The Abbott government has confirmed it will push ahead with the sale of Medibank Private through a sharemarket float next financial year, rejecting claims it could put upward pressure on health insurance premiums.

The finance minister, Mathias Cormann, said the government would prepare for an initial public offering of Australia's largest health insurer in 2014-15, subject to market conditions.

Cormann said the Medibank Private sale – which is in line with long-term Coalition policy – would not require the passage of new legislation through parliament.

He declined to comment on past speculation that the privatisation could be worth about $4bn, but said the government would time the sale to "maximise net proceeds".

Labor immediately reaffirmed its long-standing opposition to the sale and called on the government to explicitly guarantee premiums would not rise.

In October, the government launched a scoping study to provide advice on the planned sale.

On Wednesday, Cormann said the scoping study had "reaffirmed our long-held view that there is no compelling reason for the government to own Medibank Private".

He sought to head off concerns that the privatisation could add upward pressure to health insurance premiums across the sector.

"The scoping study found no evidence that premiums would increase as a result of the sale of Medibank Private," Cormann said.

"As it does now, Medibank Private will need to continue to compete against other funds for policyholders and will need to continue to comply with relevant regulatory requirements around changes in premiums.

"The sale of Medibank Private will remove the inherent conflict currently in place where the government is both the market regulator and the owner of a large participant in the market."

The Australian Medical Association president, Steve Hambleton, said he had previously asked the government to use the scoping study to examine the possible impact on health premiums, because commonwealth ownership might have put downward pressure on premiums.

Hambleton said it was "somewhat reassuring" to hear Cormann's comments about the study finding no evidence premiums would increase as a result of the sale.

"But I guess we won't know about the impact on services and benefits for members until after the sale," Hambleton told Guardian Australia.

Many of the details of the sale remain unknown. Cormann said government would prepare for the initial public offering by appointing joint lead managers and other appointments. He expected that retail and institutional investors would be interested in the sale.

Cormann said the government did not need new legislation to achieve the sale as it would move ahead on the basis of the Medibank Private Sale Act, passed by the Howard government in 2006.

The legislation sets a 15% cap on ownership of Medibank Private by a single entity. Such ownership restrictions are lifted five years after a sale, according to the existing act.

Labor's health spokeswoman, Catherine King, said she believed a government-owned health insurer served as a "moderating influence" in the market. Medibank had "some of the best fees", she said.

"Labor has long held the view that Medibank Private should remain in public hands," she said.

Labor's finance spokesman, Tony Burke, said Medibank delivered a dividend of between $350m and $500m per year. He said budget rules meant the earnings from the sale would not affect the deficit position but the loss of the dividends would be reflected in the deficit.

"Therefore the impact on the deficit from today's decision is quite straightforward. The government in one move adds in the order of about half a billion dollars to Australia's deficit each year,” he said.

Burke said the Howard government did not complete a sale of Medibank Private despite passing legislation in 2006 allowing it.

The union representing Medibank employees argued the decision would provide the government with only short term gain as a result of the loss of "generous dividends".

The Community and Public Sector Union's national secretary, Nadine Flood, warned the sale would lead to job losses and lead to ordinary Australians paying more for health insurance.

"This is a sad day for the thousands of hard-working staff who have made Medibank Private such a success over many, many years," she said.

"The only winners will be the investment bankers and spin doctors seeking fat fees to handle the float and other health insurers who will welcome less competition," she said in a statement.

Medibank said it looked forward to working with the government and its advisers on the sale process.

The chair, Elizabeth Alexander, said customers should be assured that Medibank remained "focused on delivering excellent value and service".

Cormann also announced that the government would appoint three new board members to help with the preparation for sale: David Fagan, a banking and major projects lawyer with Clayton Utz; Linda Nicholls, a director of Fairfax Media and Sigma Pharmaceutical Group; and Christine O’Reilly, a director of companies including CSL and Transurban.

Cormann thanked retiring board members Leanne Rowe and Steve Vamos "for their outstanding contribution to the Medibank Private board over a number of years".

The Greens' health spokesman, Richard Di Natale, criticised the sale decision but said all proceeds should be reinvested into health care.

"The sale of Medicare Private simply to deal with an invented budget emergency is lazy and short sighted," Di Natale said.