Medibank is facing charges it deliberately kept quiet about cuts in members’ hospital benefits
Medibank Private is facing allegations that it deliberately kept quiet about cuts in members’ hospital benefits to avoid negative publicity before its $5.7 billion stock market float in 2014.
The Australian Competition and Consumer Commission has filed charges in the Federal Court accusing the nation’s biggest health insurer of misleading and unconscionable conduct over its failure to disclose its move to limit benefits for in-hospital pathology and radiology.
The ACCC alleges Medibank adopted a calculated strategy of keeping communications about the matter “contained and reactive”.
The company knew or expected that many members incorrectly thought all of their in-hospital medical expenses were covered, the ACCC said in a statement after filing the charges on 16 June.
The company calculated there was a risk it would lose customers and suffer damage to its brand ahead of its privatisation if the change in benefits was disclosed, it said.
“Medibank estimated the change would lead to it making substantial financial gains, including from not paying the gaps, and from not paying the medical claims of members who left Medibank after becoming aware of the change,” it said.
“The members most likely to become aware of the change were members who claimed more frequently, some of whom were suffering from chronic conditions. Most of these members were then confronted with out-of-pocket expenses when in hospital receiving treatment.”
The alleged conduct affected most Medibank hospital policies, and those of its subsidiary AHM, in place since January 2012, the ACCC said.
After Medibank scrapped agreements with pathology and radiology providers in September 2014, policyholders were no longer fully covered for gap fees on those services, it said.
A few months later, the public offering of Medibank shares raised $5.7 billion for the government.
“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 a time when consumers may be vulnerable,” ACCC chairman Rod Sims said.
The watchdog investigated Medibank after a deluge of complaints by disgruntled customers.
“People found themselves billed hundreds of dollars in out-of-pocket costs they were not expecting,” Consumers Health Forum chief executive Leanne Wells said.
Medibank issued a statement rejecting the ACCC’s claims.
“Medibank takes its obligations under the Australian Consumer Law seriously, and has appropriate processes in place to ensure compliance,” it said.
