Medibank sale against public interest

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Medibank sale against public interest

The long-expected decision follows the recommendations of a scoping study commissioned by government, but not publicly released. The Minister indicated that current arrangements around premium setting would remain, while the scoping study found no evidence that a sale would increase premiums.

According to the Government, monies realised from the sale will fund infrastructure projects. While 26 are non-profits, MPL converted to for-profit status in Several of these issues continue to be pertinent. One of the main arguments used in support of a sale is that selling MPL will improve its efficiency by lowering management costs and facilitating expansion into new business areas.

This would in turn support greater competition in the private health insurance sector, ultimately benefitting consumers. However, when the sale bill was debated inMPL was still a non-profit entity.

Non-profits were generally restricted to utilising surplus revenues for the sole benefit of policy holders. The Act also broadened the business activities of health insurers and the range of products they could offer, improving their competitiveness.

This raises questions over the extent to which additional efficiencies could be achieved by a sale. Evidence that this conflict has become more pressing since the passage of the Medibank Sale Act has not yet been presented.

This is partly correct. In accounting terms, the sale would simply involve the swapping of one asset, shares in MPL, with another asset, cash. The proceeds of the sale will not be treated as revenue for the Commonwealth, and will not improve the budget deficit or surplus position in the year the monies are received.

Medibank sale against public interest

The Commonwealth will, however, have the proceeds for the sale available, and this will mean that it may either expend this money on other priorities without additional borrowing, or pay off some debt.

However, it will no longer receive dividends from MPL, and this will reduce revenues, causing a deterioration in its budgetary position in all future years.

Arguments against a sale include that policy holders, as members of the fund, retain some rights over assets of the fund.

Nevertheless the issue remains contentious. Former Finance Minister Lindsay Tanner argued in favour of retaining MPL in public hands because of its potential role in progressing health reform.

But it is debateable whether MPL was used to drive major health reform under the former Labor Government. Finally, there are concerns that selling MPL would raise premiums. This is because a buyer would seek to maximise their returns by optimising premium revenue. But the Health Minister must approve any premium increases unless this is contrary to the public interestso this potentially limits unnecessary rises.

A further issue is that to operate as a registered health insurer in Australia, a business must primarily operate for private health insurance purposes. This could potentially deter general insurance businesses from bidding for MPL and thus reduce the pool of potential buyers.Medibank Private will need to continue to compete against other funds for policy holders and will need to continue to comply with relevant regulatory requirements around changes in premiums.

go to the Public Health Insurance Advisory Council (PHIAC []) or the Department of Health (DOH []). Proceeds from the sale of Medibank Private will.

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Since the s the Commonwealth and State governments of Australia has privatised a sizeable portion of the public . Business and Market News. Read the latest business news and breaking stories on Australian and World business, economy, finance and market news on 9Finance. Fund managers are keenly awaiting the $4 billion initial public offering of the country's largest private health insurer Medibank Private.

Medibank Private sale. Mr Langley said Medibank's management expense ratio of per cent, which measures the cost of administrating policies against revenue, could be much lower than the industry average of per cent.

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