The corporate watchdog says it has started proceedings in the Federal Court against Medibank Private for “misleading and unconscionable conduct”.
The Australian Competition and Consumer Commission said the private health insurance provider failed to give notice to members on its decision to limit benefits paid for in-hospital pathology and radiology services.
These services include blood tests, x-rays, CT scans and MRI scans.
“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 at a time when consumers may be vulnerable,” ACCC chairman Rod Sims said in a statement.
The allegations will also include that Medibank calculated there was a risk that if the change was disclosed, members would leave the insurer, damaging Medibank’s brand and reputation and negatively impacting its IPO.
The ACCC will argue Medicare estimated the change would lead it to making large financial gains from not paying gaps.
In a response to the court proceedings, Medibank said it was “committed to acting in the best interests of our members and refutes claims by the ACCC”.
“We have been working cooperatively with the ACCC throughout its investigation,” the statement said, adding the company had processes in place to ensure compliance.
“We encourage members to contact us if they have concerns.”
Medibank is Australia’s largest private health insurer, with 3.9 million members.
The ACCC said the conduct affected most policies in place since January 1 2012.
After that date, Medibank had agreements with pathology and radiology providers, setting out that where those providers charged above the Medicare Benefits schedule fee, Medibank would pay the difference.
From September 1, 2014, Medibank terminated or phased out those agreements and members have not been completely covered.
The ACCC said it would seek compensation, penalties and the implementation of a trade practices compliance program.