The Australian Competition and Consumer Commission (ACCC) has initiated Federal Court proceedings against Bupa HI Pty Ltd (Bupa). The health insurer has agreed to a proposed penalty of A$35m ($23m) for widespread breaches of Australian Consumer Law. Bupa has admitted to engaging in misleading or deceptive conduct and unconscionable conduct, affecting thousands of health insurance members over more than five years.

This substantial proposed penalty, jointly agreed upon by the ACCC and Bupa, signals Bupa’s acknowledgment of serious wrongdoing and its commitment to resolving the matter. The cooperative approach aims to expedite resolution and mitigate further reputational damage, setting a precedent for future regulatory actions where significant financial consequences are likely even with admissions of misconduct.

While Bupa stated that the affected “Mixed coverage” and “Uncategorized Item” claims represent a small fraction (less than 0.02% and 0.004% respectively) of the 20 million claims processed annually between May 2018 and August 2023, the ACCC highlighted that Bupa’s conduct affected “thousands of members” over “more than five years.”

This disparity in emphasis highlights the regulator’s focus on the absolute number of harmed individuals and the duration of the misconduct, rather than just proportional figures.

Misleading and unconscionable conduct

The ACCC’s proceedings detail Bupa’s admitted misconduct, which included misleading or deceptive conduct and making false or misleading representations. Bupa incorrectly informed members they were not entitled to private health insurance benefits for their entire claim, even when partial coverage existed under their policies. These misrepresentations occurred both during eligibility checks with Bupa staff before treatment and after procedures due to automated claims assessment systems.

The conduct primarily involved two types of claims:

• Mixed Coverage Claims: Where a member’s policy covered part of the treatment but not others, Bupa incorrectly rejected the entire claim, denying benefits for covered portions.
• Uncategorized Item Claims: These included treatments not assigned a standard clinical category in Bupa’s system, despite members being eligible for benefits for at least one item.

Crucially, Bupa also admitted to engaging in “unconscionable conduct” concerning its assessment of 388 Mixed Coverage Claims. Between June 2020 and February 2021, Bupa ceased manually reviewing certain Mixed Coverage Claims that its automated systems had incorrectly assessed as having no benefits payable. This decision was made despite Bupa knowing that manual review was essential to identify and pay benefits for these claims.

Bupa attributed the errors to “inaccurate or unclear instructions, training or guidance” for staff and systems “programmed to incorrectly reject Mixed Coverage and Uncategorized Item Claims.”

Impact on consumers and providers

The consequences of Bupa’s actions extended beyond administrative errors, causing significant financial, physical, and emotional harm to thousands of consumers. ACCC Chair Gina Cass-Gottlieb emphasized the severity, stating: “Bupa’s conduct affected thousands of members over more than five years, and caused harm to consumers some of whom delayed, cancelled or went without treatment for which they were, at least partially, covered under their health insurance policies.”

Many consumers were left thousands of dollars out of pocket, forced to personally finance medical treatments Bupa was obligated to cover. Some policyholders even upgraded to more expensive policies unnecessarily.

Beyond financial strain, the impact on health was profound. “In addition to financial impacts, some consumers were exposed to potential medical risks or complications, physical pain and distress as a result of not proceeding with medical treatment or as a result of 1dergoing multiple treatments after being falsely advised they were not covered for certain procedures,” noted the ACCC press release. This breach of trust, especially during critical health needs, led to emotional distress, delayed treatments, and physical pain.

Medical providers and hospitals were also adversely affected, not receiving entitled payments for certain claims, affecting their operations and financial stability.

Bupa’s apology and rectification

In response to the ACCC’s action, Bupa Health Insurance has publicly apologized. Nick Stone, CEO, Bupa APAC stated: “We are deeply sorry for failing to get things right for our customers and are saddened by the impact this has had on them and their families. This should never have happened.” He acknowledged that Bupa did not meet the standards expected by its 4.4 million health insurance customers, providers, and employees.

Bupa has initiated compensation efforts, including interest and customer goodwill payments. To date, Bupa has paid A$14.3m ($9.4) for approximately 4,100 affected claims and eligibility checks.

Bupa states it has focused on fixing these issues by making changes to its operations and improving systems and processes to prevent recurrence.

Rectification measures include:

• resolving system issues related to claims processing;
• establishing a dedicated team that has manually reviewed almost 20,000 historical claims;.
• introducing manual assessments where automation is unsuitable;
• improving education and training for customer-facing teams;
• strengthening governance and internal processes.

Bupa’s proactive compensation and rectification efforts likely influenced the ACCC’s decision to jointly propose the penalty. However, the ACCC’s statement that Bupa “should have invested in the necessary systems, processes and training to prevent this from happening, and address it promptly when it occurred” indicates that while remediation is welcomed, it does not absolve Bupa of its initial failure to prevent widespread, long-standing issues.