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FTC takes action against company that sold sham health insurance

The proposed court orders require Benefytt Technologies to pay the Federal Trade Commission $100 million, which would go toward refunding customers.
Credit: AP
This Jan. 28, 2015, file photo, shows the Federal Trade Commission building in Washington. (AP Photo/Alex Brandon, File)

TAMPA, Fla. — A company that sold sham health insurance plans and targeted vulnerable consumers will have to pay $100 million to refund customers as part of a proposed settlement with the Federal Trade Commission, the FTC announced Monday.

According to the FTC, Benefytt Technologies lied to customers about their health insurance plans — which were largely useless — using deceptive lead generation websites to lure them in and charging people exorbitant fees for unwanted add-ons without their permission. Benefytt also operated under names such as Health Insurance Innovations and through multiple other subsidiaries 

The defendants and third-party partners operated deceptive websites with URLs like "obamacareplans.com," the FTC complaint alleges, but did not sell comprehensive health insurance plans that qualified under the Affordable Care Act. Those plans must follow certain requirements like covering preventive care and pre-existing conditions. 

Consumers using the website were often led to aggressive sales agents who used high-pressure sales tactics to pitch them on Benefytt's sham plans, which cost hundreds of dollars per month but left many patients unprotected during serious medical events. Benefytt’s sales agents told consumers that the plans would cover things they did not actually cover, like pre-existing conditions or prescription drugs. These plans were then nearly impossible to cancel, the FTC alleges.

The FTC said Benefytt sales agents would charge junk fees for extra products like life or accident insurance plans, telemedicine access or fitness programs that consumers were unaware they were purchasing. The company continued to charge some consumers these fees even after they'd canceled their core health care plan, according to the FTC.

“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, in a statement. “The company is being ordered to pay $100 million, and we’re holding its executives accountable for this fraud.”

Under the proposed court orders, Benefytt will have to contact customers who are currently paying for a plan and allow them to cancel their enrollment. It would also prohibit the company from lying about their products, and permanently ban former CEO Gavin Southwell and former vice president of sales Amy Brady from selling or marketing any healthcare-related product. Brady would be banned from telemarketing. 

The settlement needs a judge to sign off before it goes into effect.

    

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