Medibank began business as an Australian Government-owned private health insurer, established by the Whitlam Government in 1975 through the Health Insurance Commission. Medibank was set up to provide competition to private "for-profit" health funds. It was designed to put pressure on other health funds to keep premiums at a reasonable level. In 2006, the Howard Coalition Government announced that Medibank would be sold in a public float if it won the 2007 election, however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that Medibank would remain in government ownership. After 2009, although continuing in government ownership, Medibank operated as a government business enterprise, operating as a fully commercialised business paying tax and dividends under the same regulatory regime as do other registered private health funds. Before the 2010 election, Liberal leader Tony Abbott made the same pledge to privatise Medibank if it won government, but the party was again defeated by Labor. Privatisation was again Liberal party policy at the 2013 election, which the Coalition won. In March 2010, Medibank withdrew benefits for restricted services on its basic First Choice Savers hospital policy. As of June 2010, benefits for procedures such as heart operations and assisted reproductive services will be available only to customers on more comprehensive policies costing as much as 50% more. Medibank stated that the changes were intended to improve customer understanding of their products. They further stated the impact on customers will be small, due to the low rate of use of the restricted services. In late March 2016, after 14 years as CEO, George Savvides retired earlier than expected. Former NABchief financial officer Craig Drummond was offered the role and commenced on July 2016.
'Not for profit' to 'for profit' health fund
Medibank was previously run as a not for profit organisation and later operated as a for-profit government business enterprise with dividends paid to the Federal Government. In May 2009, the Rudd Labor government announced that Medibank would become a 'for profit' business and would pay tax on its earnings. The process of converting the status of the business was completed on 1 October 2009, following approval from the then regulator, the Private Health Insurance Administration Council, an independent statutory authority that regulated the Australian private health insurance industry until 2014. Private health insurance policy is set down by the Federal Department of Health.
Medibank privatisation
On 26 March 2014, Abbott Government Minister for FinanceMathias Cormann announced that Medibank would be sold through an initial public offering in the 2014-2015 financial year. With the Medibank Private IPO priced at $2.15, the government exceeded the indicative range of $1.55 to $2.00 disclosed in the prospectus. However, it ensured that retail investors only pay $2.00, locking in a minimum 7% gain for them in the short-term. The sale raised $5.7 billion for the government. The sale was completed with 100% of the company sold, listing on the Australian Stock Exchange under the code MPL on 25 November 2014, with 440,000 individual owners with a market capitalisation of A$5.921 billion. Medibank held a 29% share of the private health insurance market.
Acquisitions and mergers
In January 2009, Medibank acquired the Wollongong-based insurer ahm and merged with the HSA Group in April 2009. Following these transactions, Medibank created the Health Solutions Division, which is focused on delivering occupational health services and health coaching programs to help Australians manage health conditions. Services are delivered under the Medibank Health Solutions brands. In July 2010, Medibank acquired health services provider, McKesson Asia-Pacific, absorbing it into Medibank Health Solutions. The telephone and online health management programs services provided by McKesson Asia-Pacific, including 'healthdirect Australia', 'NURSE-ON-CALL' and 'Healthline' will be maintained by Medibank.
Industry structure and main competitors
Private health insurance in Australia is heavily regulated to protect consumers. Prudential supervision is undertaken by the Australian Prudential Regulation Authority to ensure health funds remain solvent. APRA also publishes extensive statistics on the industry and annual financial statement for individual health funds to provide full transparency for stakeholders. The pricing and features of health insurance products is regulated by the Department of Health. To inform consumers, the Private Health Insurance Ombudsman operates a website to explain private health insurance and provide a standardised basis to compare health fund products.
