Eligible Medibank policyholders will receive a greater allocation of shares than other investors in the December float, if they pre-register to reserve a prospectus, the government has said.

The news is a blow for customers who believe they should receive free shares. They have argued that their premium contributions have helped to build Medibank to a point where it is being valued between $4.1 billion and $5.7 billion by the banks marketing the sale.

But the government said Medibank's policyholders were customers, as opposed to members, of the health fund.

Mr Savvides declined to comment on whether it was confusing the issue to give preferential treatment, even though customers of previously privatised businesses such as Telstra or Commonwealth Bank did not receive a benefit when those businesses were floated.

He said the decision was the responsibility of the government.

"I'm not sure what will happen in the end … but if it's heavily oversubscribed then there will be reductions in allocation and the good news will be that policy holders will be treated specially," he said.

"They'll get more because they are a customer of the company, and in that way they are being recognised and it's important to recognise the loyalty of our customers."