The number of people covered by an individual health insurance policy dropped by almost 10% to 1.2 million in the four years between 2015 and 2019, figures show.
Over the same period, the government doubled insurance premium tax (IPT) from 6% to 12%.
The number of people covered by corporate health insurance also fell to 3.5 million, a drop of more than 5% in four years.
The data from the Association of British Insurers (ABI) reveals average health insurance premiums rose by nearly 15% for personal health insurance and by over 8% for corporate health insurance.
As well as an increase in IPT, there have been significant increases in medical costs driven by the use of increasingly sophisticated technologies and treatments.
The total number of people covered by health insurance fell to 4.7 million, nearly 300,000 fewer people than four years ago.
Health insurers paid out over £10bn in claims for important medical treatments including cancer, mental illness and cardiovascular treatment.
Roshani Hill, head of protection and health at the ABI, said that as well as providing a vital service to millions of people, health insurance provides much needed relief to an overburdened NHS.
“This makes increasing IPT and driving people away from health insurance a false economy,” Hill argued. “IPT has doubled since 2015, giving the UK one of the highest rates in Europe. It is time to give responsible people a break and cut the tax on insurance.”