Medibank slapped with $5M fine for wrongly rejecting claims, misleading members

Jul 18, 2020
The insurance company wrongly rejected over 1,000 enquires or claims. Source: Getty.

The Federal Court has ordered Medibank’s private health insurance brand known as ahm Health Insurance to pay out $5 million in penalties for making false representations to members regarding their benefits.

According to the national consumer regulator, the Australian Competition and Consumer Commission (ACCC), Medibank breached Australian Consumer Law by falsely advising 849 members that they weren’t covered for certain procedures under their policies when in fact they were.

Hundreds of ahm members who held either a ‘lite’ or ‘boost’ policy had lodged claims or enquired about coverage on joint investigations or joint reconstruction procedures only to be told they wouldn’t be covered despite the policies actually entitling them to coverage. At least 1,396 enquires or claims were incorrectly rejected by the insurance company.

Medibank admitted to failing to include 186 joint investigations and reconstruction services in its claiming system for ‘lite’ policy holderes between February 2013 and July 2018, and 26 of the same services for the ‘boost’ system between February 2017 and July 2018. Then, despite Medibank identifying in June 2017 that some service codes weren’t being included, the company still rejected 370 enquiries or claims over another 13 months until the conduct ceased in July 2018.

The services involved in the breach included spinal surgery, pelvic surgery, hip surgery and knee reconstructions, as well as procedures on fibulas, elbows, heels, wrists, kneecaps and jaws.

ACCC chairman Rod Sims described the move as a “serious breach of consumer law” adding that the representations, which were made for more than five years in some cases, have seriously affected hundreds of customers who were denied the cover they were entitled to.

“Some Medibank policy holders incurred extra out of pocket expenses for major medical procedures, some delayed having these joint procedures and managed their pain, while others ‘upgraded’ their Medibank policies at an additional cost when they didn’t have to,” he said.

Medibank self-reported the conduct in August 2018 and since notified 130,000 current and former policy holders while inviting them to make a complaint or seek compensation. By the end of June 2020, Medibank had paid more than $775,000 in compensation to 175 affected members including those who had upgraded their policies under the false pretence that they weren’t initially covered.

“Businesses who self-report breaches of the Australian Consumer Law are not exempt from ACCC enforcement action, but the penalties ordered by the court will take their cooperation into account,” Sims said.

Medibank is yet to contact a further 670 policy holders who have not already taken up the offer for compensation and provide them with a further chance to claim. The company will also pay these members an additional $400 as a one-off payment.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

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