Federal Court slaps Medibank with $5 million penalties

Federal Court slaps Medibank with $5 million penalties | Insurance Business Australia

Federal Court slaps Medibank with $5 million penalties

To the tune of $5 million in penalties ordered by the Federal Court, Medibank Private Limited will be paying the price for having breached consumer law by making false representations to members of its low-cost health insurance brand ahm.

According to the Australian Competition & Consumer Commission (ACCC), about 1,400 enquiries or claims were incorrectly rejected over the span of a half decade due to Medibank’s failure to include numerous joint investigation and reconstruction services in its claiming systems for the ahm “lite” and “boost” policies.

The breach came to light in 2018, and Medibank has since notified about 130,000 policyholders to invite them to seek compensation or make a complaint. As of June 22 this year, over $775,000 in compensation had been paid by the insurance provider to 175 affected members.  

“Medibank’s false statements to consumers were a serious breach of our consumer law,” commented ACCC Chair Rod Sims when the competition watchdog announced the Federal Court decision.

“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.”

These services included critical ones such as spinal surgery, pelvic surgery, hip surgery, and knee reconstructions.

Sims added: “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, which admitted liability, has decided to review its compliance procedures as well as amend its incident management process.