Medibank Private holders should 'act' if Coalition sells fund
Grahame Danaher, chief executive of the not-for-profit health insurer Westfund, said Medibank members were already shortchanged by the Labor government extracting large dividends since the insurer converted to "for profit" status in 2009. He said the proposed sale by a Coalition government was "not as easy as it sounds".
"It's not palatable to sell it to an overseas health fund, especially a for-profit one," he said. "And you couldn't sell it to another fund here because of competition issues."
There are 35 health funds in Australia, but the two largest - Medibank and Bupa - have more than 50 per cent of the market.
Medibank is one of seven government business enterprises. Its total dividends to the government will top $850 million if a mooted "special" dividend of $300 million is approved by the board this financial year. The Medibank Sale Act is through Parliament but does not stipulate a method of sale. A sharemarket listing is considered the most likely option, and is estimated to raise up to $4 billion.
Mr Danaher said Medibank's policyholders would expect "recognition for their loyalty" if the insurer was floated. Failing that, "anything can be raised in the courts".
"I know there has been anger in the past in regard to members seeing Medibank as very much their own institution, and that any sale would give rise to some discontent."
Members of MBF and Manchester Unity received cash according to the type and length of their membership when the businesses were acquired. Members of NIB, the only listed health insurer, received shares when it floated.
Mr Danaher said a sale of Medibank would likely help smaller funds such as his, if policyholders lost confidence about services under the new ownership and the removal of government backing.
Opposition Leader Tony Abbott said in April that the Coalition did not "see any reason in principle why you still need to have a government-owned private health insurer". This view is backed by the Greens, which say it could support a sale if the proceeds went to public health. Labor does not support a privatisation.
But an industry source has told BusinessDay that a sale is not unanimously supported in the Coalition, with one prominent Liberal believed to favour holding on to Medibank for its dividends.
Frequently Asked Questions about this Article…
The Coalition has proposed privatising Medibank Private, Australia’s biggest health insurer. The Medibank Sale Act is through Parliament but doesn’t specify a sale method; a sharemarket listing is considered most likely and could raise up to $4 billion. For everyday investors, a flotation could create a new public stock opportunity, shift market dynamics in private health insurance and affect government dividends from the business.
Grahame Danaher, CEO of not‑for‑profit Westfund, has warned policyholders should be upset and could pursue legal action if they aren’t “compensated for their loyalty.” He says members were already shortchanged by large dividends paid since Medibank converted to for‑profit status in 2009, and that a sale—especially to an overseas for‑profit buyer—would be controversial and complicated.
The article says policyholders would likely expect recognition for their loyalty and points to past cases where members received compensation: MBF and Manchester Unity members got cash on acquisition, and NIB members received shares when it floated. No specific compensation plan for Medibank has been announced, so outcomes would depend on the sale terms or any legal action.
Industry commentators in the article say selling to an overseas for‑profit health fund would be politically unpalatable, and selling to another large domestic fund is difficult because of competition issues. There are 35 health funds in Australia, but Medibank and Bupa together control more than 50% of the market, which complicates consolidation.
A public listing is estimated to raise up to $4 billion. Separately, Medibank is one of seven government business enterprises and its total dividends to government would top about $850 million if a proposed $300 million “special” dividend is approved by the board this financial year.
Yes. The article notes that when MBF and Manchester Unity were acquired, members received cash based on membership type and length. When NIB — the only listed health insurer mentioned — floated, members received shares. These examples show there are precedents for member compensation or share allocations.
One view in the article is that if Medibank policyholders lose confidence under new private ownership or if government backing is removed, smaller funds like Westfund could gain members. However, the dominance of Medibank and Bupa (over 50% combined market share) means competition and regulatory issues would be central to any sale.
The Coalition (including Opposition Leader Tony Abbott) argues there’s no reason to keep a government‑owned private health insurer and may proceed with a sale; the Greens say they could support a sale if proceeds go to public health; Labor opposes privatisation. The article also notes the sale isn’t unanimously supported within the Coalition, with some preferring to retain Medibank for its dividend income. For investors, political outcomes will influence timing, sale method and whether a public float happens.
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