Legal fight could hit Medibank revenue

Medibank’s fight with the ACCC over misleading conduct allegations may deal a blow to revenues.

Medibank has experienced a disproportional share of private health insurance ombudsman complaints versus its market share. Picture: AAP Image/Dan Himbrechts.

Medibank Private’s revenue could be hit, during a crucial sales period, by a legal fight with the competition regulator.

Macquarie’s analysts have outlined there was a risk that proceedings brought against Medibank by the Australian Competition and Consumer Commission could negatively impact revenue growth for the insurer in the important June quarter sales period. The investment bank added the revenue impact could potentially be felt over a longer period as the legal proceedings progressed.

The ACCC revealed in June it had taken action against the private health insurance provider for failing to give notice to members on its decision to limit benefits paid for in-hospital pathology and radiology services. The regulator said it started proceedings in the Federal Court against the health insurance giant, which was privatised almost two years ago, for “misleading and unconscionable conduct”.

The allegations also include that Medibank calculated there was a risk that if the change was disclosed, members would leave the insurer.

The ACCC will argue Medibank estimated the change would lead it to making large financial gains from not paying gaps.

Macquarie said in a client note on Medibank that while variation of coverage was normal in the private health insurance sector, it was not clear to the investment bank that the approach taken by Medibank in this case was consistent with typical sector procedure.

Macquarie’s analysts also highlighted that Medibank was experiencing a disproportional share of private health insurance ombudsman complaints versus its market share.

The investment bank’s team pointed to a combination of sector affordability and value and Medibank’s IT system migration of customers for the complaints.

“The current level of complaints will pressure Medibank customer acquisition and retention, impacting revenue growth,” the analysts said.