The applicant's pleaded case on unconscionability
249 The applicant's points of claim with respect to its unconscionability case relevantly provide as follows:
Medibank's decision to implement the Benefit Change
17. By November 2013, Medibank was concerned at its increasing cost of providing cover for Diagnostic Gaps, and in around May 2014, following an internal review, Medibank decided to terminate or let expire its MPPAs with Diagnostic Providers (other than with two providers), and to cease paying the Diagnostic Gaps (Benefit Change).
Medibank's expectation of the impact on members arising from the Benefit Change
18. By around May 2014, Medibank knew or expected the following:
(a) members did not have a good understanding of private health insurance, and commonly thought that all of their in-hospital medical expenses were covered;
(b) most members made no enquiries about out-of-pocket expenses prior to admission to hospital but, if they were informed about such expenses before treatment, many of them would switch providers to reduce or avoid the out-of-pocket expenses;
(c) the Benefit Change was likely to result in members incurring out of pocket expenses, averaging $151 for pathology and $83 for radiology, with a high risk that the expenses would be higher and that Diagnostic Providers might demand upfront payments from members; and
(d) the members most likely to be affected by the Benefit Change were Recipient Members, and especially those with chronic conditions.
Medibank's decision to limit disclosure of the Benefit Change
19. Despite the Notice Representations, its knowledge of the matters in paragraph 18 and its obligations under the Industry Code, from around May 2014 Medibank adopted a strategy of keeping communications in relation to the Benefit Change "contained" and "reactive" (the Non-disclosure Strategy). In particular, with respect to disclosure of the Benefit Change, Medibank decided:
(a) to advise individual members of the Benefit Change only when they made enquiries prior to admission to hospital, or submitted complaints in respect of Out-of-pocket Expenses for in-hospital diagnostic services;
(b) not to send Change Notices to members; and
(c) to avoid communications to members not identified as going to hospital.
20. At the time of adopting the Non-disclosure Strategy, Medibank calculated that:
(a) there was a risk that its members (including members who had not claimed for In-hospital Diagnostic Services) were informed of the Benefit Change, they would cease to insure with Medibank; and
(b) there was a high risk that publicity about the Benefit Change would damage Medibank's brand and reputation, and have a negative impact on the lead up to its planned initial public offering of securities.
21. At the time of adopting the Non-disclosure Strategy, Medibank estimated that the Benefit Change would lead to it making substantial financial gains, including:
(a) as a result of not paying Diagnostic Gaps; and
(b) as a result of not paying the future medical claims of members who ceased to insure with Medibank after becoming aware of the Benefit Change.
22. As a consequence of the Non-disclosure Strategy, members requiring hospital treatment were the most likely to become aware of the Benefit Change.
Characteristics of consumers purchasing private health insurance
23. At the time Medibank adopted the Non-disclosure Strategy, it knew or ought reasonably to have known that consumers of private health insurance are at a significant disadvantage relative to Medibank, because these consumers:
(a) had significantly lower bargaining power relative to Medibank;
(b) typically had a poor familiarity with private health insurance policy terms, and the complexities of private health insurance;
(c) relied on Medibank to inform them about their entitlements to benefits and about potential out-of-pocket expenses;
(d) relied on Medibank to inform them of any changes to their private health insurance arrangements that would have a detrimental impact on them;
(e) had a limited ability to obtain information about Out-of-pocket Expenses prior to admission to hospital, due to the fact that:
(i) prior to admission they may not know what In-hospital Diagnostic services may be required;
(ii) they may be too unwell, preoccupied or anxious to enquire about Out-of-pocket Expenses; and
(ii) even where enquiries were made, their treating medical practitioner may not have known or been able to inform them about any Diagnostic Gaps payable by the member.
24. At the time Medibank adopted the Non-disclosure Strategy, it knew or ought reasonably to have known that Recipient Members were a particularly vulnerable class of consumers, as in addition to the factors in paragraph 23, Recipient Members had been previously hospitalised and/or had chronic medical conditions requiring frequent admissions to hospital.
Implementation of the Benefit Change and Non-disclosure Strategy
25. Pursuant to its decision to implement the Benefit Change, from on or about 1 September 2014 Medibank terminated or let expire the MPPAs (with some limited exceptions) and ceased paying Diagnostic Gaps charged by those providers, save for occasional ad hoc payments in response to complaints from members.
26. Further, in accordance with the Non-disclosure Strategy:
(a) Medibank did not send Change Notices to members, and did not update the marketing or the Cover Summaries to inform members of the Benefit Change;
(b) in about early September 2014, Medibank provided its enquiry handling staff with instructions to explain the Benefit Change to existing members who contacted Medibank prior to entering hospital; and
(c) Medibank made minor amendments to its website and its "Going to Hospital" brochure, and released a new "Informed Financial Consent" brochure which encouraged members to obtain information about Out-of-pocket Expenses from treating doctors and diagnostic providers. These materials were not specific to, and did not identify or explain, the Benefit Change. Medibank did not distribute these materials directly to members, and members could only access the information if they actively searched for it.
27. By November 2014, Medibank was aware (including as a result of numerous complaints by members) that many members had not received information about Out-of-pocket Expenses resulting from the Benefit Change prior to receiving in-hospital diagnostic services. Medibank was also aware that some Diagnostic Providers had significantly increased the amount of their fees following the cessation of the MPPAs, resulting in a higher Diagnostic Gap, and that members had incurred those higher charges as Out-of-pocket Expenses.
