A planned tech upgrade which was meant to drag a major Australian health fund into the future has instead left droves of members in the lurch, with some forced to pay huge medical bills for procedures they were supposed to be covered for. 

Hundreds of Defence Health members have made complaints to the Commonwealth Ombudsman over the technological fiasco, which they said left them embarrassed and temporarily out-of-pocket as they waited for claims to be refunded manually.

The insurer’s Google reviews page and social media accounts have also taken a battering from furious customers who have struggled to contact the company.

The ABC has spoken to multiple current and former Defence Health members who said the upgrade had been disastrous.

Gerard Fogarty, the acting chief executive of Defence Health, apologised but said the issues “did not affect the majority” of members.

He said the system was affected by “unforeseen issues” and “performance problems”.

“Extensive testing was conducted before the new system was implemented,” Mr Fogarty said.

“However, given the complexity and scale of the transition, some issues were identified post going live that impacted some of our membership base.

Customers complain of lack of communication

Defence Health’s technical bungles prompted Sheryll Bird, a nurse from Werribee in Melbourne’s western suburbs, to quit the health insurer after more than 20 years of membership.

Mrs Bird’s issues started after a dental claim was denied because Defence Health had not deducted her premiums.

She waited two hours on hold to manually pay the insurer, even though she previously set up a direct debit.

“There’s just been absolutely no communication whatsoever from them, when one tries to ring them … you’re on hold for up to two hours.”

The Commonwealth Ombudsman, which investigates complaints about private health insurers, told the ABC it had received 328 complaints about Defence Health since the start of the year.

About 93 per cent of those — or 305 complaints — were made after July 1, 2023.

A spokesman for the ombudsman said 20 complaints were still open.

“We have referred most of the complaints we received about Defence Health directly to the insurer, so it can contact the member and resolve their concerns as quickly as possible,” a spokesman said.

“We expect insurers to carefully plan, and mitigate risks associated with changes that might negatively impact their members, like changes to ICT systems.”

Insurer apologies to members

Late last year, Defence Health wrote to more than 300,000 members spruiking its new website and platform as “the first of its kind in Australia”.

The system was meant to be up and running this year but in August, Defence Health’s chief executive Joanne Kadlecik contacted members to apologise, conceding that the transition to the new platform had caused “significant disruption.”

“I’m sorry if our service level let you down in recent weeks. It was not part of the plan,” Ms Kadlecik said.

“I’m confident we’ll be back on track very soon,” she said.

A short time later, Ms Kadlecik went on medical leave and was temporarily replaced as chief executive by her predecessor, Mr Fogarty, a retired army major general.

In a statement, Mr Fogarty told the ABC that Defence Health considered rolling back the new system but ultimately chose not to because it was “not an option”.

The health insurer is now manually processing a month’s worth of claims because of technical issues which caused a backlog.

Mr Fogarty said the company had hired more people and was aiming to clear the delays by the end of the month.

He did not say when Defence Health expected its new system to be fully functional, but said that customers who were struggling to pay their premiums because of technical issues could still make claims.

“We are committed to ensuring members are still able to make claims if they are in arrears due to the technical issues,” Mr Fogarty said.

Members left stressed and upset

Marian Pham, 41, from Melbourne’s west has been a member of Defence Health for about a decade but complained to the Commonwealth Ombudsman twice because she could not get in contact with the insurer.

She was awaiting major surgery when Defence Health told her that she had not paid an excess fee, even though she had earlier in the year.

“They’ve got no record that I’ve paid this amount to them,” Mrs Pham said.

“I was feeling anxious that entire time, trying to work out whether I am covered,” she said.

Mrs Pham said she expected Defence Health to make her hospital stay easier.

“In actual fact, I have to go and dig up receipts from earlier on and spend all this time on hold, it’s actually outrageous,” she said.

Kylie from Mornington, in Melbourne’s south-east, has been a member for more than 20 years was told just moments before a medical procedure that she would have to foot a $1,250 bill because she was not a financial member.

“When I turned up at 8 o’clock that morning to have the procedure done, they said I either had to pay for it up front or reschedule the procedure,” said Kylie, who did not want to use her surname.

“I’d never been late on a payment, it’s a direct debit, it just comes out automatically.

“I was just lucky that I was able to pay for it up-front. I’m sure there are a lot of people that couldn’t afford to.”

Kylie said she was left mortified.

Maxine Kenny, 62, from Sunbury in Melbourne’s west had to call an ambulance while she was on holiday in Queensland but it was only after returning when she realised that Defence Health had stopped deducting her premiums, even though she set up a direct debit.

After multiple calls to insurer, some with wait times of up to two hours, Mrs Kenny was verbally told that she would be covered for the ambulance trip.

But she is worried that promise will not be honoured.

“You live in that fear,” she said.

Mrs Kenny now checks every month to make sure her premium is paid.

“I shouldn’t have to do that,” Mrs Kenny said.