Medibank left consumers in pain: ACCC
Medibank allegedly added financial distress to customers' physical pain by incorrectly telling more than 800 policyholders they weren't covered for joint investigations or reconstructions
The consumer watchdog has launched civil proceedings against the health insurer over allegations it misled customers who needed spinal surgery, pelvic surgery, hip surgery or knee reconstructions, leaving them to pay thousands of dollars themselves or wait in pain for needlessly upgraded cover to kick in.
Medibank discovered customers were being short changed in 2017 and reported the issue to the Australian Competition and Consumer Commission the following year after establishing the problem stemmed from what it called an internal process failure.
The consumer watchdog accepts Medibank did not deliberately deceive customers, but said Federal Court action would send a message to the whole industry.
"This behaviour is pretty dreadful," ACCC chair Rod Sims said on Tuesday.
"If you're supplying a product, you better make sure you're supplying what you said you would."
"Lite" or "boost" policyholders with Medibank's ahm subsidiary were covered for joint investigations or reconstruction procedures, but were denied by the company.
Mr Sims estimates roughly 60 ahm customers needlessly upgraded their policies to access coverage for which they had already paid and, in some cases, had to suffer in intense pain while serving an additional waiting period.
"The costs to the people were pain, delay and sometimes out-of-pocket cost," Mr Sims said.
"And the pain when you're dealing with joint investigations and joint surgery, it can very often be severe."
Mr Sims said Medibank's handling of the customer complaints that eventually alerted it to the issue was the "most concerning behaviour" unearthed during the ACCC's investigation.
"People were complaining that they were in such pain, they really couldn't wait, and yet they were told they weren't covered for something when in fact they were covered," he said.
Breaches are alleged to have taken place from 2013 to 2018, when Medibank self-reported to the regulator.
Complaints led to the inconsistency being identified in 2017, with the private health insurer since contacting 130,000 customers and paying out $745,691 in compensation.
Medibank said item codes relating to the relevant category were not entered into their claims assessment system.
"We apologise unreservedly to our customers who have been impacted by the error," a statement from ahm senior executive Jan O'Keefe read.
Medibank shares had dropped 2.1 per cent to $3.545 by 1300 AEST.
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