On 20 September 2017 the Australian Competition and Consumer Commission (ACCC) appealed a Federal Court judgment that considered the lawfulness of a change to Medibank Private Limited's ("Medibank") insurance coverage of inpatient diagnostic treatment. The ACCC has appealed the first instance decision rejecting the ACCC's claims that Medibank had engaged in misleading or deceptive conduct and unconscionable conduct.
Australia's national health scheme, Medicare, provides subsidised access to prescribed medical services. The Medicare Benefits Schedule ("MBS") lists the medical services to which the scheme applies, and the prescribed fees payable on those medical services (known as schedule fees).
Patients with private health insurance that receive inpatient diagnostic treatment are entitled to have 75 percent of the schedule fee paid by Medicare, and 25 percent of the schedule fee paid by their private insurer. Because medical service providers are permitted to charge 'gap fees' above the value of the schedule fee, private health insurers can distinguish their policies by offering to reimburse insured patients for any gap fees they incur.
Prior to September 2014, Medibank reimbursed insured patients for gap fees incurred with specified diagnostic service providers. From 1 September 2014, Medibank's policy was amended so that Medibank only reimbursed insured patients for gap fees incurred with two diagnostic service providers.
ACCC Federal Court Proceedings
The ACCC brought proceedings in the Federal Court of Australia against Medibank, asserting that Medibank had, in contravention of the Australian Consumer Law, engaged in misleading or deceptive conduct ("MDC claim") and unconscionable conduct.
The ACCC brought the MDC claim alleging that Medibank had made two representations to insured patients:
- First, that Medibank would reimburse insured patients for all out-of-pocket expenses incurred in respect of inpatient diagnostic services, and
- Second, that Medibank would notify insured patients in writing of any "detrimental changes" to their policies.
The ACCC argued that the first representation became misleading or deceptive as a result of the September 2014 policy change, and argued that the second representation was misleading or deceptive because Medibank had failed to provide such notice after the September 2014 policy change.
The ACCC's unconscionable conduct claim was brought on the alleged basis that, in effecting the September 2014 policy change, Medibank was taking advantage of insured patients' lack of understanding of their insurance policies, causing insured patients harm by not notifying them of the policy change, and breaching industry norms that oblige insurers to keep insured patients informed of changes to policy.
First Instance Decision
On 30 August 2017 the Federal Court in ACCC v Medibank Private Limited  FCA 1006, in regards to the MDC claim, held that Medibank had not made either of the two representations that the ACCC alleged. The court found that Medibank had never represented to fully reimburse insured patients for all gap fees they might incur and found that Medibank had, prior to and after September 2014, adequately warned insureds that gap fees incurred in relation to diagnostic services may not be reimbursed by Medibank. The court also found that Medibank had represented that it would inform insured persons of changes to fund rules that might result in "detrimental effects", but had not represented to inform insured persons of any change to an insured's policy that could constitute a "detrimental change". The court found that the September 2014 policy change could not be characterised as a change to fund rules, and Medibank was, therefore, not obliged to inform insured patients in writing of the change.
The court held that because Medibank had not made the representations alleged by the ACCC, Medibank could therefore not have engaged in unconscionable conduct.
On 20 September 2017 the ACCC filed a Notice of Appeal, aimed, according to the ACC media release, at gaining clarity as to the extent to which it was acceptable for Medibank not to duly inform vulnerable consumers about the changes to their private health insurance. The decision of the Full Court is anticipated to assist all insurers with some guidance on the nature and extent of their ongoing recommended obligations.