Company to reimburse $100 million in ‘fictitious’ health insurance case

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A Tampa-based company accused of selling ‘fictitious’ health plans marketed by third-party distributors, including a Hollywood-based insurance agency shut down amid fraud allegations, has agreed to pay back $100 million to its customers, according to court documents filed this week by the Federal Trade Commission.

Benefytt Technologies, known until March 2020 as Innovations in Health Insurance, deceived vulnerable consumers out of hundreds of millions of dollars by lying about its products, charging illegal “junk fees” and using deceptive websites to obtain contact details of customers searching the Internet at low prices. — priced “Obamacare” plans, the FTC said in court filings and a press release.

Benefytt has worked closely with one of its largest third-party distributors, Hollywood-based Simple Health Plans LLC, and its CEO Steven J. Dorfman, charged by the FTC in a lawsuit filed Monday in U.S. District Court in Tampa.

The company’s current executives have signed a proposed court order agreeing to reimburse customers $100 million. Two of its deceased executives – former CEO Gavin Southwell and former vice president of sales Amy Brady – have agreed to settle cases against them by agreeing to a permanent ban on marketing or selling any healthcare-related product. Brady will also be banned from telemarketing, the FTC said.

Under the terms of the proposed orders, neither Benefytt Technologies, Southwell nor Adams have admitted or denied the FTC’s charges. The FTC’s proposed orders await a judge’s signature, and an FTC spokeswoman said she doesn’t know when that will happen.

Benefytt and his attorneys did not respond to requests for comment on the case.

Benefytt Technologies sells association memberships and other healthcare-related products to consumers, often through telemarketers and Internet sites that collect consumer contact information. Southwell served as president of the company between 2016 and 2021. Brady served as vice president of sales before leaving in 2021.

The company also sells Medicare Advantage plans marketed on cable news channels by aging celebrities like Good Times’ Joe Namath, William Shatner and Jimmie Walker.

Benefytt worked closely with Simple Health Plans before the FTC obtained a temporary restraining order on October 31, 2018, the day before open enrollment for affordable healthcare coverage, which halted operations. of the agency, according to the agency’s complaint against Benefytt.

In its case against Simple Health, the FTC accused the company of using deceptive sales practices between 2012 and 2018 to enroll thousands of consumers with the assurance that they were purchasing major medical insurance covering pre-existing conditions, hospital stays, network visits for primary care doctors and specialists, prescription drugs and other services required by the Affordable Care Act.

In reality, according to the FTC, consumers had to pay hundreds of dollars a month for limited-benefit hospital indemnity coverage that paid a maximum of $3,200 a year, prescription discount cards, and plan memberships. of well-being. Dorfman and his agents, meanwhile, pocketed more than $150 million in commissions.

In March 2018, Dorfman and his wife Izabella Freitas embarked on a $300,000 wedding ceremony in Bal Harbor that included $133,000 in flowers and photos in front of a Lamborghini and a Rolls Royce. The couple filed for divorce in May 2020, according to court records.

Many consumers told investigators that they didn’t realize they had been duped until they found themselves in debt for medical procedures or unable to buy prescription drugs with their “credit cards.” health insurance,” according to documents filed by the FTC.

Simple Health was one of Benefytt’s largest third-party distributors, according to the FTC’s complaint against Benefytt.

“For years before the FTC’s lawsuit against Simple Health, [the] the defendants knew about and contributed to the distributor’s misconduct,” he said. “Despite compelling evidence of ongoing fraud, [the] Defendants continued to invest heavily in their relationship with Simple Health, ultimately collecting hundreds of millions of dollars from Simple Health customers and paying substantial commissions and bonuses on distributor sales.

Other distributors “regularly engage in deceptive practices” when marketing Benefytt’s products, the complaint states.

After enrolling consumers in the plans, “Benefytt made things worse by making it difficult to cancel their plans, even going so far as to transfer consumers who called to cancel to the sales agents who cheated them in the first place,” the FTC said in its press release.

Southwell, Brady and Benefytt were aware of the officers’ misconduct but “took steps to disguise and further the deception,” the statement said.

The alleged deceptions have been the subject of several other court cases, some of which have been resolved while others are still pending.

The FTC’s efforts to obtain a permanent injunction to shut down Simple Health Plans have been mired in litigation by Dorfman, even though a court-appointed receiver has liquidated nearly all of Simple Health and Dorfman’s assets.

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The case is currently on hold pending Dorfman’s appeal of a court ruling denying his motion to dissolve the temporary restraining order preventing him and Simple Health from resuming operations. The Court of Appeal has so far not responded to the appeal.

Meanwhile, Dorfman and two former Simple Health Plan executives face multiple criminal charges of defrauding consumers in all 50 states through the use of interstate telecommunications systems and US mail.

In July, Benefytt agreed to pay $11 million to settle charges brought by the Securities and Exchange Commission that it misled investors by covering up thousands of consumer complaints when Health Insurance Innovations was a publicly traded company. stock Exchange. In July 2020, the company was acquired for an estimated $625 million by a hedge fund, Madison Dearborn Partners LLC, and taken private.

In September, Benefytt and its founder Michael Kosloke agreed to pay $27.5 million to settle a class action lawsuit filed on behalf of 230,131 identified victims. If all submitted claim forms, each would receive an average payout of $80. Kosloske, ousted by the company’s board of directors before the FTC’s investigation into Simple Health Plans came to light, walked away with more than $40 million from the sale of the company’s stock.

Presumably, the $100 million that Benefytt was ordered to pay within a year of a final order in the case will provide additional financial relief for victims. Information on how victims can obtain reimbursement is not yet available.

In addition to paying the $100 million, Benefytt will also have to:

  • Notify current customers of the settlement and allow them to cancel their registrations and get refunds.
  • Sell ​​all products without misleading customers about their features.
  • Keep a close eye on third-party companies selling their products to make sure they don’t use misleading or misleading tactics.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].

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