Australia's biggest health insurer, Medibank Private, has topped the complaints list for health insurance companies in a report prepared by the Private Health Insurance Ombudsman (PHIO).
At the same time, the beleaguered but highly profitable insurer is on its way to Federal Court following an ACCC investigation that found it misled policyholders about providing cover for medical tests, one reason for the high number of complaints in 2015–16.
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Gap no longer covered
In September 2014, Medibank phased out agreements with pathology and radiology businesses that committed Medibank to covering charges for patients that exceeded the Medicare Benefits Schedule fees, known as gap payments.
The change promised a major revenue boost for the insurer, one that has been borne out by recent profit statements; Medibank announced a half-year profit of $228 million in February this year.
The ACCC charges that Medibank agreed to inform its 3.9 million policyholders (including those of its subsidiary, Ahm) about any extra costs resulting from the changed arrangements but then failed to do so. Meanwhile, policyholders have been finding out the hard way.
Ombudsman report a damning read
Perhaps it's no surprise, then, that Medibank fares so poorly in a recent report by the Private Health Insurance Ombudsman (PHIO). Though the insurer has less than one-third market share, it received slightly over 40% of the complaints, significantly more than any of the other 33 health funds reviewed. (Medibank was followed by Bupa on the complaints list, with just under 30%.)
Earlier CHOICE reporting uncovered two Medibank policies that meet the criteria for junk insurance, a name for tax-avoidance policies that end up covering very little should you need to make a claim.
Octogenarian feels the pinch
One CHOICE member got in touch with us about her 89-year-old mother, a pensioner who has been with Medibank Private since 1986. After receiving radiology and other tests as an in-patient and returning home, she received a $1500 bill from a diagnostic imaging provider.
"This took my mother and me by surprise because neither of us had been informed that there would be a gap that would not be covered by her private health insurance," the woman told us in a letter.
The daughter contested the charge but got the run-around from both Medibank and the diagnostics business, each of whom blamed the other for the surprise bill. However, the diagnostics business did write back, saying "unfortunately the changes with Medibank Private health insurance have caused grief to a lot of our patients".
Failure to communicate
Why did Medibank keep such critical information under its hat? Because it knew customers were likely to take their business elsewhere if they knew their out-of-pocket costs would significantly increase at their next healthcare appointment. It also worried that its reputation would suffer, the ACCC charges.
According to the ACCC, Medibank was well aware that customers were in the dark about the increased charges.
"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 chair Rod Sims says.
Which policies are affected?
The ACCC also alleges that Medibank misleadingly told customers and prospective customers that they would be covered for gap costs with the following policies:
Medibank policies: Basic Hospital, Mid Hospital, Standard Hospital, Top Hospital and Ultra Health Cover policies.
Ahm policies: Budget Hospital, Basic Hospital, Classic Hospital, Top Hospital (No Obstetrics), Top Hospital and Top Hospital 500 policies.
How to seek compensation
If you're a Medibank customer who's had to pay out-of-pocket costs without being informed by the company that you would have to do so, or if you've been misled into thinking you were covered, you may have a valid claim for compensation.
File a complaint with Medibank first and then with the Private Health Insurance Ombudsman if you are not satisfied with Medibank's response.
The ACCC is currently seeking a financial penalty for Medibank as well as compensation for policyholders.