Medibank

Medibank Private Limited

Type	Public
Traded as	ASX: MPL
Industry	Private Health Insurance & Disease management
Founded	1975 as arm of the Health Insurance Commission
Headquarters	Melbourne, Australia
Key people	Craig Drummond (CEO and Managing Director - from 4 July 2016) David Koczkar (Acting CEO and Managing Director)
Products	private health insurance, travel insurance, life insurance, pet insurance, workplace health promotion, workplace health management, Health call centres
Revenue	A$6.37 billion (2014)[1]
Operating income	$197.4 million (2012)[1]
Net income	$126.6 million (2012)[1]
Number of employees	2,700
Subsidiaries	ahm (Australian Health Management)
Website	www.medibank.com.au www.medibankhealth.com.au www.ahm.com.au

Medibank Private Limited (ASX: MPL) is a national private health insurer based in Australia. It is Australia's largest health insurance provider with 3.8 million members, 29.1% of the market, under two brands. Previously an Australian government business enterprise, it was privatised in 2014 by the Abbott Government and now operates as a publicly listed company on the ASX.

History

The company began business as an Australian government-owned private health insurer, established by the Whitlam Government in 1975 through the Health Insurance Commission (now known as Medicare Australia).^[2] It is a leading Australian health insurance provider with 3.8 million members, providing cover under two brands (Medibank and ahm).

Medibank was set up to provide competition to private "for-profit" health funds. Although government owned, the fund has operated as a government business enterprise since 2009, operating as a fully commercialised business paying tax and dividends under the same regulatory regime as do all other registered private health funds. Highly regulated regarding the premiums it can set, the fund was designed to put pressure on other health funds to keep premiums at a reasonable level.^[3][4] In 2006, the Coalition Howard Government announced that Medibank would be sold in a public float if it won the 2007 election,^[5] however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership. Liberal leader Tony Abbott made the same pledge to privatise Medibank if it won the 2010 election but was again defeated by Labor. Privatisation was again Liberal party policy at the 2013 election, which the Coalition won. On 26 March 2014 Minister for Finance Mathias Cormann announced that Medibank would be sold through an initial public offering in the 2014-2015 financial year.^[6] 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.^[7][8]

After 14 years as CEO, George Savvides retired earlier then expected in late March 2016. Former NAB chief financial officer Craig Drummond was offered the role. Drummond commenced as chief executive officer in July 2016.

Corporate structures

'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.^[9] In May 2009 the Rudd Labor government announced that Medibank would become a 'for profit' business and would therefore in future pay tax on its earnings. The process of converting the status of the business was completed on 1 October 2009, following approval from the regulator, the Private Health Insurance Administration Council (PHIAC),^[10][11] an independent statutory authority that regulates the Australian private health insurance industry. Private health insurance policy is set down by the Federal Department of Health.

Privatisation proposals

In April 2006, the then Howard Liberal government announced its intention to privatise Medibank Private if re-elected at the 2007 election.^[12][13] Labor Party policy was for Medibank to remain as a government business enterprise (GBE), reporting to the Minister for Finance. Following the election, won by Labor, Medibank Managing Director George Savvides said he looked forward to working with the Rudd Labor government but for Medibank employees and members it would be "business as usual" as they will remain a GBE, "which is what we know, removing the ownership change agenda from our planning process".

Medibank Private IPO

In 2014, the Abbott Government prepared for a $4 billion proposal to privatise the entity.^[14] The Government argued that the sale would be positive by increasing funds that can be used for taxpayers, but some, including Ray Williams, the public servant who created Medibank Private in 1976, said benefits should flow directly to customers who had paid money to Medibank Private.^[15] Finance Minister Mathias Cormann stated the sale allows the government to be a regulator rather than a market participant as well in the private health insurance market.^[16]

With the Medibank Private IPO priced at $2.15, the government has exceeded the indicative range of $1.55 to $2.00 disclosed in the prospectus. However, in a nod to voters, it has sensibly ensured that retail punters only pay $2.00, at least locking in a minimum 7% gain for them in the short-term.^[17] The sale raised $5.7 billion for the government.^[18]

With a 29% share of the private health insurance market, Medibank possesses significant negotiating power with healthcare providers as well as economies of scale in claims and marketing. However, management has been in place for more than a decade so a striking turnaround in efficiency seems unlikely and there are other risks to consider such as regulatory change and the company’s equity-oriented investment portfolio^[19]

