FTC Halts Purveyors of Sham Health Insurance Plans

WASHINGTON, Nov. 2 -- The Federal Trade Commission issued the following news release:

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Florida-based Simple Health Plans LLC has collected more than $100 million with deceptive scheme targeting Americans in need of coverage

At the request of the Federal Trade Commission, a federal judge temporarily shut down a Florida-based operation (https://www.ftc.gov/system/files/documents/cases/simple_health_plans_tro_memo.pdf) that allegedly collected more than $100 million by preying on Americans in search of health insurance, selling these consumers worthless plans that left tens of thousands of people uninsured. Many of these consumers have incurred substantial medical expenses and have been stuck with thousands of dollars in unpaid medical bills.

A federal court temporarily halted the operation (https://www.ftc.gov/system/files/documents/cases/simple_health_tro_signed.pdf) pending resolution of the case. The FTC seeks to permanently stop the defendants' practices and return money to consumers.

In a complaint filed in federal court against Simple Health Plans LLC (https://www.ftc.gov/system/files/documents/cases/simple_health_plans_complaint_11-2-18.pdf), the company's owner, Steven J. Dorfman, and five other entities, the FTC alleged that the defendants misled people to think they were buying comprehensive health insurance that would cover preexisting medical conditions, prescription drugs, primary and specialty care treatment, inpatient and emergency hospital care, surgical procedures, and medical and laboratory testing.

Consumers who enrolled reported paying as much as $500 per month for what was actually a medical discount program or extremely limited benefit program that did not deliver the promised benefits and effectively left consumers uninsured, the FTC alleged.

"Many consumers were misled into thinking they had purchased comprehensive health insurance, but when they needed to rely on that insurance, they learned they had none of the promised benefits," said Andrew Smith, the Director of the FTC's Bureau of Consumer Protection. "The plans defendants were selling are not health insurance and they aren't a substitute for health insurance. Get the details in writing and take your time before signing up for any of these plans."

According to the FTC's complaint, the defendants behind Simple Health lured consumers through a network of deceptive lead generation websites that claimed to provide information about comprehensive health insurance. On the sites, the defendants falsely held themselves out as experts on and providers of government-sponsored health insurance policies, such as those offered under Medicare and the Affordable Care Act. In many cases, the sites also misleadingly featured the logos of the AARP or well-known insurance carriers, such as Blue Cross Blue Shield plans, when in fact the defendants were not affiliated with such entities.

For example, one of the websites, www.trumpcarequotes.com, deceptively claimed to offer "Health Insurance for Smart People" from "the Nation's Leading Carriers" at "Low Affordable Premiums" with "Prescription Drug Coverage." Another Simple Health website, www.simplemedicareplans.com, promoted "Medicare Health Plans for Your Needs and Budget."

According to the FTC's complaint, consumers who submitted their contact information to one of the defendants' websites or called one of the toll-free phone numbers on the sites ended up on the phone with telemarketers working for the defendants. The telemarketers often falsely identified themselves as insurance agents licensed in the consumer's state.

The defendants' telemarketers led consumers to believe that for a one-time enrollment fee, ranging from approximately $60 to $175, and a monthly payment, ranging from approximately $40 to $500, Simple Health could provide them with a "PPO" health insurance plan that was comprehensive and widely accepted by doctors in the consumers' geographical areas, the FTC alleged. In many cases, they promised that the plans would have no copays or deductibles.

Those who enrolled subsequently learned that the plans they had purchased from Simple Health are not comprehensive health insurance and do not provide the promised coverage and benefits. A typical plan provides no coverage for preexisting medical conditions or prescription medications, pays only $50 toward physician visits--capped at three visits per year--and covers a maximum of $100 per day for hospitalization. The maximum benefit a consumer could realize from the plan is $3200 per person, per year, and only if that person were hospitalized for 30 days.

The FTC alleged that as a result, tens of thousands of consumers who thought they had purchased comprehensive health insurance found themselves uninsured, some saddled with substantial medical expenses that they assumed would be covered by the purported health insurance they had obtained from Simple Health.

On top of that, because the defendants' limited benefit plans and discount memberships do not qualify as health insurance under the Affordable Care Act, some people who enrolled were subject to a fee imposed on those who can afford health insurance, but choose not to buy it, the FTC alleged.

The defendants are charged with violating the FTC Act and the agency's Telemarketing Sales Rule. The defendants named in the complaint are Steven J. Dorfman, Simple Health Plans LLC, Health Benefits One LLC, Health Center Management LLC, Innovative Customer Care LLC, Simple Insurance Leads LLC, and Senior Benefits One LLC.

The Commission wishes to thank the Broward County Sheriff's Office, the Miami-Dade Police Department, The Transportation Security Administration - Miami and Fort Lauderdale Office, the IRS Financial Crimes Task Force - Orlando Division, and the Dallas County Constable Precinct 3 for their support in this matter.

The Commission vote approving the complaint was 5-0. The U.S. District Court for the Southern District of Florida entered a temporary restraining order against the defendants on October 31, 2018, and a preliminary injunction hearing is currently scheduled for November 14, 2018.