The nation’s biggest health insurers illegally rejected the claims of thousands of sick or injured Australians over seven years, leaked documents show.

A government whistleblower who investigated their conduct has also revealed how his efforts were frustrated by years of inaction, failures to fully alert the public, intervention from his superiors, and suspicions that the insurers were falsifying or withholding evidence.

“I am going public with this story because it doesn’t seem right that the authorities say nothing to the public after finding health insurers breaking the law,” the whistleblower said. “I believe this was plainly illegal corporate wrongdoing and the authorities should have taken it seriously.”

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Private health insurers routinely refuse to pay hospital bills by linking their customers’ illnesses to a pre-existing health condition. But, before doing so, they are legally required to appoint a doctor to review the medical evidence and consider advice from the customer’s treating physician.

Quick guide Health insurance and pre-existing conditions Show Hide Why do health insurers reject claims if a customer has a pre-existing medical condition? In short, the rules are designed to stop claimants from gaming the system. A pre-existing condition (PEC) is defined as any illness, ailment, or condition for which signs or symptoms existed six months before a claimant took out insurance. Those with pre-existing conditions must wait 12 months before making a related claim for hospital cover. Without such a requirement, customers who get sick or foresee the need for hospital treatment could simply take out a policy, immediately make a claim, and then end or downgrade their policy once the hospital treatment ends. This effectively forces other policy-holders to cover the obvious costs incurred by the insurer. What must insurers do before rejecting a claim due to a pre-existing medical condition? The law requires insurers appoint a medical practitioner to review claims before they are rejected on PEC grounds. The doctor, paid by the insurer, reviews the medical evidence and considers advice from the customer’s treating physician. The insurer’s doctor must be satisfied that there is a direct link between the sickness or injury that is the subject of the claim, and the signs or symptoms that existed in the six months prior to taking out insurance. What can the commonwealth ombudsman do to investigate complaints? The commonwealth ombudsman acts as the public watchdog of private health insurers. It responds to individual complaints about a range of insurer conduct, including costs, service and the quality of advice. The ombudsman has a small team dedicated to private health insurance matters, which previously operated as a standalone agency, the private health insurance ombudsman. The team gets through a huge volume of work. It investigates thousands of complaints against private health insurers each year, and the numbers have almost doubled in the past decade. In 2017-18 alone, the ombudsman investigated 4,553 complaints against health insurers, 367 of which were related to pre-existing conditions. When someone complains about a pre-existing condition rejection, the ombudsman asks the customer for medical certificates from their treating physician, and requests the insurer provide its own doctor’s assessment and the outcome letter sent to the customer. A case officer weighs up the evidence and can resolve it themselves, seek the advice of colleagues or superiors, or escalate the complaint up to senior management.



Where it suspects the insurer was wrong, the ombudsman can seek a review by an independent medical advisor. If the independent advice also finds wrongdoing, the ombudsman writes to the insurer and asks them to reconsider its decision.



Where more systemic failings are detected, like those at Bupa and NIB, the ombudsman can either warn the insurer directly or refer the matter to the Department of Health, which acts as the regulator.

Documents show insurance giant NIB has repeatedly failed to have doctors review such cases for the past seven years.

NIB has privately admitted to the commonwealth ombudsman, which investigates complaints against private health insurers, that its processes were not “aligned to the legislative requirements” due to “some pre-existing condition determinations not being undertaken by a medical practitioner”.

The public has not been told of NIB’s failings, despite referrals to the regulator. NIB has been allowed to deal with the problem by reviewing the cases internally, and contacting what it says is a “small number” of customers to apologise and offer reimbursement.

In 2016, another major insurer, Bupa, admitted it had rejected 7,740 claims without a doctor’s review in the five years before that date. The insurer had spent years falsely telling customers their rejections had been “determined by a medical practitioner”.

Bupa detected the failings itself and conducted its own internal investigation, before referring the case to the Department of Health and the commonwealth ombudsman.

But internal records reveal the commonwealth ombudsman raised concerns about Bupa’s compliance with the law in 2014, two years before the multinational’s public mea culpa. The ombudsman did not mount an investigation to uncover the full extent of Bupa’s failings.

Facebook Twitter Pinterest In 2016, Bupa admitted it had rejected 7,740 health insurance claims without acquiring a doctor’s review. Photograph: Mick Tsikas/AAP

Documents also show that a third insurer, HCF, was twice questioned about its apparent failure to engage doctors to review claims, once in June 2016 and again in March 2018.

One investigator’s attempts to investigate the 2018 complaint were hampered by allegations that HCF was withholding evidence – a claim HCF now rejects.

HCF’s behaviour prompted the investigator to raise the case with his superiors, but he was allegedly told he was “too invested” and to leave the case alone.

When he persisted, he was sidelined and told he could no longer investigate pre-existing condition rejections. Documents seen by Guardian Australia confirm the investigator was told to cease pursuing such cases, though the ban was lifted four months later.

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The whistleblower said the evidence was highly suggestive of systemic, industry-wide problems. That should have prompted a wider inquiry by the commonwealth ombudsman, he said.

“I believe that based on the alarming developments with Bupa and NIB, plus the suspicious refusal of HCF to provide evidence, the ombudsman had reasonable grounds to carry out what is called an ‘own-motion’ investigation to determine the extent of the problem.”

In a statement, HCF said it had complied with all requests from the commonwealth ombudsman. The insurer also denied any suggestion that it was not complying with legal requirements to appoint doctors.

“HCF has responded in full to all matters regarding PEC [pre-existing condition] to the ombudsman, and there is nothing outstanding with the ombudsman on this matter,” a spokesman said. “HCF is compliant with, and fully meets its obligations under the legislation.”

Facebook Twitter Pinterest Documents reveal HCF was twice questioned by the commonwealth ombudsman about its apparent failure to engage doctors to review health insurance claims. Photograph: Mick Tsikas/AAP

NIB, meanwhile, conceded in a statement to Guardian Australia that it had not been appointing doctors to review all cases involving pre-existing medical conditions.

But a spokesman said this occurred only when the insurer believed it had “very clear” advice from the customer’s treating physician about when symptoms began.

NIB said it had changed its processes in October 2018 to fix the problem.

The company said it had also reviewed all the potentially compromised rejections in the past seven years, and is now reimbursing affected customers.

“As part of this review, we identified a small number of people had their claims rejected on the basis of an incorrect pre-existing condition decision,” the spokesman said.

“Our appointed medical practitioner has reviewed each case and we have been promptly reimbursing these people their correct benefit entitlement and associated interest. We are also still attempting to contact a small number of members who we have been unable to reach at this stage to discuss remediation.”

NIB is now working with the commonwealth ombudsman and Department of Health to “correct our process as well as assist members that were detrimentally impacted”.

“We apologise to our members who have been impacted by these incorrect assessments and encourage anyone who may have concerns to contact us to discuss their individual circumstances,” the spokesman said.

Bupa, like NIB, said it had only failed to appoint doctors in “straightforward” cases where it was clear that a pre-existing condition rejection should be made. It said it was “clearly wrong” to write to customers telling them the their claims had been rejected after determinations by a medical practitioner.

But a Bupa spokesman said the insurer had been completely transparent about the failings, and had continued to keep the regulators up-to-date with its reforms.

“Since then we have changed the leadership of the pre-existing condition team, delivered ongoing tailored compliance training to relevant staff and increased resourcing of the medical review function,” he said.

The commonwealth ombudsman said it was restricted in commenting on individual cases. But it said it was “satisfied that we dealt with the matters that were referred to us in accordance with our processes”.