(Reuters) - Australia's consumer watchdog said on Tuesday it had sued Medibank Private Ltd <MPL.AX> alleging the health insurer had denied benefits to hundreds of customers who were entitled to payouts.
About 800 holders of "lite" or "boost" policies of Medibank's low-cost ahm brand were incorrectly told they were not entitled to be covered for joint investigations or reconstruction procedures when in fact they were paying for such coverage, the Australian Competition and Consumer Commission alleges in the case before the Federal Court.
"Some members were forced to delay surgery due to high out-of-pocket costs for these procedures and to seek alternative remedies to manage pain, when they were in fact entitled to insurance cover," ACCC Chair Rod Sims said in a statement.
"Medibank's alleged misrepresentations had serious consequences for members requiring procedures including spinal surgery, pelvic surgery, hip surgery and knee reconstructions, which often cost thousands of dollars."
The private health insurer said it had internally investigated complaints from customers in 2017 and had found that some reconstruction codes were not entered into its claims assessment system.
It voluntarily told the ACCC about the issue in 2018, and ahm had contacted about 130,000 customers and compensated about 175 a total of A$745,691 ($503,639.70), Medibank added in a statement.
The ACCC said it was seeking penalties, consumer redress, declarations, injunctions, publication orders, the implementation of a compliance programme and costs.
($1 = 1.4806 Australian dollars)
(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Stephen Coates)
