Even though it says it will fight a move from the competition regulator to take it to court, investors still didn’t like the news that the ACCC was suing NIB, the Newcastle based health insurer.
The shares fell more than 4% yesterday to $5.14 to take the fall since the most recent peak in early May (of $6.44 on May 1) to more than 16% as investors fret about profit margins and the impact of rising costs on consumers.
In a statement released yesterday the ACCC alleged NIB had engaged in misleading and deceptive conduct when it failed to tell 400 members in advance of its decision to remove some eye procedures from a program that protected customers from out-of-pocket costs.
The ACCC says NIB failed to warn customers in advance that it had removed certain procedures from its MediGap Scheme, which covers the "gap" between health insurance rebates and Medicare rebates, so members would not face out-of-pocket expenses.
The Commission claims that between June 2011 and October 2016, NIB told members that “several of its policies covered eye procedures and members would not pay any out-of-pocket expenses, when in fact members could incur out-of-pocket costs”.
It says NIB was unconscionable in that the insurer identified 400 members who it “probably ought to proactively communicate" with over the MediGap changes.
The ACCC also alleges the insurer warned a doctor who told his own NIB clients of the change not to communicate with NIB members or the media about the MediGap Change.
“Consumers have a right to be informed of important changes to their insurance cover in advance, as these changes can result in very large financial consequences at a time when consumers are at their most vulnerable,” ACCC Chairman Rod Sims said in yesterday’s statement.
“Private health insurers must ensure their disclosure practices are in line with the Australian Consumer Law. Insurers should not expect consumers to bear the responsibility of making independent enquiries to find out about important changes made unilaterally by insurers.”
The representations are alleged to have been made by NIB in relation to the following 10 policies: “Basic Plus”, “Family Basic Saver”, “Family Plus”, “Hospital Plus”, “Just Hospital”, “Mid Plus”, “Premier Plus”, “Top Cover”, “Young at Heart Mid” and “Young at Heart Top,” Mr Sims said. In a statement issued later Tuesday morning, NIB strongly rejected the ACCC claims.
"nib holdings (nib) has been advised by the Australian Competition and Consumer Commission (ACCC) that it intends to institute proceedings in the Federal Court against nib’s Australian residents health fund primarily in relation to an alleged failure in August 2015 to communicate to customers limited changes made to its MediGap Scheme.
"MediGap is a scheme in which doctors and other in-hospital medical providers can elect to receive a higher level of fee reimbursement subject to there being no “out of pocket” expense for the patient.
"nib rejects the position being taken by the ACCC and believes it has acted lawfully and ethically. nib has worked collaboratively with the ACCC throughout its investigation and has already taken steps to redress many ACCC concerns.”
nib is committed to acting in the best interests of our customers and will strenuously defend the claims made by the ACCC in the Federal Court. One of objectives behind the limited changes made to MediGap was principally about improved clinical practice. As this matter is now before the Federal Court, we are unable to make any further comment on the allegations.