250 The applicant next pleads in [31] of the concise statement that by implementing the benefit change and the non-disclosure strategy, Medibank engaged in conduct that was unconscionable, in contravention of s 21 of the ACL, "in the circumstances" where Medibank:
(1) made the diagnostic cover representation and the notice representation as described in the applicant's concise statement at [15] and [16], respectively;
(2) was and is a signatory to the Industry Code;
(3) knew or expected the matters described in [18] of the concise statement;
(4) knew or expected consumers were disadvantaged or vulnerable as described in the concise statement at [23] and [24] respectively;
(5) had made the calculations as described in [20] and [21] of the concise statement; and
(6) by November 2014 knew the matters described in [27] of the concise statement.
251 In order to understand and address those "circumstances", it is necessary to pick up the allegations to each of those cross-references. Thus cross-referenced and understood, those "circumstances" alleged are as follows:
(1) Medibank knew or expected around May 2014 that:
(a) members did not have a good understanding of private health insurance and "commonly thought that all of their in-hospital medical expenses were covered";
(b) "most" members did not make enquiries about out-of-pocket expenses before admission and "if they were informed about such expenses before treatment, many of them would switch providers" to reduce or avoid the out-of-pocket expenses;
(c) the MPPA change was likely to result in members incurring out-of-pocket expenses averaging $151 for pathology and $83 for radiology, with a high risk that expenses would be higher and that diagnostic providers might demand upfront payments from members;
(d) the members most likely to be affected by the MPPA change were members who had previously claimed for in-hospital diagnostic services (so-called recipient members);
(2) Medibank knew or expected consumers were disadvantaged or vulnerable because they had lower bargaining power relative to Medibank, "typically" had poor familiarity with private health insurance and the complexities of private health insurance, relied on Medibank to inform them about their entitlements and potential out-of-pocket expenses, and relied on Medibank to inform them of "any changes" to their private health insurance that would have a detrimental impact on them and had a limited ability to obtain information about out-of-pocket expenses before admission to hospital;
(3) Medibank had "calculated":
(a) that if members were informed of the MPPA change, they would cease to insure with Medibank;
(b) there was a "high risk" that negative publicity about the benefit change would adversely impact the planned Initial Public Offering;
(c) it would make "substantial financial gains" as a result of not paying diagnostic gap amounts and by not paying the claims of members who ceased to insure with Medibank after finding out about the change;
(4) Medibank knew by November 2014 that many members had not received information about out-of-pocket expenses for diagnostic services before receiving the services and that some providers had significantly increased their fees following the MPPA change, which higher charges had been incurred by members as out-of-pocket expenses.
252 It follows that on the applicant's pleaded case on unconscionability, it must establish, on the balance of probabilities, each, or sufficient, of those circumstances.
253 I have already explained why, in my view, neither Medibank nor ahm made the diagnostic cover representation or the notice representation: see [161]-[246] above. I have also already explained why, in my view, the fact that Medibank is a signatory to the Industry Code is of no assistance: see [244] above. In my view, because Medibank did not make representations to members about MPPAs, and because Medibank did not engage in misleading or deceptive conduct, it cannot have been unconscionable (that is, contrary to good conscience in the sense of being morally reprehensible or repugnant) for it to have terminated the MPPAs without notifying members. As Medibank submitted:
There was simply no reason, as a matter of law or commercial morality, to advise all 3.8 million members about the termination of many MPPAs when:
(a) Medibank had never made representations to members about the MPPAs;
(b) prior to the decision, the MPPAs only applied to 62% of pathology services and 24% of radiology services received by Medibank's members; and
(c) after the decision, Medibank retained MPPAs with providers (Sonic and Epworth) that accounted for 45% of the benefits that Medibank was paying for pathology services in excess of the MBS fee.
254 In my view, that is sufficient to dispose of the applicant's case on unconscionability.
255 If I am wrong about that, it is necessary for me to consider each of the other "circumstances" said by the applicant to give rise to the unconscionability. Accordingly I will now turn to deal with the relevant evidence as to those circumstances, and the submissions made in respect of that evidence.
256 The evidence in the Court Book about the diagnostic funding review conducted by Medibank, which led to the termination of the MPPAs, runs to well in excess of 1500 pages.
257 It comprises, among many other things, market research reports and, in one case, secondary evidence of the contents of the market research report. One of those documents is a report from Ipsos-Eureka dated 14 December 2012, which itself runs to almost 150 pages. Another (internal) market research report, referred to as the "Atchison Report" was also in evidence. A 62-page document that the applicant referred to in submissions as "the Sibbick memo" also loomed large in the course of the hearing. It is entitled "Medical Gaps report", and was prepared by "Joseph Sibbick - GTM Team". Among other things, the Sibbick memo summarises market research information apparently provided to Medibank by an organisation rejoicing in the name "TH?NK".
258 Aside from the market research information, the voluminous evidence about the diagnostic funding review includes minutes of various meetings of the Provider Networks and Integrated Care (PNIC) leadership team from November 2013 onwards - where, among other things, various perceived or actual risks of terminating the MPPAs, or some of them, were discussed - internal memoranda and emails, including about draft "communication strategies", draft presentations and the like. I will set out below those parts of that evidence which the parties regarded as important. The applicant's submissions also include a 50-page annexure, entitled "Annexure D - The Medical Funding Review" in which it sets out the critical parts of the documents upon which it relies.