The Insurance and Financial Services Ombudsman Scheme has investigated a consumer’s complaint that an insurer agreed to cover only two thirds of a surgeon’s estimated $12,000 fee for spinal surgery.
On its website the IFSO highlights a case study where a client, who had health insurance, planned to have spinal surgery – a single level microdiscectomy L4/5 – and applied for prior approval. The estimate included a surgeon’s fee of $12,563.75.
The IFSO says the insurer approved the claim but said it would only pay up to $8,001 for the surgeon’s fee.
“The policy stated that the insurer would pay “reasonable charges” for the procedure, which was defined as charges that the insurer decides “are reasonable based on [its] review of [its] data (acting reasonably)”,” the IFSO says.
The client felt this was unfair and said he had contacted two other surgeons and their fees were also above $8,001.
…[He] asked the insurer to either pay the full amount or tell him which surgeon would do the operation within the cap…
“He believed he should be fully covered and asked the insurer to either pay the full amount or tell him which surgeon would do the operation within the cap,” says the IFSO.
The client then made a complaint to the IFSO Scheme.
“Because the policy provision was a discretion, the IFSO Scheme looked at the case and considered whether the insurer’s decision was reasonable and made in good faith, in accordance with the relevant legal test.”
It notes the law says the Scheme can only replace an insurer’s discretionary decision if it was not reasonable, based on the information at the time, or if the insurer did not act in good faith.
The case study says the insurer explained how it worked out the reasonable charge.
“It reviewed historic claims for the same procedure between July 2024 and May 2025. It looked at how long those surgeries took and the range of surgeons’ fees. It then calculated the price at which half of those claims were performed at or below (the median). For this surgery, that figure was $8,001. The insurer checked the number against other funders and current clinical practice before confirming it as the reasonable charge.”
…after reviewing the information, the Scheme found the insurer had exercised its discretion reasonably, based on the relevant legal test…
The IFSO states that after reviewing the information, the Scheme found the insurer had exercised its discretion reasonably, based on the relevant legal test.
“The policy allowed the insurer to decide the reasonable charges based on its data, and the method used to set $8,001 was reasonable. The IFSO Scheme could not require the insurer to name a surgeon who would perform the operation for that price,” it states.