Medibank slapped with $5m fine for misleading customers

Major health insurer Medibank Private has been slapped with a multimillion-dollar fine for misleading customers.

Major health insurance provider Medibank Private has been slapped with a multimillion-dollar fine for making misleading claims about benefits cover to members.

The country’s largest private health insurer has been ordered by the Federal Court to pay $5 million in penalties for making false representations to members about the benefits offered to them through their respective policies.

Medibank’s breaches of Australian consumer law were committed through the group’s subsidiary ahm Health Insurance, which rejected claims for critical spinal, pelvic and hip surgeries.

The Australian Competition and Consumer Commission (ACCC) identified 849 ahm members were falsely advised about their policy cover when lodging claims or inquiring about their coverage.

It also found 1396 inquiries or claims were incorrectly rejected by the group.

Medibank Private CEO Craig Drummond. Picture: Aaron Francis/The Australian

Medibank initially admitted the breach occurred because it failed to investigate services within its ahm “lite” and “boost” policies between February 2013 and July 2018.

The health insurer had identified the service code issue in June 2017 but continued to reject more than 370 claims over the next 13-months.

ACCC chair Rod Sims said Medibank’s false statements caused policy holders to incur extra out-of-pocket expenses for procedures that should have been covered under a health insurance policy.

“These representations were made for more than five years in many cases and affected hundreds of customers who were denied the cover they were entitled to under their existing Medibank policies for joint procedures that they required,” Mr Sims said.

“Some Medibank policyholders 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.”

Medibank self-reported its misconduct to the competition regulator in August 2018 and has paid more than $775,000 in compensation to 175 affected members.

Ahm senior executive Kate Williams said it was communicating with customers who held impacted policies.

“While we believed the issue impacted a small number of customers, it was the right thing to do to write to all customers who are or were insured by the ahm Boost and Lite products since inception of the products.,” she said.

“We did that to ensure that any customers affected by this error were compensated.”