Medibank put on the auction block
The Federal Government has moved to allay concerns that the privatisation of the nation’s largest health fund will hurt patients, reporting that there was “no evidence” the move would force insurance premiums up.
In a widely-anticipated decision, Finance Minister Mathias Cormann announced on 26 March that the Government will proceed with the sale of Medibank Private in a transaction that could net the Commonwealth $4 billion.
Senator Cormann said competition in the health insurance sector was strong and, combined with the existing regulatory requirement that all premium increases be approved, meant there was no reasons to expect the sell-off would push up member costs.
“Medibank Private is a commercial business operating in a well-functioning, well-regulated competitive private health insurance market with 34 competing funds,” the Minister said. “The scoping study [into the proposed sale] found no evidence that premiums would increase as a result of the sale of Medibank Private.”
AMA President Dr Steve Hambleton reacted cautiously to the sell-off plan.
“It’s hard to say whether the news is good or otherwise,” Dr Hambleton told ABC Radio. “We certainly asked in the scoping study that there be an examination of the impact on premiums. We were concerned that premiums may increase. We note that the Minister says he has no evidence that premiums will increase.”
Ever since Medibank Private sale legislation was passed by Parliament in 2006, the AMA has warned of the potential for the privatisation of the fund to lead to a jump in premiums unless the sell-off was managed carefully.
Dr Hambleton said it was difficult to judge the potential impact of the privatisation because the AMA had not seen the results of the scoping study.
“It would be good to know that sort of advice so that we can assure ourselves that [it] will be ok,” the AMA President said. “Of course, we won’t know until after the sale about what impact the sale might have on the services offered and the benefits to members, but these are some of the unknowns.”
Senator Cormann said the Government plan was to sell the insurer through an initial public offering during 2014-15, though “the precise timing and structure [of the IPO] are yet to be determined”.
“There is no compelling reason for the Government to own Medibank Private,” he said, announcing the appointment of three new members to the insurer’s Board: lawyer David Fagan, corporate adviser Linda Nicholls and CSL Director Christine O’Reilly.
But the Government may encounter opposition to its plans.
Shadow Health Minister Catherine King said Labor believed Medibank should be kept in public ownership, not least to act as a “moderator” for fees and premiums charged by health funds.
Ms King said the Government needed to prove its case for selling the insurer off, including its claim that the move would increase competition.
The proposed sell-off comes as the insurer is embroiled in a range of controversial efforts to expand its range of activities.
Through its spin-off Medibank Health Solutions, the fund has run foul of doctors providing health services to Defence Force personnel over the terms of contracts it has offered, and it has also engaged in moves to expand operations into primary health care.
The Federal Government has also mused that Medibank may in future take a role in the management of the National Disability Insurance Scheme.