On 30 August 2017, the Federal Court delivered its decision in the Australian Competition and Consumer Commission's (ACCC's) case against Medibank Private Limited (Medibank), dismissing each of the ACCC's allegations against Medibank.
The approach of the Court in considering the ACCC's allegations and Medibank's responses, including in recognising the complexities of communicating private health insurance product information to members, will likely provide some comfort to private health funds. However, the ACCC's focus on the sector, and emphasis on the importance of transparent and accurate communications with members, is likely to continue. The Court's decision particularly highlights the importance of providing information to members about potential out-of-pocket expenses.
In summary, the Court found:
- No misleading cover representations - Medibank did not mislead or deceive consumers about cover for in-hospital diagnostic services, finding that none of the documents in evidence could be read or construed by a reasonable or ordinary consumer as a representation that Medibank would indemnify members for all costs, as alleged by the ACCC.
- No misleading notice representations - Medibank did not represent that it would provide members with prior notice of any detrimental change to the level of payments made for in-hospital services including diagnostic services, but rather stated that it would provide notice of any detrimental changes to its Fund Rules. The Court found that Medibank's decision to terminate MPPAs (which meant that Medibank no longer met the out-of-pocket expenses for some members for in-hospital diagnostic services) did not effect any change to the Fund Rules or benefits applicable to Medibank's policies.
- No unconscionable conduct - Medibank did not act unconscionably by terminating or failing to renew some of its agreements with in-hospital pathology and radiology providers without giving its members written notice of the effects of doing so. The Court dismissed the ACCC's allegation of an unconscionable 'non-disclosure' strategy, with the Judge (Justice O'Callaghan) remarking that Medibank's decision not to communicate with members 'was a decision made in the context of the exercise…of its business judgment. Some may agree with it, some may disagree with it, but, in my view, there was nothing remotely unconscionable about it'.
Implications for private health insurers
The Federal Court's decision includes a number of findings that are favourable to health funds, including:
- Representations not construed in isolation - The Court considered statements in Medibank's product documents in their totality, rather than in isolation. On this basis, Justice O'Callaghan found that the ACCC's allegation that Medibank had represented to its members that they would not incur any out-of-pocket expenses for in-hospital diagnostic services 'flies in the face of repeated warnings about out-of-pocket expenses in the Cover Summaries, the Member Guide and other product documents'.
- The meaning of 'cover' - The word 'cover', used in Medibank marketing and product documents, cannot be read to mean 'entirely cover' or 'indemnify', as the ACCC contended. Rather, the term identifies the types of medical procedures covered by one policy as opposed to another. Justice O'Callaghan found a 'clear and obvious distinction between the risks covered by insurance and the benefits payable for those risks'.
- Practical approach to communications - The Court commented that 'it is neither necessary nor practical for Medibank to list the thousands of medical services that are included with a policy'. Its practice of listing any exclusions, and noting that some benefits were fully paid and some partly paid, was compliant with the Australian Consumer Law.
- Form and content of Standard Information Statements (SISs) - The Court also dismissed the ACCC's submissions criticising the form and level of detail on policy features contained in SISs, noting that the form and content of SISs is prescribed by legislation and remarking that 'it is, with respect, passing strange to criticise Medibank for doing nothing other than comply with its statutory obligations'.
The ACCC has stated that it is 'carefully considering the judgment'. The ACCC will announce in the coming weeks whether it will appeal the judgment. In making its decision, the ACCC will be mindful that it has initiated proceedings against nib for very similar conduct.
Irrespective of whether the ACCC decides to appeal this judgment, it is likely that it will continue to scrutinise conduct by private health insurers, in line with its 2017 enforcement priorities. For this reason, it is critical that funds continue to ensure that their advertising and product information is true, accurate and complete. Further, funds should consider taking steps to ensure they are prepared for an investigation by the ACCC - see our ACCC investigations guide
for further information.