The federal government has authorised a rise in private health insurance premiums that will cost families an extra $126 a year on average.

The 2.74 per cent annual increase is due to take effect from April 1 next year, and builds on rises of 2.92 per cent this year and 3.25 per cent in 2019.

Almost 14 million Australians will be impacted by the cost increase.

A single person will pay an extra $1.14 per week, and a family will pay $2.44 more a week.

But Health Minister Greg Hunt says it’s the lowest annual average premium increase in 20 years.

“Australian government reforms mean private health insurance will continue to offer Australian families affordable choice and flexibility in their health care,” his office said in a statement on Monday.

Opposition health spokesman Chris Bowen said the confirmation of the 2021 increase was a blow for families, especially given some funds were likely to impose higher premiums.

“Hunt’s hike is well above projected inflation, and will cost families an extra $126 on average,” he said.

Mr Bowen also noted the competition watchdog recently found insurers had paid out $500 million less in benefits due to COVID-19 measures restricting access to some treatments.

“With premiums soaring and (welfare) benefits falling, it’s no wonder that health insurance coverage is already at its lowest level in decades – and today’s announcement will only add to the pressure,” he said.

The government returns about $6.3 billion to private health insurance holders through the private health insurance rebate scheme.

In 2019/20, Australians received a record $21.9 billion in benefits for medical services through the private health system, according to the government.