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17 Jun 2016

The consumer watchdog is taking the nation’s largest health insurer to court alleging it engaged in misleading and unconscionable conduct after it reduced benefits without informing policyholders.

In damning accusations that reflect widespread public discontent over the conduct of private health funds, the Australian Competition and Consumer Commission has launched legal action against Medibank Private claiming it deliberately withheld information about a cut in benefits for in-hospital radiology and pathology services to make money and avoid hurting its image ahead of its public float.

"We think these are very serious allegations, and we think the behaviour we're alleging should change right across the industry," ACCC Chairman Rod Sims told The Australian.

In a strongly-worded statement, the ACCC claimed Medibank made a calculated decision to keep communications about the change “contained and reactive” for fear that if it was disclosed members might leave the fund, and the bad publicity could damage its reputation and “have a negative impact on its planned initial public offering of securities”.

The issue arose when, in September 2014, Medibank terminated and phased out agreements with pathology and radiology providers to pay the gap for in-hospital services. As a result, the ACCC said, policyholders were left with average out-of-pocket expenses of $151 for pathology services, and $83 for radiology services.

The ACCC alleges Medibank failed to give members with advance notice of the changes despite previously committing to do so, and that representations it made that members would not face out-of-pocket expenses for in-hospital pathology and pathology services were, from 1 September 2014, false and misleading.

“Consumers are entitled to expect that they will be informed in advance of important changes to their private health insurance cover, as these changes can have significant financial consequences at a time when consumers may be vulnerable,” Mr Sims said. “Private health insurers must ensure their disclosure practices comply with the Australian Consumer Law.”

Medibank has rejected the ACCC’s allegations.

“Medibank take sits obligations under the Australian Consumer Law seriously, and has appropriate processes in place to ensure compliance,” a spokesman for the health fund said. “We have been working cooperatively with the ACCC throughout its investigation.”

AMA President Dr Michael Gannon welcomed the ACCC’s action.

Dr Gannon said the AMA has long been highly critical of the actions of insurers making changes to their health cover without informing policy holders, and it was pleasing to see that at least one was now being held to account.

“It has become a distressingly common experience for patients to think they are covered for the cost of medical treatment, only to find that they are lumbered with unexpected out-of-pocket costs,” Dr Gannon said.

“It is completely unacceptable for insurers to make changes to the cover they provide without informing policyholders, and it is very important that this type of behaviour is now being called out.”

The ACCC’s action follows the release earlier this year of the AMA Private Health Insurance Report Card, which showed that many policies offered by health insurers were no better than junk, while others did not provide the cover expected.

The AMA’s analysis of the 40,000 policies offered by the nation’s 33 private health funds has found that Medibank Private, NIB, HCF, HBF, which together account for more than 55 per cent of the health insurance market, are marketing products that, because of multiple exclusions, provide barely more cover than Medicare or, in many instances, provide no additional entitlement at all.

The ACCC last year launched a report highly critical of the quality and accuracy of information provided by the health funds, which the watchdog said served to confuse consumers about what they were covered for and hampered their ability to make informed choices.

Health Minister Sussan Ley has commissioned a review of the private health insurance industry amid widespread discontent about rising premiums and shrinking cover, and the Coalition has promised that if it is re-elected it will institute a rating system for health cover and “weed out” junk policies by mandating a minimum level of cover.

Dr Gannon said it was time insurers were held accountable for their actions, which often caused great financial and emotional distress for patients caught unaware by surprise out-of-pocket expenses.

“Policyholders need to know exactly what they are covered for and are entitled to, rather than being hit with shock bills when they are ill or at their most vulnerable,” he said.

The AMA Private Health Insurance Report Card 2016 is at

Adrian Rollins


Published: 17 Jun 2016