‘Sham’ health insurer ordered to refund $100M to FTC
The Federal Trade Commission (FTC) has cracked down on a health services provider accused of selling unqualified, sham health insurance plans through deceptive marketing and sales tactics.
Benefytt Technologies, a Tampa-based health insurance technology company, has been ordered to pay $100 million in refunds for their actions, which included lying about their “sham health insurance plans,” using deceptive lead generation websites to bring in new customers, and illegally charging customers “exorbitant junk fees'' for add-ons they didn’t request, according to the FTC. Benefytt launched in 2008 and was formerly known as Health Insurance Innovations. The company has faced multiple investigations and lawsuits about its practices.
The products sold by Benefytt did not meet qualifications for comprehensive insurance plans under the Affordable Care Act, also known as Obamacare. However, by leveraging websites such as Obamacareplans.com that targeted people looking for comprehensive coverage, Benefytt led customers to believe they were signing up and paying for qualified plans when they were not. Under the healthcare law, comprehensive health plans must cover pre-existing conditions, preventive care and also cap out-of-pocket expenses. Unsuspecting customers believed they were getting qualified plans, instead of Benefytt’s sham plans that left them vulnerable in medical catastrophes.
“Benefytt pocketed millions selling sham insurance to seniors and other consumers looking for health coverage,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The company is being ordered to pay $100 million, and we’re holding its executives accountable for this fraud.”
News of the FTC complaint and the $100 million verdict comes after Benefytt was acquired by private equity firm Madison Dearborn Partners in 2020 for $625 million. More recently, the company appointed Todd Baxter as its new CEO in June 2022, the Tampa Bay Times reported.
The conflict between Benefytt and the FTC underscores the changes to short-term health plans, which do not offer comprehensive coverage and do not meet Obamacare standards, made during the Trump era. Bare-bones health plans began popping up online after the Trump administration expanded short-term plans to up to three years in 2018. Prior to that, short-term health plans were offered as a period of three months without renewal options and were intended to offer temporary coverage to those transitioning their health plans, such as students or individuals between jobs. These plans, dubbed “Trumpcare” in 2019, have been characterized as “junk” plans by healthcare advocacy groups and other healthcare stakeholders.
In addition to paying $100 million, Benefytt was prohibited from lying about their products or charging the illegal junk fees. In addition, former CEO Gavin Southwell and former vice president of sales Amy Brady, are permanently banned from selling or marketing any healthcare-related product. Brady is also banned from telemarketing.
Under terms of the court order, Benefytt must also inform current customers and give them the chance to cancel their plans. The FTC stated Benefytt made it hard for customers to cancel their plans once they were enrolled with the company, “even going so far as to transfer consumers who were calling to cancel back to the sales agents who deceived them in the first place.”
The deceptive sales process––which included lying about the nature of the plans, bundling and charging junk fees for unwanted products without consent and using high-pressure sales tactics––violated the FTC Act, the Telemarketing Sales Rule (TSR) and the Restore Online Shoppers Confidence Act (ROSCA), the FTC alleged.
The $100 million in refunds will go to the FTC, which will be distributed to customers harmed by the company and its practices, the agency said. Benefytt is also ordered to closely monitor subsidiaries that sell its products and ensure they are not using misleading or deceptive sales or marketing strategies.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."