Services

Medibank acquired the Wollongong-based insurer ahm (Australian Health Management) in January 2009 and merged with the HSA Group in April 2009.^[10] Following these transactions, Medibank created the Health Solutions Division, which is focused on delivering occupational health services (such as employment medical examinations and injury treatment) and health coaching programs to help Australians manage health conditions (e.g. diabetes). Services are delivered under the Medibank Health Solutions brands.^[20]

In July 2010 Medibank acquired fellow health services provider, McKesson Asia-Pacific, absorbing it into Medibank Health Solutions. The move extended Medibank's health management capability and essentially completes Medibank’s transformation into a genuine health company that offers health insurance and 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.

In March 2010 Medibank Private 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.^[21] 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.^[22]

Industry structure and main competitors

Private health insurance in Australia is heavily regulated to protect consumers. Prudential supervision is undertaken by PHIAC to ensure the funds remain solvent.^[23] PHIAC 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.^[24]

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.^[25]

2016 Tax Return Controversy

In 2016 due to a system upgrade Medibank was unable to deliver the majority of their customers tax statements by the legal due date of 15 July 2016. This left millions of customers unable to do their tax returns.^[26]

Sponsorship and community

Sponsorship

Medibank is the naming-rights sponsor for the 5th year in a row of the annual Medibank Melbourne Marathon Festival in Victoria. it is also a partner of parkrun Australia, the Sydney Gay and Lesbian Mardi Gras, the Medibank Feel Good Program in Brisbane, the 2016 Basketball Victoria Medibank Classic and the 2017 Australian Open.

Until the end of 2016, Medibank had the naming rights to Medibank Private Stadium (formerly Leederville Oval), home of WAFL teams East Perth and Subiaco. From 2011–2015 it was naming rights sponsor of Medibank Icehouse, home of Australian Ice Hockey League teams Melbourne Mustangs and Melbourne Ice, and the Olympic Winter Institute of Australia. Medibank was also the naming rights sponsor of Medibank Wave Warriors from 2013–2016. Since 2014, Tour de France winner and champion cyclist Cadel Evans has been an ambassador for Medibank.

Community

Medibank invests in community programs that support the health of all Australians. This includes Growing Healthy Kids, which supports local programs that encourage healthy and active lifestyles in childhood.

It supports workplace giving and provides gift-matching to support a ‘culture of giving’, which contributes to the health and wellbeing of its people and the communities its supports.

Medibank Special Purpose Fund

Medibank previously operated a special purpose fund that gave grants for medical treatment that is not covered by traditional insurance policies for its members. Typically the grants were for rare, innovative clinical treatments that are not covered by private health insurance or Medicare. The grants did not cover members who were under-insured, or cosmetic procedure,or experimental treatments. The fund was open only to Medibank Private members. The fund is now closed.^[27]

Reputation

According to social media ranking website, ServiceRage.com, Medibank it ranked seventh out of nine Australian health insurance companies in the customer service area.^[28]

References

External links

Corporate websites

• Medibank - "for better health" Australia's largest health insurer
• Medibank Health Solutions "Tailored Health Care for Work, Government & You"
• ahm
• Travel Doctor
• Medibank Community Fund

Charities supported

• White Lion - Courage to Grow - empowering disconnected young people White Lion
• JDRF - Juvenile Diabetes Research Foundation Australia JDRF
• The Salvation Army in Australia Salvation Army Australia
• Ronald McDonald House Charities Ronald McDonald House Charities

Research papers and Safer Healthcare Advice

• Research Papers & Safer Healthcare Advice

S&P/ASX 50 companies of Australia   → S&P/ASX 200
AGL Energy Amcor AMP APA Asciano Aurizon ANZ ASX BHP Billiton Brambles Caltex Australia Coca-Cola Amatil Commonwealth Bank Computershare Crown CSL Dexus Goodman GPT Incitec Pivot IAG James Hardie Lend Lease Macquarie Medibank Mirvac National Australia Bank Newcrest Mining Oil Search Orica Origin Energy QBE Insurance Ramsay Health Care Rio Tinto Santos Scentre Seek Sonic Healthcare South32 Stockland Suncorp Sydney Airport Holdings Telstra Transurban Vicinity Wesfarmers Westfield Westpac Woodside Petroleum Woolworths