Health fund merger talks spark unease
Sydney Morning HeraldBy Mark Metherell
Merger moves by two major health funds sparked concern from hospital and consumer groups yesterday about the impact of big business on Australia's health insurance industry.
The national consumer watchdog said it would seek an explanation from MBF and AXA - the second and third biggest funds in Australia - about any merger plans and their impact on fund competition.
This comes a day after the country's biggest health fund, Medibank Private, was reported to have sought Federal Government approval to lift its premiums by 13 per cent.
The latest developments are part of what industry analysts believe are the first shots in a health insurance contest between corporate heavyweights.
The Australian Consumers' Association's Nicola Ballenden said the speculation about a merger and Medibank's bid for big increases raised the prospect of health insurance developing into a bank-style market dominated by a handful of big players, with little real competition.
At present, there are 44 health funds, many of them a fraction the size of the big players, and most not-for-profit organisations.
It is believed only about a third of the funds have sought to lift their premiums in the bid now being considered by the Government.
Several applicants for rises are bigger funds - which challenges the argument that big fund efficiencies would deliver lower premiums.
The chief executive of a big hospital operator, Catholic Health Australia, Francis Sullivan, said the present policy on insurance inevitably would lead to a market-driven health system.
He said the "cherry-picking" of profitable, healthy patients and a lack of incentives for treatment of chronically ill patients by the private system were the result of a system based largely on price.
The creation of bigger health funds did not need to be all "gloom and doom" but did raise the question of whether market dominance by a few funds would lead to better outcomes for patients.
Late yesterday, AXA confirmed it had held talks with MBF after earlier refusing to confirm or deny reports of the merger.
A spokesman for the Federal Health Minister, Senator Kay Patterson, said neither the minister, nor her department, had been advised of merger talks, reported by one source to have been under way since late last year.
The Government did not have a set view on such a development and would deal with any matters on a case-by-case basis, the spokesman said.
The chairman of the Australian Competition and Consumer Commission, Professor Allan Fels, said a merged entity would have 27 per cent of the market, compared with Medibank's 30.7 per cent.
The top four firms in the industry would have close to 75 per cent of the market, and a merger in this setting required close examination.
The Opposition Leader, Simon Crean, said the "audacious" bid by Medibank Private, the largest fund, showed that the creation of big funds did not guarantee premiums would be kept down.
The Australian Medical Association president, Dr Kerryn Phelps, called for more transparency in the setting of premiums.
With families on tight budgets being lured into funds, it was only fair they knew the true financial state of the funds.
The Doctors Reform Society said if the private sector could not operate efficiently with the help of the $2 billion rebate, public hospitals should be allowed to make better use of the money.
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