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Medibank sale could force up premiums: AMA

04 Nov 2013

The AMA has flagged concerns that the Abbott Government’s proposed sale of Medibank Private could result in higher health insurance premiums for families because of increased commercial pressure and a potential reduction in competition.

Acting on long-standing Coalition policy, Finance Minister Mathias Cormann late last month initiated work on privatising Medibank, the nation’s largest private health insurer, with estimates the sale could deliver at least $4 billion to the Government’s bottom line.

But AMA President Dr Steve Hambleton has raised fears that the sell-off could potentially hurt patients, and called for close scrutiny of the terms of any proposed sale.

Ever since legislation authorising the sale was proposed in 2006, the AMA has voiced concerns that the privatisation of Medibank Private will lift premiums and leave families worse off.

Dr Hambleton said there were three specific areas of concern regarding the proposed sale.

Firstly, if Medibank Private (which is the biggest health fund, with close to 30 per cent of the market) was sold to another health fund it would severely curtail competitive pressure.

Secondly, premiums could be forced higher as private owners sought a quick return on investment to help service the equity needed to fund the purchase, with the risk increasing the higher the purchase price.

Thirdly, that Australian policyholders could be heavily exposed to international financial risk if the buyer is an offshore entity, as could well be the case.

Dr Hambleton said that the sale could also drive premiums up faster by removing the moderating influence of Government from a part of the market.

“We are concerned that competition needs to be maintained in the private health privatisation would remove the current conflict where the Government is both the regulator of the private health insurance market, as well as a large market participant.”

Senator Cormann said the proceeds of the sale could be used to fund other policy priorities or reduce overall Government debt.

Dr Hambleton said the AMA would be guided in its view on the sale by the results of the scoping study and the degree to which it addressed the Association’s concerns.

Adrian Rollins

 


Published: 04 Nov 2013