Medibank gets green light for premium hike as government mulls sale Medibank has been given the go-ahead to lift its premiums by 6.5 per cent. Slated for sale by the Coalition government, Australia's largest health insurance provider Medibank Private will lift its premiums by 6.5 per cent in 2014. In November, Finance Minister Mathias Cormann appointed several advisors, including Ernst and Young, to compile a scoping study to provide the government with recommendations over all aspects of the proposed sale of Medibank. The study will be provided to the government by the end of February to enable consideration of a sale in the 2015 financial year budget. Opponents of privatisation claim that the government selling Medibank will increase premiums, while supporters argue that the insurer has been run as a commercial business for some time. In 2009, the Rudd government turned Medibank into a for-profit company, which pays dividends to the government. On Monday, Federal Health Minister Peter Dutton announced the approval of across the board private health insurance premiums. All 34 health insurers had applied to increase their fees, said Mr Dutton. Across the industry, rates will be raised by an average of 6.2 per cent, with the changes taking effect from April 1, 2014. Inflation rate currently sits at 2.2 per cent. Australia's only listed private health insurer, NIB, will lift premiums across all products by an average of 7.99 per cent. The increase is the largest across the private healthcare sector. The increase is necessary to keep pace with the rising cost of providing health care services as well as NIB's contribution to the risk equalisation scheme, said NIB chief executive Mark Fitzgibbon. ""In financial year 2013, NIB paid out more than $1 billion in benefits to customers, including risk equalisation. That's an increase of more than 10 per cent on the previous year," he said. The risk equalisation scheme forces health insurers to contribute to a pool on money to help share the burden of more expensive customers. The scheme is designed to stop providers from cherry-picking healthy customers and denying age groups that generally require more care. Nib's customer profile includes more young customers, making the risk equalisation scheme a cost, rather than a benefit. "An easier way to look at it is that our forecast risk equalisation expense has contributed more than 1.5 per cent to our 7.99 per cent price increase," said Mr Fitzgibbon. Shares in NIB reacted positively to the news a premium increase, jumping as much as 2.5 per cent. They are currently trading 1.2 per cent higher at $2.47, just 13 cents short of their record high of $2.60, reached in November this year.