Medibank share price lower after settling with the ACCC: Is it time to invest?

The Medibank Private Ltd (ASX:MPL) share price is dropping lower on Thursday after settling proceedings with the ACCC. Should you invest?

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The Medibank Private Ltd (ASX: MPL) share price has come under pressure and is dropping lower on Thursday.

In afternoon trade the private health insurer’s shares are down 1.5% to $2.93 after announcing a settlement with the Australian Competition and Consumer Commission (ACCC).

What did Medibank announce?

This afternoon Medibank announced that it has resolved the ACCC’s proceedings in relation to the Boost and Lite products of its subsidiary ahm.

According to the release, the Federal Court has approved the agreed settlement and the ACCC has accepted an Enforceable Undertaking (EU) offered by Medibank.

Medibank has agreed to a $5 million penalty to resolve the proceedings.

What was the issue?

The proceedings were in relation to representations made by ahm when responding to claims and eligibility enquiries by customers for joint investigations and reconstruction procedures under its Boost and Lite products.

Medibank voluntarily notified the ACCC of the issue in 2018 and briefed the regulator on ahm’s approach to customer communication and the remediation program.

The ACCC acknowledged this and also that the error was inadvertent and ahm didn’t intend to make false or misleading representations. The competition watchdog also advised that it considers the company’s remediation program to be appropriate and generous in its design and scope.

Senior Executive Kate Williams commented: “We have agreed to resolve this matter and offer this EU as a demonstration of how seriously we take our obligations under the Australian Consumer Law. We believe the approach we have taken to be transparent with all past and current ahm Lite and Boost customers about the issue, the way we have implemented a remediation program and how we have engaged proactively with the ACCC, reflects our commitment to do the right thing.”

Should you buy the dip?

While I think Medibank is a quality company, I’m not in a rush to invest just yet.

At present I feel there is too much uncertainty in the industry due to the pandemic, affordability issues, and reform risks.

In light of this, I would sooner buy the shares of private hospital operator Ramsay Health Care Limited (ASX: RHC) than a private health insurer.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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