The AFR was given the scoop today that the Medibank Private float would be deferred until after the election and Health Minister Tony Abbott followed up with confirmation on AM this morning.

The rationale is that the government should clear the decks for T3 – which should have been blindingly obvious for anyone with half a political brain at the outset.

The political and media campaign against a Medibank Private float has been quite ferocious. Even the likes of Terry McCrann have let fly for reasons that don’t seem particularly strong, giving weight to predictable arguments from the likes of Julia Gillard.

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For what it’s worth, I support a public float of Medibank Private that would put $2 billion into public hands to help reduce the $20 billion negative net worth of the Federal Government. Investment markets are booming and normally volatile health insurance profits are at a good point in the cycle, so why not cash it in now?

It is garbage to suggest members somehow own the thing. If Medibank Private suddenly needed a $500 million capital injection you can bet it would come from the government. Can anyone produce a document anywhere that shows prospective policyholders were told Medibank Private was a mutual and they would be sharing in any equity upside? Medibank Private was created by legislation and has always been recognised as publicly owned and underwritten – just like its sister scheme Medicare.

Then you have the scare campaigns about rising premiums. A privatised Medibank Private couldn’t double prices because the Federal Government actually politically approves and announces premium increases each year.

Sure, premiums have risen faster than inflation over the Howard years and the government has an appalling record of approving privatisations of businesses that then mercilessly gouge consumers. Look no further than the Commonwealth Bank, Sydney Airport and the ASX.

But in the case of Medibank Private, the pricing power is far more heavily regulated and underwritten by the public purse through the 30% health insurance rebate scheme. Any prospectus would have to clearly spell out a stable regulatory system and pricing path.

Given the market leadership position of Medibank Private, it would been unacceptable to sell it to either BUPA or MBF, given the dominant force this would have created. But a public float is a different question, the only problem being the timing.

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Peter Fray
Peter Fray
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