Medibank Private Sale Will Drive Up Premiums

AMA President, Dr Mukesh Haikerwal, said today that higher premiums would be inevitable as the new owner sought to maximise returns to shareholders.

"There is also a chance of flow-on higher premiums across the whole private health sector because of reduced competition, but the extent of the rises would depend on whether the new owner is a new or an existing player in the sector," Dr Haikerwal said.

Key points of the AMA submission to the ACCC include:

• The AMA, while not wishing to comment on the legality of the situation, doubts the morality of the sale given that much of the value of Medibank Private is in its financial reserves which were not contributed by the government but rather, extracted from the members in compliance with regulatory requirements. This does not imply any criticism of the regulatory requirements. Reserves are necessary for proper prudential management of private health funds

• If the Government no longer wishes to be involved as an operator of a private health fund, there is a strong case for mutualising Medibank Private and retaining the equity with those who have contributed it, namely the members

• The AMA believes that, if the Government goes ahead with the sale of Medibank Private, existing health funds should be prevented from purchasing Medibank Private so that the anti-competitive aspects of the sale are minimised

• The Government also needs to ensure that the products on offer by Medibank Private continue to be on offer under the new arrangements - i.e. no loss of amenity to private health insurance members as a result of the sale.

The AMA submission to the ACCC can be viewed here.