In May 2016, The Prescription published the first in a series of blogs about communicating detrimental changes to private health insurance products. Here we are – a little over 12 months later – and it is quite remarkable to see how the landscape has shifted. The ACCC has commenced major proceedings against Medibank and has, through a series of publications and public statements, made absolutely explicit its expectations of private health insurers with regard to communicating detrimental changes to policies and benefits to their customers.
We return again to the subject of ‘detrimental changes’ with the news that the ACCC has commenced proceedings against another ASX-listed health insurer, NIB, for alleged breaches of the Australian Consumer Law.
The proceedings against NIB allege conduct which is broadly similar to that which has been alleged against Medibank. That is, that NIB made changes to its benefits arrangements which were adverse to members’ interests and decided not to notify the members of those changes. Like the Medibank proceedings, the relevant benefit change was not a formal change to the NIB fund rules but rather a change to its arrangements with service providers to pay amounts above the statutory minimum benefits private health insurers are required to pay under the Private Health Insurance Act 2007 (Cth).
When a privately insured person undergoes a medical or surgical procedure in a hospital, Medicare pays 75% of the Medicare Benefits Schedule fee (MBS Fee) and the private health insurer pays the other 25%. If the specialist charges an amount which is greater than 100% of the MBS Fee (which they are entitled to do), the patient pays a ‘gap’.
Like most other private health insurers, NIB operates a gap cover scheme (which NIB calls the ‘MediGap Scheme’). Gap cover schemes are exceptionally simple – the insurer offers to pay a participating specialist an amount which is greater than the MBS Fee provided that the participating specialist agrees to charge no more than that amount (ensuring that the member pays no ‘gap’).
The ACCC alleges that in May 2015, NIB decided to remove a whole category of eye procedures from the MediGap Scheme. The commercial effect of this was that NIB would cease to a pay a ‘gap’ amount for those eye procedures, regardless of the provider. The ACCC further alleges that NIB decided not to notify members of the change (rather than merely failing to notify members). A curious factual allegation is that NIB became aware that a medical practitioner associated with an eye hospital was proactively notifying patients of the change to the MediGap Scheme and responded to that circumstance by requesting a commitment from the hospital that they would not communicate with members or the media about changes to the MediGap Scheme.
It is common in the industry for insurers to make changes to their contracting arrangements with hospitals, specialists and other providers from time-to-time. What seems to set the Medibank and NIB proceedings apart is that the relevant changes represented wholesale changes to whole categories of benefits and services and that both insurers allegedly did not take sufficient steps to adequately notify their customers of these changes. In the Medibank proceedings, the ACCC allege that Medibank decided to terminate or let expire its agreements with diagnostic service providers (taking those services wholly outside of their no-gap arrangements). In the NIB proceedings, the ACCC allege that the changes to the MediGap Scheme took a category of eye procedures wholly outside of their no-gap arrangements.
NIB has stated that it ‘rejects the position being taken by the ACCC and believes it has acted lawfully and ethically’.
The NIB proceedings still have a long way to run. As has been a consistent theme in this series, the key learning is that the ACCC makes no distinction whatsoever between a change in benefits because of a formal rule change and a change in benefits because of a change in underlying contracting arrangements with providers. Both need to be communicated transparently and well in advance of the relevant change to enable consumers to make informed choices about their cover before their need for treatment arises.
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