The Abbott Government is facing a backlash from members of Medibank Private who are demanding a right to free shares under the planned sale of the health fund.

Policyholders this week launched a public campaign against the government’s proposal to float the insurer without compensating members for their contributions to the business since it was launched in 1976.

A petition demanding that the government issue up to $30,000 worth of free shares to members has been posted on the political campaigning website www.change.org.

More than 500 people have signed the petition since it was first posted to the site on April 5.

The petitioners are calling on the government to acknowledge their ownership claims to assets of the business:

“The government through Medibank Private have always called policy holders members, and the Medibank sale must recognise members per previous demutualisations of health funds – NIB, NRMA Insurance,” assert the petitioners on the site.

“Mr Abbott you will not get away with short changing Medibank Private members of up to $30,000 in possible benefits from their loyal membership to Medibank Private.”

A screen-shot of the petition on the Change.org website.

Independent South Australian senator Nick Xenophon last night said obstacles to the float might be more significant than the government realised.

“This is still early days but it could be that the legal hurdles end up being much bigger than the political ones,” he told The New Daily. “I have no doubt that the government’s lawyers will be sharply focussing on this because it’s a potential legal minefield.”

The petitioners argue that efforts by the Howard and Rudd Governments to weaken policyholders’ ownership rights through legislative reforms since 1997 were “simply fraudulent”.

Nick Xenophon.

“For Medibank Private and the govt to now claim we are simply customers and not beneficiary(ies) to any sale like other mutual society organisations is simply fraudulent,” the petitioners state on the website.

An investigation this month by The New Daily into the ownership controversy unearthed 1981 cabinet documents showing that the Fraser government ditched a plan to privatise Medibank Private after written advice from the Attorney General’s Department showed the Commonwealth was not the owner of the health fund’s assets.

The high level advice was recorded in a confidential memorandum given to senior Fraser government ministers on 19 March 1981.

While the 1981 legal advice appears to support policyholders’ renewed claims to the fund’s assets, it does not buttress the technical argument made in the petition that Medibank Private was a mutual before 1997.

The anger of policyholders towards the Commonwealth’s claim to full ownership of the health fund can be gauged from the following comments attached to the petition:

“I have been a financial member of Medibank Private for over 15 years and want my share please.”

“It’s a no brainer that current members be looked after in the sale of Medibank Private. This selling of assets in Australia by the Government is atrocious. Members need to be recognised Abbott.”

More comments of disgruntled Medibank Private members can be read at the following link to the petition.

George Lekakis has been a finance journalist for 20 years, working at the Herald-Sun, the Australian Financial Review and Alan Kohler’s Eureka Report. He currently teaches investigative and business journalism at Monash University.