal Health Minister Greg Hunt's demand of a premium increase of less than 3 per cent for 2020.

"This is really just another cash grab," Dr David said.