Defendants accused of selling ‘sham’ health insurance ordered to refund $100 million to customers

A Tampa company accused of selling “sham” health plans sold by third-party distributors, including a Hollywood insurance agency that was shut down for fraud, has agreed to pay $100 million in restitution to customers, according to court documents filed this week by the Federal Trade Commission. Commission.

Benefytt Technologies, known until March 2020 as Health Insurance Innovations, defrauded at-risk consumers out of hundreds of millions of dollars by misrepresenting its products, charging “absurd fees,” and using fraudulent websites to obtain the information of customers who searched online for earn less money. “Obamacare” costs too much, the FTC said in court filings and press releases.

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

Company officials have signed a court order agreeing to refund $100 million to customers. Two of its outgoing executives – former CEO Gavin Southwell and former vice president of marketing Amy Brady – agreed to settle their charges by accepting an indefinite ban on the marketing or sale of any health-related products. Brady will also be banned from telemarketing, the FTC said.

According to the statement, Benefytt Technologies, Southwell or Adams have neither admitted nor denied the FTC’s allegations. The FTC rules are awaiting a judge’s signature, and an FTC spokeswoman said she did not know when that would happen.

Benefytt and his attorneys did not respond to a request for comment on the lawsuit.

Benefytt Technologies sells affiliate memberships and other health-related products to consumers, often through telemarketers and websites that collect consumer information. Southwell was the company’s president between 2016 and 2021. Brady served as vice president of sales before leaving in 2021.

The company also sells Medicare Advantage plans that are marketed on newsreels with celebrity seniors like Joe Namath, William Shatner and Jimmie Walker from Good Times.

Benefytt worked with Simple Health Plans before the FTC issued a temporary ban on Oct. 31, 2018, on the eve of the registration of Affordable Health Care coverage, which closed the activities of the organization, the complaint of the organization against Benefytt.

In the case against Simple Health, the FTC argued that the company used deceptive marketing between 2012 and 2018 to recruit thousands of consumers with the assurance that they were buying major health insurance related to pre-existing conditions, hospital stays, and online visits. primary care physicians and specialists, prescription drugs and other services required by the Affordable Care Act.

In fact, the FTC said, consumers are charged hundreds of dollars a month for low-cost medical care that provides up to $3,200 in annual co-pays, drug discount cards and membership in health plans. Dorfman and his agents, meanwhile, earned more than $150 million in commissions.

In March 2018, Dorfman threw himself and the bride Izabella Freitas a wedding of $ 300,000 in Bal Harbor that included flowers and pictures of $ 133,000 in front of a Lamborghini and a Rolls Royce. The couple filed for divorce in May 2020, court records show.

Many consumers told investigators they didn’t realize they had been scammed until they found themselves with huge medical bills or unable to buy prescription drugs with “health insurance cards,” FTC filings state.

Simple Health was one of Benefytt’s largest third-party divisions, the FTC’s complaint against Benefytt states.

“For years before the FTC’s lawsuit against Simple Health, [the] the defendants knew and caused the distributor’s wrongdoing,” it said. “Although there is ample evidence of ongoing fraud, [the] the defendants continued to invest heavily in their relationship with Simple Health, and eventually collected hundreds of millions of dollars from Simple Health’s customers and paid large sums and bonuses for the products they distributed.

Other distributors also “repeatedly engage in deceptive practices” in advertising Benefytt, the complaint says.

After signing consumers up for the plans, “Benefytt made things worse by making it difficult to cancel their plans, even going so far as to transfer consumers who call back to the sellers who defrauded them in the first place,” the FTC said in a news release.

Southwell, Brady and Benefytt were aware of the agent’s wrongdoing but “took steps to conceal and perpetuate the fraud,” the release said.

The alleged fraud has been the subject of several court cases, some of which have been dismissed while others are still ongoing.

The FTC’s efforts to obtain a permanent injunction to shut down Simple Health Plans have been at odds with Dorfman, although a court receiver liquidated nearly all of Simple Health’s assets and Dorfman.

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The case is currently on hold pending Dorfman’s appeal of the court’s decision to deny his request for a temporary restraining order barring him and Simple Health from resuming employment. The appeals court has so far not acted on the appeal.

Meanwhile, Dorfman and two former executives at Simple Health Plan are charged with multiple counts of defrauding consumers in all 50 states through the use of international mail and US mail.

In July, Benefytt agreed to pay $11 million to settle charges with the Securities and Exchange Commission that it misled investors by concealing thousands of consumer complaints when Health Insurance Innovations was a publicly traded company. In July 2020, the company was purchased for $625 million by 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 lawsuit filed on behalf of 230,131 people it identified. If all applications are submitted, each will receive an average payment of $80. Kosloske, who was fired from the company’s board before the FTC investigation against Simple Health Plans, was left with more than $40 million from his company’s sales.

Perhaps, the $100 million Benefytt has been ordered to pay within a year of the lawsuit will provide additional financial relief to victims. Details on how victims can get refunds are not yet available.

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

  • Notify current customers of the settlement and allow them to cancel their subscriptions and receive a refund.
  • Sell ​​all products without misleading customers about their appearance.
  • Carefully check other companies selling their products to make sure they are not using deceptive or misleading tactics.

Ron Hurtibise covers business and consumer news for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.