ACCC alleges Medibank misrepresented insurance coverage

ACCC alleges Medibank misrepresented insurance coverage

Australia's consumer rights watchdog has alleged Medibank Private's incorrect communication with members led some to "needlessly" upgrade insurance policies to gain benefits that were already covered under their existing plans. 

The Australian Competition and Consumer Commission (ACCC) has instituted proceedings in the Federal Court against the company, trading as 'ahm Health Insurance', alleging it breached Australian Consumer Law by making false representations about benefits.

The ACCC alleges Medibank falsely told members on 'lite' or 'boost' policies they were not entitled to cover for joint investigations or reconstruction procedures, even though they actually were.

"We will allege that Medibank incorrectly rejected claims or eligibility enquiries from over 800 members for benefits that they were entitled to and were paying for," says ACCC chair Rod Sims.

"As part of our case, we estimate about 60 members needlessly upgraded their policies so they could access the joint investigation and reconstruction procedures they were already entitled to under their existing, cheaper insurance policies.

Sims says in some cases it is alleged that members who upgraded their policies were also required to serve a further waiting period to access these procedures.

"Medibank's alleged misrepresentations had serious consequences for members requiring procedures including spinal surgery, pelvic surgery, hip surgery and knee reconstructions, which often cost thousands of dollars," he says.

"Some members were forced to delay surgery due to high out-of-pocket costs for these procedures and to seek alternative remedies to manage pain, when they were in fact entitled to insurance cover."

The allegations cover the periods of February 2013 to July 2018 for members with ahm 'lite' policies, and February 2017 to July 2018 for ahm 'boost' policies.

Medibank self-reported this conduct to the ACCC and has begun compensating affected members. 

Those who believe they have been denied a benefit should contact ahm directly or complete a compensation form on the ahm website.

The ACCC also alleges that Medibank breached the Australian Consumer Law by failing to supply insurance cover for joint investigations and reconstructions, despite accepting payment from members for that cover.

The ACCC is seeking penalties, consumer redress, declarations, injunctions, publication orders, the implementation of a compliance program and costs.

Medibank's response

The health insurer has responded to the ACCC proceedings explaining how the issue was identified as a result of customer complaints, which prompted an internal investigation and the establishment of a compensation scheme.

Medibank claims in 2017 it discovered not all Medical Benefits Scheme (MBS) item codes applicable to the joint investigations and reconstruction procedures category were entered into ahm's claims assessment system.

Around 130,000 customers insured by boost and lite products were contacted in 2018 to "ensure that anyone affected by the error was compensated", with the insurer noting $745,691 has been paid to around 175 customers.

The company voluntarily notified ACCC and emphasises it has been working cooperatively with the regulator throughout its investigation.

ahm senior executive Jan O'Keefe says the company apologises unreservedly to customers impacted by the error.

"We have already notified all customers who are or were insured by the ahm Boost and Lite products since inception of the products. We did that to ensure that any customers affected by this error were compensated," says O'Keefe.

"While we believed the issue impacted a small number of customers it was the right thing to do to write to all customers who held a Boost and Lite product, to give all customers the opportunity to check whether they were eligible for compensation.

"In conducting the investigation, we also reviewed ahm's process for developing and managing products, to help ensure that this does not happen again."

Since 2013 ahm has received and resolved around 10 Private Health Insurance Ombudsman (PHIO) complaints and an estimated 43 customer complaints across the lite and boost product range that "may have been related to joint investigations and reconstruction procedures".

"In 2017, we established a process which allowed us to track trends across complaints and this provided us with the capability to identify this issue upon which we undertook an investigation to understand its scale," says O'Keefe.

"We then decided to proactively write to our customers, establish a program of compensation and selfreport to the regulator.

"We believe the approach we have taken to be transparent with all past and current ahm Lite and Boost customers about the issue, the way we have implemented a compensation program and how we have engaged proactively with the ACCC, reflects our commitment to do the right thing."

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