A sharp rise in the cost of claims has seen the Southern Cross Medical Care Society post a loss.
The not-for-profit health insurer reported a deficit of $14.4 million for the year to June, a turnaround from last year's profit of $7.8 million.
Income rose 4% to $544 million, due to rises in premiums and a 1% increase in the number of members to more than 843,000.
But claims rose 13% to $526 million, which Southern Cross says is due to increased demand for surgical procedures and rising charges from healthcare providers.
For every dollar paid by members in premiums, the insurer incurred 97% in claims to meet to costs of treatment.
It warns premiums will increase if costs continue to rise at current rates and says private health care is in danger of become increasingly unaffordable.