The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court against Medibank Private Limited (Medibank) alleging it contravened the Australian Consumer Law by engaging in misleading conduct, making false or misleading representations and engaging in unconscionable conduct.

The allegations are in relation to Medibank’s failure to notify Medibank members and members of its subsidiary brand, ahm, regarding its decision to limit benefits paid to members for in-hospital pathology and radiology services.

The ACCC alleges that Medibank did not provide members with any advance notice of the change despite previously representing that it would do so. Medibank also adopted a strategy of keeping communications about this change contained and reactive. The ACCC alleges that Medibank’s conduct was misleading and, in all the circumstances, unconscionable.

“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 Chairman Rod Sims said.

“Private health insurers must ensure their disclosure practices comply with the Australian Consumer Law. Competition and consumer issues in the health and medical sectors are a current enforcement priority for the ACCC.”

The ACCC alleges that additional circumstances in support of unconscionable conduct include that:

  • Medibank knew or expected that many members incorrectly thought all of their in-hospital medical expenses were covered, and that most members didn’t make enquiries about out-of-pocket expenses before being admitted to hospital;
  • Medibank calculated there was a risk that, if the benefit change was disclosed, members might leave Medibank;
  • Medibank calculated there was a risk that the publicity around the benefit change would damage Medibank’s brand and reputation, and have a negative impact on its planned initial public offering of securities; and
  • Medibank estimated the change would lead to it making substantial financial gains, including from not paying the gaps, and from not paying the medical claims of members who left Medibank after becoming aware of the change. The members most likely to become aware of the change were members who claimed more frequently, some of whom were suffering from chronic conditions.  Most of these members were then confronted with out-of-pocket expenses when in hospital receiving treatment.

The ACCC also alleges that Medibank represented to members and potential members that a number of its policies covered in-hospital pathology and radiology services, such that members would not pay any out-of-pocket expenses for these services, unless Medibank provided them with prior notice otherwise. These representations were false or misleading from 1 September 2014, since from that time members incurred out-of-pocket expenses for such services and were not notified by Medibank. The relevant policies include:

  • Medibank’s Basic Hospital, Mid Hospital, Standard Hospital, Top Hospital and Ultra Health Cover policies; and
  • ahm’s Budget Hospital, Basic Hospital, Classic Hospital, Top Hospital (No Obstetrics), Top Hospital and Top Hospital 500 policies.

The ACCC is seeking declarations, injunctions, compensation orders, pecuniary penalties, findings of fact, implementation of a trade practices compliance program, corrective notices and costs.


Medibank is Australia’s largest private health insurer and has approximately 3.9 million members through its Medibank and ahm brands. The conduct affected most Medibank and ahm hospital policies in place since 1 January 2012.

Since at least 1 January 2012, Medibank had agreements with many pathology and radiology providers who supplied services to hospital patients (such as blood tests, x-rays, CT scans and MRI scans). Under these agreements, in situations where these providers charged above the Medicare Benefit Schedule (MBS) fee, Medibank paid charges above the MBS fee (the gap) on behalf of Medibank and ahm members.

From 1 September 2014, Medibank terminated or phased out these agreements. As a result of the agreements no longer being in force, since 1 September 2014, Medibank and ahm members have no longer been completely covered for in-hospital pathology or radiology services, and have had to pay the gap as an out-of-pocket expense.