Medibank tips $450m into federal coffers

Medibank has paid $450 million of dividends to the federal government over the past financial year off the back of a surge in profit.

The payout, detailed in the company's annual report, comes as the government-owned insurer raised its premiums during the year by an average of 6.2 per cent.

The lift is due to what it says are rising health services costs and member claims.

Chief executive George Savvides said the private health insurance industry was dealing with one of the "most intense periods of volatility" it had seen due to the introduction of means testing by the previous Labor government.

Despite this, he said the business was still growing "at half a billion dollars a year".

"This year's result is the outcome of significant focus on delivering sustainable profitable growth in an environment where the private health industry faces increasing challenges," he said.

"We continue to see strong growth prospects for the year ahead."

The Coalition pledged to privatise Medicare if it won government, but has not yet committed to a time frame.

While Mr Savvides said he had been given "no timetable" for the sale, he expected it to be within the government's first term.

"The government is working out its own pathway," he said. "We do believe it's going to be in the first term, so we'll find out."

Medibank generated $5.3 billion from private health insurance premiums for the financial year, up from $5.1 billion in 2012. Its net profit after tax was $233 million, up 84 per cent from a year earlier.

Consumers Health Forum of Australia chief executive Carol Bennett said Medibank's profitability raised the question of whether it was worth selling.

"You wonder whether or not it is in the best interests for the government to sell it," she said. She called for the money given back to the government in dividends to be spent on improving health services for consumers. "We'd like to see it put back into ensuring consumers get good access to quality services and are not paying high premiums.

"Consumer out-of-pocket costs are increasing all the time. It's a big issue for consumers because, while they have a choice, they're not always aware of their choices."

While Mr Savvides said the introduction of means testing by the Labor government had affected the company, but it was too early to calculate how much.

Ms Bennett said she was unaware of any evidence to suggest changes to the rebate were affecting the insurer's bottom line.

Medibank's members grew to 3.8 million in the 2013 financial year. It attributed its surge in profit to new hospital and defence contracts and the strength of the government-backed brand.