Shares for Medibank policy holders?

The federal Minister for Finance, Mathias Cormann, has not ruled out issuing Medibank’s 3.8 million policy holders with shares in the float of the government-owned private health insurer.

Asked by Eureka Report whether Medibank members would be given shares in a public listing, Cormann left the door open for possible policy holder participation in the potential float. Cormann said the government will await the recommendations of the scoping study – scheduled to be completed by the end of February next year – before making that decision.

Government sources say the federal government is confident from legal advice that it has received that there is no obligation to do so, given it is the owner and the relationship between policy holders and Medibank is a contractual one. Nevertheless, policy holder participation in a potential $4 billion float would be a potential plus for the float.

Medibank is Australia’s largest private health insurer, covering 29.5% of the market.

The last research brief ordered by the government about whether policy holders should be compensated was in 2007.

The research brief concluded that the government clearly owns Medibank Private Ltd (the managing organisation of the fund). It also said members of the fund have certain benefits to rights and associated assets and these rights need to be considered in its sale.

If policy holders do get compensated via shares, it may be similar to the way nib Holdings (NHF) – currently the only listed private health insurer – allocated shares to its policy holders when it demutualised in 2007.

With nib, policy holders were granted shares depending on what type of policy they held and how long they had been with the organisation, with a cap applied to how much they could receive.

For example, ambulance cover policy holders were eligible for 10 shares a year with a maximum allocation of 300 shares, while family policy holders could get 200 shares a year at a maximum of 6,000 shares.