Demutualisation of Private Health Insurance

[TheRage]

I am just interested in peoples opinions on this concept. I know this is not on the table for a while but I like to plan ahead. I have worked in the past in the medical field for eight years so I have a very good understanding of who uses private health insurance and the monies made and spent in the area. I also know what cash generating machines these funds are despite not having shareholders to report to. Personally I am looking forward to the move from an investing perspective but am a liittle concerned from a policy holders point of view. How will the government's 30% rebate be affected by the move. If premium's are increased and services reduced to ultimately increase profit's what level of people will stop using private health insurance. How will the public health system cope?

On a final point I have read that NIB are considering floating toward the end of the year before the government gets it go at it. Is this possible or even likely.

 

[Julia]

Rage,

I share your concerns from a policyholder point of view. I've never had a claim and am getting very tired of the twice yearly premium increases.

 

[TheRage]

Thank you for your reply Julia. I personallly wonder how many people will continue with thus type of insurance if prices keep appreaciating above inflation. One thing I have noticed is a shift by these entities away from paying for certain medical procedures which I thought were absolute gauranteed. For instance my fund is no longer covering some elective surgery.

 

[theasxgorilla]

I'm with NIB...I hope they give me shares!

The thing I like about NIB is that it has a community 'credit union' feel to it, yet they're big enough to punch above their weight and offer coverage equivalent to the main players.

I can't see a single benefit to floating...what business do health insurance funds have on the share market??? Someone is going to make a lot of money very quickly from the float...some baby boomers planning for retirement no doubt...sorry Julia, not having another BB dig...but lets face it, in the short term who will benefit most from this arrangement?

The Rage, if what you say about health insurance funds making a lot of money is correct, it seems to me like this is just a way to get that money into a place where it can easy move from weak hands to strong...the share market. The smart/wise thing to do would be to keep fattening the fund and protect it...strategically speaking health costs are going to increase as time goes on and the population ages...or so they say.

 

[greggy]

I am just interested in peoples opinions on this concept. I know this is not on the table for a while but I like to plan ahead. I have worked in the past in the medical field for eight years so I have a very good understanding of who uses private health insurance and the monies made and spent in the area. I also know what cash generating machines these funds are despite not having shareholders to report to. Personally I am looking forward to the move from an investing perspective but am a liittle concerned from a policy holders point of view. How will the government's 30% rebate be affected by the move. If premium's are increased and services reduced to ultimately increase profit's what level of people will stop using private health insurance. How will the public health system cope.

On a final point I have read that NIB are considering floating toward the end of the year before the government gets it go at it. Is this possible or even likely.

Private heath insurance is fast becoming too expensive. In my own family situation it has been a necessary item. My daughter was very sick a year ago and spent a long time in a private hospital where she received excellent care. We go without other things in order to pay for this. Yet I can understand the frustration for people like Julia who barely ever claim. If too many people drop out of private health insurance the public health system will turn into a state of chaos. The public health system is under enough pressure already.

 

[Julia]

I have seriously considered dropping out on several occasions (usually when I get the bill to pay the next premium), and being quite prepared to just pay for any treatment I might need in the future, but what stops me is the mental picture as follows:

I'm injured in an accident, taken to the local (regional and not very good) hospital, where the surgery required will be carried out by a junior doctor, first year out and pretty much zilch experience. Obviously I don't want this so (with insurance coverage) I wave my Medibank Private card and insist on being taken to a private hospital with surgeon of my choice. OK, they do it no question. However, if I don't have the card to wave, and say, now listen fellas, I can pay for whatever it costs, just phone DrXYZ to say he has a new patient and get me to the private hospital. Are they going to be as willing to do it pronto, or at all?

Re Medibank Private being sold and traded on the ASX, is it possible it could work in members' favour in that there would be more of an incentive to become competitive? Dunno about this, but would be interested to have others' thoughts.

Gorilla, didn't think you were having a dig. What you said was simply realistic.

 

[greggy]

I have seriously considered dropping out on several occasions (usually when I get the bill to pay the next premium), and being quite prepared to just pay for any treatment I might need in the future, but what stops me is the mental picture as follows:

I'm injured in an accident, taken to the local (regional and not very good) hospital, where the surgery required will be carried out by a junior doctor, first year out and pretty much zilch experience. Obviously I don't want this so (with insurance coverage) I wave my Medibank Private card and insist on being taken to a private hospital with surgeon of my choice. OK, they do it no question. However, if I don't have the card to wave, and say, now listen fellas, I can pay for whatever it costs, just phone DrXYZ to say he has a new patient and get me to the private hospital. Are they going to be as willing to do it pronto, or at all?

Re Medibank Private being sold and traded on the ASX, is it possible it could work in members' favour in that there would be more of an incentive to become competitive? Dunno about this, but would be interested to have others' thoughts.

Gorilla, didn't think you were having a dig. What you said was simply realistic.

Hi Julia,

What you say about junior doctors is spot on. I once took my daughter to the local public hospital and was sent home with a diagnosis of gastro. The next day my daughter was still complaining of a stomach ache so we took her to a private hospital where her appendix was taken out the same day. They told us there that if we had not taken her that it was going to burst soon.

 

[doctorj]

Do demutualising funds present a profit opportunity for people nimble enough to recognise which funds are more likely to demutualise?

My understanding is that when a mutual fund goes through this process, equity is divided up amongst its members. Has this already affected who people hold policies with? Which one will go first?

