Secret plan for health fund giant
By JOHN KERIN
05feb02
The Australian
TWO of Australia's health fund giants are involved in secret merger talks that promise the biggest shake-up in the industry since the birth of Medibank Private.
AXA Australia and MBF are understood to be talking about joining forces to form a single insurer to rival the industry giant, Medibank Private.
John Howard's office has been consulted about the merger. The Government has long believed the health insurance industry is overcrowded and high administrative costs are robbing members of value for money.
The Prime Minister yesterday weighed into a furore over planned health cover hikes, warning Medibank Private that given the government assistance the industry had received, its application for an average 13 per cent premium rise was excessive.
The AXA Australia-MBF merger would create a truly national insurer with 2.6 million members and 29 per cent of the health insurance market. Medibank Private, with 2.9 million members, holds 32 per cent of the market.
The merged fund would lead Medibank Private in Queensland and South Australia and strengthen its position in the largest markets -- NSW and Victoria.
Although both funds were tightlipped about a merger yesterday, industry sources confirmed preliminary talks had taken place and suggested AXA-MBF would give Medibank Private a run for its money in offering competitive premium rates.
A spokesman for MBF said last night the fund "did not want to comment on speculation" about a merger and a spokeswoman for AXA Australia had no comment.
AXA, which trades as HBA in Victoria and National Mutual in South Australia, said yesterday it had applied for an average 2 per cent rise for its almost 1 million members.
The increases, which can be knocked back by Health Minister Kay Patterson, come despite the Government's providing more than $2 billion a year in subsidies through its 30 per cent rebate and the funds recording a record $800 million profit in 2000-01.
Medibank Private has blamed a 60 per cent jump in claims and a downturn in returns from its US investments since the September 11 terrorist attacks for its planned premium increases.
Other funds are expected to follow suit, seeking rises between 5 and 10 per cent.
The funds believe that after exercising two years of restraint, including holding premiums down during Mr Howard's re-election year, now is the opportune time to apply for catch-up increases.
The influx of new members blew out the number of claims by almost 600,000 last year from 1.6 billion to 2.2 billion -- a 20 per cent increase.
Mr Howard said yesterday Medibank Private's rise of 13 per cent sounded "a bit rich".
"Given that some of the other funds are looking at much lower increases, I have no doubt the Health Minister ... will look very carefully and with a degree of scepticism about the largest private health fund wanting a 13 per cent increase," Mr Howard told the Nine Network.
He said the revival of private health was a two-way process requiring co-operation between government and the funds.
"I say to the private health funds, the Government has given you a lot of assistance, we have provided you via the 30 per cent tax rebate with a great deal of additional business," he said.
Australian Health Insurance Association executive director Russell Schneider defended premium rises, saying they were needed to ensure the viability of the funds.
"These rises have got to be kept in perspective. Most funds have not had a rise in the last two or three years with many freezing their premiums."