The Federal Court has declared that Western District Health Fund Limited, trading as Westfund, has engaged in misleading and deceptive conduct in relation to advertising its health insurance products to consumers.
In January 2002, Mr Brian Cassidy, the Chief Executive Officer of the Australian Competition and Consumer Commission as delegated officer* instituted proceedings against Westfund in relation to advertising that appeared on television between February and September 2001 and for misleading or deceptive representations made on its web site.
In both the television advertisement and on the web site, Westfund represented that the fund would pay all hospital and medical expenses associated with all operations and that members would not be required to pay any excess or co-payment. In fact, Westfund by law** could not pay all medical expenses in relation to all operations and there were circumstances in which a member may be required to pay an excess or a co-payment. These representations also included two fine print disclaimers which failed to detract from the overall impression conveyed by the advertisement that a Westfund member would not be required by the fund to make any payment in respect of hospital or medical expenses associated with any operations.
"The advertising of health insurance products by health funds to consumers impacts on their choice of health provider or insurance policy and is therefore fundamentally important to members or future members", Acting ACCC Chairman, Mr Sitesh Bhojani, said today.
"Information contained in advertisements must be accurate, complete and free from technical jargon to enable consumers to make an informed choice between health insurance products.
"The ACCC is concerned that many health funds do not pay sufficient attention to their obligations under the consumer protection provisions of the Trade Practices Act 1974 when making representations to consumers about health insurance policies".
Apart from declaring that Westfund's conduct was misleading and deceptive, the other Federal Court orders, all made with the consent of Westfund, include:
- an order that Westfund write to consumers who purchased health insurance from the fund between 15 February 2001 and 22 September 2001, informing them that they may have been misled by the advertisements and/or the website and that Westfund, for those members, offer to refund, to the extent possible:
- hospital expenses not paid by Westfund
- certain medical expenses
- any excess or co-payment paid by the member
- the cost of membership for those members who, as a result of having been misled, choose to leave Westfund
- an order that Westfund publish a corrective statement on its web site
- an injunction preventing Westfund from making representations in the future about health insurance benefits without clearly and prominently displaying the extent to which an insured person is required to make any payment in respect of hospital and/or medical expenses associated with operations
- an order requiring Westfund to establish, maintain and have audited, a trade practices compliance program.
*The proceedings were instituted by the ACCC under the consumer protection provisions of the ASIC Act 2001 that mirror provisions found in Part V (consumer protection) of the Trade Practices Act 1974. The Chief Executive Officer of the ACCC alleged that Westfund had contravened sections 12DA, 12DB(c), 12DB(g) and 12DF of the ASIC Act. At the time of the alleged conduct, health insurance fell within the definition of a financial product and was regulated through the ASIC Act. At this time, the Australian Securities and Investments Commission had formally delegated the regulation of all consumer protection aspects of health insurance to the ACCC through the use of nominated ACCC officers as delegates. Since 11 March 2002, health insurance has been subject to the consumer protection provisions of the Trade Practices Act 1974.
** With exceptions, the National Health Act 1953 proscribes the benefits an insurer can pay in relation to a procedure which is listed in the Medical Benefits Schedule.
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