Mum-and-dad investors and superannuation funds will soon own the bulk of Australia's biggest private health insurer following the government's decision to dispose of Medibank Private by Christmas.

The decision to sell to the public rather than to a single buyer was announced in April, while the move to bring forward the $4 billion sale was announced on Friday.

The Abbott government will dispose of Medibank Private by Christmas. Credit:Glenn Hunt

The position of Medibank policyholders is uncertain. Hundreds of them have petitioned the government demanding free shares on the grounds that their contributions built the fund from its inception in 1976. The government says it will consider their position in coming weeks.

Announcing that he was bringing forward the sale deadline by six months, Finance Minister Mathias Cormann said Medibank Private was a commercial business for which there was ''no compelling reason'' for public ownership.