Senator FIFIELD (Victoria) (1.03 p.m.)-I rise to contribute to the debate on the Medibank Private Sale Bill 2006. This bill will implement the government’s policy in relation to the sale of Medibank Private. It will establish a framework to give the government the flexibility it needs to sell Medibank in the way best suited to the achievement of its objectives. These objectives include: to contribute to an efficient, competitive and viable private health insurance industry; to maintain service and quality levels for Medibank Private contributors, including in rural and regional Australia; to ensure the sale process treats Medibank Private Ltd employees in a fair manner, including through the preservation of accrued entitlements; to minimise post-sale residual risk and liabilities to the Commonwealth; and to maximise the net sale proceeds from the sale.
The Senate Standing Committee on Finance and Public Administration-which I chair-conducted an inquiry into the bill, the report of which was tabled in the Senate on Monday. The committee received 13 submissions from members of the public and organisations and heard from 12 witnesses at a public hearing. The submissions and evidence have provided valuable contributions to the committee’s consideration of the bill, and I would like to put on record the committee’s thanks to all those who took the time and effort to make submissions.
The committee’s report addresses concerns relating to Medibank’s ownership and the government’s right to sell it; the impact of the sale on Medibank’s performance and that of the private health insurance market; the protection of members and employees; and the provisions which restrict ownership and control of Medibank Private for five years from the date of sale. The government’s independent legal advice is unequivocal on the question of ownership. The Commonwealth owns Medibank Private and, with the passing of this bill, will be free to sell its shares. It is also clear that legal and beneficial ownership of Medibank Private vests in the Commonwealth, which removes any right by contributors to claim against Medibank’s assets.
A number of witnesses were concerned that privatisation would lessen Medibank’s ability to continue providing competition in the health insurance market. The fact is that Medibank Private is already a market pacesetter in efficiency and innovation. It has successfully negotiated with health providers on the basis of its bulk buying power. This has brought with it gains for members, through minimised premiums, and has served as a model for other private health insurers in the way they approach their businesses.
From the evidence received by the committee, Medibank Private is also highly competitive in terms of the ratio of revenue it spends on management, its member retention and its very high market share. There is no reason that this should not continue under private ownership. Indeed, it is difficult to imagine a circumstance where future owners would risk their investment by running the company less competitively than its current managers. Medibank Private, regardless of ownership, will continue to be an important player in the health insurance market. Consumers will continue to benefit from strong competition, and the sale will help to ensure that any premium increases are minimised.
Some are concerned that the quality of insurance sold by Medibank would somehow diminish after the company’s sale. The sale will not result in any reduction in the surety of the insurance product sold by Medibank Private. The capital adequacy and solvency provisions, which all private health insurers must meet, remain untouched by the bill. Medibank Private will be no less safe and solid than any of its competitors.
The Community and Public Sector Union and the Save Medibank Alliance expressed concern that the sale of Medibank Private would lead to reduced security for Medibank employees. The committee appreciates that the prospect of changed ownership may be unsettling for staff but believes that the union’s concerns are unfounded. After all, the bill does not dilute any of the entitlements and protections currently afforded Medibank’s employees. Medibank Private Ltd is a public company, limited by shares, and existing employees work for this entity. The mere fact of Commonwealth ownership makes no difference to the legal position of its employees, nor would employee status be affected by the transition of ownership to private hands.
The bill imposes restrictions to ensure the company must remain incorporated and managed in Australia and must not be broken up. No one shareholder may hold more than 15 per cent of the company, and the majority of board members must be Australian citizens. The appeal of these provisions lies in their safeguarding against radical changes to the business in the short and medium term. The sunset clause on these restrictions achieves the best of both worlds. Employees are protected during the transition period, while the company’s new owners will be free to run their business unfettered in the longer term. The potential benefits of sale are readily apparent to the committee majority, as are the important safeguards which have been put in place to ensure that the best interests of all parties are observed and taken into account.
These include powers residing with the Private Health Insurance Ombudsman, the Private Health Insurance Administration Council, the Australian Competition and Consumer Commission, the Minister for Health and Ageing and the Department of Health and Ageing. Representatives of each of these entities made submissions to the committee, signalling their readiness to uphold the oversight responsibilities for which they are each responsible. The committee was convinced that the sale of Medibank Private is in the interests of health consumers and that the interests of health consumers will still remain the paramount concern of Medibank Private.
I would like to take this opportunity to thank committee members for their cooperation. I also thank the secretariat, particularly Alistair Sands, Tim Watling and Monika Sheppard, for their assistance with the inquiry. I commend the report of the committee to the Senate and I commend the bill to the Senate.