 

[nioka]

I have seriously considered dropping out on several occasions (usually when I get the bill to pay the next premium), and being quite prepared to just pay for any treatment I might need in the future, but what stops me is the mental picture as follows:

I'm injured in an accident, taken to the local (regional and not very good) hospital, where the surgery required will be carried out by a junior doctor, first year out and pretty much zilch experience. Obviously I don't want this so (with insurance coverage) I wave my Medibank Private card and insist on being taken to a private hospital with surgeon of my choice. OK, they do it no question. However, if I don't have the card to wave, and say, now listen fellas, I can pay for whatever it costs, just phone DrXYZ to say he has a new patient and get me to the private hospital. Are they going to be as willing to do it pronto, or at all?

Re Medibank Private being sold and traded on the ASX, is it possible it could work in members' favour in that there would be more of an incentive to become competitive? Dunno about this, but would be interested to have others' thoughts.

It doesn't always work out that way.I have been in three accidents and my wife one emergency and have ended up in the public system and unable to take advantage of top cover. However I have been able to get immediate treatment for surgery when some of my friends have waited years in the queue.
I'm in medibank private ( super extras). Thinking of changing if it is privatised and members get no benefit such as shares. I think the govt will cash it in soon. They have nothing more left to sell, apart from air and water.

 

[Julia]

It doesn't always work out that way.I have been in three accidents and my wife one emergency and have ended up in the public system and unable to take advantage of top cover. However I have been able to get immediate treatment for surgery when some of my friends have waited years in the queue.
I'm in medibank private ( super extras). Thinking of changing if it is privatised and members get no benefit such as shares. I think the govt will cash it in soon. They have nothing more left to sell, apart from air and water.

Why did that happen, Nioka? i.e. why were you unable to take advantage of your cover?

 

[TheRage]

Do demutualising funds present a profit opportunity for people nimble enough to recognise which funds are more likely to demutualise?

My understanding is that when a mutual fund goes through this process, equity is divided up amongst its members. Has this already affected who people hold policies with? Which one will go first?

This has certainly been on the back of my mind. I have almost changed over to NIB on speculation that it will be the first. There is some suggestion that they will give holders 1500 shares each at the outset. Policy rotation then dump after issue could be a good way for a quick profit. But that will depend on markets reaction to them.

 

[doctorj]

This has certainly been on the back of my mind. I have almost changed over to NIB on speculation that it will be the first. There is some suggestion that they will give holders 1500 shares each at the outset. Policy rotation then dump after issue could be a good way for a quick profit. But that will depend on markets reaction to them.

Dump the policy straight after and move to the next one and get the remainder of the policy refunded.

 

[nioka]

Why did that happen, Nioka? i.e. why were you unable to take advantage of your cover?

Firstly there were no private beds available in the public hospital. They do have some but they were taken (allocated on the basis of need). There was not a bed available at short notice at the close private ones.
Secondly In one case. Because of suspected spinal injury ( a fall from a horse in the bush) and being in the rescue helicopter and not "with it" the ambulance decided to take me to the place with the best facilities which was the public hospital.
I have found in an emergency you get good treatment without health cover but without the private extras. I have seen though that if it is not an emergency you need health cover.

 

[nioka]

This has certainly been on the back of my mind. I have almost changed over to NIB on speculation that it will be the first. There is some suggestion that they will give holders 1500 shares each at the outset. Policy rotation then dump after issue could be a good way for a quick profit. But that will depend on markets reaction to them.

Often the amount of shares given in these cases depends on the time in the fund. If you change now there may be little benefit. eg. NRMA. I was a gold member of 40 odd years. I got a lot more shares than my daughter. (I also cashed out a policy, on maturity, with AMP a year before the privatisation and missed out on a very nice handout. My younger brother "got in" by a few months and did not miss out.)
If I thought this would not apply I would switch from Medibank to another fund as I think the greedy govt will claim the medibank value as theirs if there is a privatisation. I'm staying there hoping that the fund will see a mass exit of members if it happened that way and they will stand up to the govt for members equity.

 

[Kauri]

Often the amount of shares given in these cases depends on the time in the fund. If you change now there may be little benefit. eg. NRMA. I was a gold member of 40 odd years. I got a lot more shares than my daughter. (I also cashed out a policy, on maturity, with AMP a year before the privatisation and missed out on a very nice handout. My younger brother "got in" by a few months and did not miss out.)
If I thought this would not apply I would switch from Medibank to another fund as I think the greedy govt will claim the medibank value as theirs if there is a privatisation. I'm staying there hoping that the fund will see a mass exit of members if it happened that way and they will stand up to the govt for members equity.

Have to agree with that, after all how many TLS customers got free shares.

 

[nioka]

Have to agree with that, after all how many TLS customers got free shares.

I'd suggest Medibank is a different case to Telstra. Medibank has built up a large bank of funds from member's subs. It is the value of these funds that will form the basis of value in any demutualisation. If the govt claims the funds then there is little value.

 

[robert toms]

I believe that NIB, when they announced a proposed demutualisation later in the year, announced a cut off date at the same time. It was was on the same day as they announced their intentions to demutualise. People that were in their fund on that date will receive shares on a pro rata basis i.e., on the amount of time they have been in the fund and how much that they have conributed to NIB.
A light or non-user of benefits will benefit in the share handout more than a person with the same length of membership...but that has claimed a higher value of benefits from the fund.
I took NIB's announcement to mean that there was not a straight forward formula on how they would be allocating shares.