‘Disappointing’: ACCC loses landmark case against Medibank

The competition watchdog has been dealt a blow after the Federal Court threw out a landmark case against private health insurer Medibank over alleged misleading and deceptive conduct.

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The Australian Competition and Consumer Commission took action against Medibank in June last year after the insurer stopped covering out-of-pocket expenses on some medical tests such as x-rays, CT scans and blood tests.

It alleged Medibank and its subsidiary brand AHM hid the changes to prevent consumers from changing insurers and to plump up profits by $24 million ahead of the company’s 2014 float.

The company denied any wrongdoing and, in a judgment delivered late on Wednesday, Justice David O’Callaghan agreed.

Justice O’Callaghan rejected the ACCC’s claim that Medibank had represented members “would not incur any out-of-pocket expenses” at all for “in-hospital diagnostic services”.

Accordingly, Medibank did not engage in misleading or deceptive conduct by failing to notify customers that it had terminated or phased out agreements from September 2014 under which it paid the “gap” between Medicare payments and the higher fees charged by some service providers for tests.

Justice O’Callaghan noted that the terminated agreements “only applied to 62 per cent of pathology services and 24 per cent of radiology services received by Medibank’s members”.

He said Medibank retained agreements with two providers accounting for “45 per cent of the benefits that Medibank was paying for pathology services” that exceeded Medicare payments.

Rod Sims, chairman of the ACCC, told Fairfax Media the competition watchdog saw the dispute as a landmark case that centred on a “really important principle” and it was “obviously a disappointing result”.

Asked whether the watchdog would lodge an appeal, Mr Sims said it was “an option” but it needed to consider the judgment “very carefully” before it could comment further.

Mr Sims said the ACCC believed private health insurers should be telling consumers about important changes to their policies.

“You shouldn’t have to find out about it by going to hospital one day where you’re not paying a gap payment and going to hospital on another day where you’re hit with one,” he said.

He said the ACCC believed the changes affected vulnerable consumers including “those with chronic medical conditions who required these services regularly”.

Medibank chief executive Craig Drummond said the company welcomed the decision.

“We are pleased that the court has dismissed the ACCC’s case, as we firmly believe that our actions were not unlawful. Today’s decision means we can continue to focus on all of our customers and understand how we can better meet their health and wellbeing needs,” he said.

Justice O’Callaghan ordered the ACCC to pay Medibank’s costs.

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