Gary Nairn (Eden-Monaro, Liberal Party, Special Minister of State) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Australian government has always recognised the importance of the private health insurance industry as an essential partner to the public health sector.

Members will be aware that my department and the Department of Health and Ageing are consulting industry on a range of reforms to the private health insurance industry.

These reforms are aimed at:

• making private health cover more affordable;
• improving customer access to information about health insurance products, to help customers make decisions about the cover they need; and
• streamlining the regulation of the industry while maintaining the benefits of competition and strong prudential oversight.

The reforms will be the first big changes to health insurance legislation since the early 1990s and will give health insurers the opportunity to provide policies that reflect contemporary clinical practice and provide more competition and improved services to consumers.

The government is committed to maintaining a viable and competitive private health insurance industry and the sale of Medibank Private represents an opportunity to improve industry competition and thereby benefit consumers. This bill provides the legislative framework to facilitate the sale.

The private health insurance sector comprises 38 funds. The Australian government, through the Minister for Health and Ageing, has a critical role to play in the regulation of these funds and the products that they offer to the public.

There is no sound policy reason for the Australian government to continue to own a health fund. Competition between funds is the best way of keeping a lid on premiums. Importantly, if a customer of any health fund is unhappy with the fund’s premiums, they are able to move to another fund without any waiting period.

The private health insurance industry will also benefit from the largest health fund being privately owned and competing on a level playing field. Further, selling Medibank Private will allow the Australian government to remove its conflict of interest in being both the industry regulator and the owner of the largest participant in that industry, thereby allowing the Australian government to focus on its role as regulator.

Decisions about implementing the sale of Medibank Private will be made in the context of the Australian government’s objectives for the sale:

• to contribute to an efficient, competitive and viable private health insurance industry;
• to maintain service and quality levels for Medibank Private contributors, including in regional and rural Australia;
• to ensure the sale process treats Medibank Private employees in a fair manner, including through the preservation of accrued entitlements;
• to minimise any post-sale residual risk and liabilities to the Commonwealth; and
• having regard to the above objectives, to maximise the net sale proceeds from the sale.

These objectives emphasise the Australian government’s focus on the benefits to customers and the industry arising from the current reform process and in the sale of Medibank Private.

The current board, managing director and management of Medibank Private have done an excellent job turning around the company’s finances and putting it in a position where there is significant interest from potential buyers.

Claims that the sale of Medibank Private will somehow be the cause of an increase in premiums for health cover are unfounded.

Competition for members between funds is the best way to limit premium increases. Consumers, and the industry as a whole, will benefit from the largest health fund being privately owned and competing on a level playing field.

A detailed study by Carnegie Wylie also concluded that a privately owned fund would be able to be more efficient, through lower management expenses and through scope for expansion into new business areas. A privately owned Medibank Private could expand into other areas, be they other forms of insurance or other medical products or other financial products—and through this greater scope, be a more efficient operation. And it is through more efficient operation that a health fund can further restrain premium growth.

There are already five ‘for profit’ private health insurance funds operating in Australia and there is no evidence that these ‘for profit’ insurers charge higher premiums than other health funds.

The government in the 2006-07 budget has already announced increased funding for medical research as a result of the sale of Medibank Private.

The bill facilitates the sale of Medibank Private, but provides flexibility to the Commonwealth regarding how that sale will be carried out.

Importantly, the bill permits Medibank Private to change from a company run on a ‘not for profit’ basis to being run for profit. As I mentioned earlier, there is no evidence that health insurers that are run for profit charge their customers higher premiums. To the contrary, commercial market pressures associated with being a for profit company provide strong mechanisms in restraining premium growth.

The bill also sets out a range of provisions relating to the conduct of the sale, including providing for exemptions from the Corporations Act 2001 and other legislation.

The bill also amends the National Health Act 1953 to clarify the circumstances in which a registered organisation run for profit can distribute profits or return capital, and to facilitate any restructuring of Medibank Private that may be necessary to ensure that the Commonwealth’s competition objectives of the sale are met. These amendments are consistent with the more wide ranging amendments being developed by the Australian Government with industry and preserve the oversight role of the Private Health Insurance Advisory Council.

Importantly, the bill does not affect the obligations of Medibank Private Limited to comply with the capital adequacy and solvency standards under the National Health Act 1953, or the other obligations Medibank Private has under that Act as a registered health benefits organisation.

In addition to other measures, the bill limits individual share ownership to 15 per cent of the company for five years and requires that Medibank Private remain based, incorporated and headquartered in Australia and that the majority of the directors be Australian citizens, also for a period of five years. The shareholder cap will provide the company with an extended period for consolidation where it can concentrate on internal reform, secure in the knowledge that it will not be subject to hostile takeover.  Further, the ‘Australianness’ provisions will provide stability for Medibank Private employees and contributors in the period following the privatisation, and would reduce the risk that market forces would lead to any precipitous structural change immediately following the sale.

I commend the bill to the House.

Debate (on motion by Mr Gavan O’Connor) adjourned.