Victims will get opportunity to cancel ‘scam’ health insurance plans, judge rules

Jun. 14--Tens of thousands of consumers still making monthly payments for "practically worthless" health insurance plans purchased from a shuttered Hollywood-based agency will be allowed to cancel those plans, a federal judge has ordered.

Thursday's ruling by U.S. District Judge Darrin P. Gayles marks the latest courtroom defeat in Steven J. Dorfman's fight to prevent the Federal Trade Commission from permanently closing his company, Simple Health Plans LLC, and distributing its remaining assets to victims of what the FTC calls a sophisticated scam.

Dorfman's customers will be contacted within days by the distributor of their plans, Health Insurance Innovations, and given the option to cancel and cease incurring monthly charges. They will not be given refunds for payments made prior to Thursday's ruling.

Simple Health Plans and numerous affiliated companies have been shut down since Oct. 31, when the FTC secured a temporary restraining order and froze its assets.

The FTC is accusing Dorfman of masterminding a scheme to fool uninsured consumers into thinking they were buying comprehensive health insurance that covered preexisting conditions and complied with the Affordable Care Act.

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Simple Health Plans earned nearly $150 million in commissions since 2013 duping people desperate for comprehensive health coverage they could afford on their limited budgets, the FTC said. Their money enabled Dorfman to throw a $300,000 wedding at the St. Regis Bal Harbour Resort and buy a Rolls Royce Wraith, a Lamborghini Aventador, a Land Rover, a $2.5 piece of property in Nevada and $1 million in jewelry, court filings say.

Dorfman found prospective customers who searched for health insurance information on the Internet and filled out forms on websites he controlled with names like trumpcarequotes.com, www.obamacare-plans.com and myobamacareapplication.com that featured logos of well-known insurers such as Blue Cross Blue Shield, the FTC's complaint states.

Dorfman's sales agents would then contact the prospects and recite a sales script with insurance terms like "PPO," "copay," "deductible," "coverage" and "preexisting condition" that had no relevance to the "practically worthless" packages of hospital indemnity plans, limited benefit plans and discount memberships sold to the victims.

Far from covering most of victims' health care and hospitalization expenses as sales agents promised, the limited benefit hospital indemnity coverage sold by Dorfman paid a maximum of $3,200 a year, the FTC said.

In January, the FTC reported that nearly 37,000 consumers victimized by Simple Health Plans were paying $6.3 million in monthly premiums. Between December and February alone, plans distributor Health Insurance Innovations charged consumers 165,798 times, totaling about $14.6 million, for products purchased through Simple Health Plans.

Last week, two federal lawsuits were filed against Health Insurance Innovations, a publicly traded plans distributor based in Tampa, by plaintiffs claiming the company financed, knew about and oversaw Dorfman's operation since 2013. A spokesman for Health Insurance Innovations said the company is cooperating fully with the FTC and plans to vigorously fight the suits.

Under the plan approved Thursday, Health Insurance Innovations will contact Simple Health Plans customers by mail and email and notify them that what they bought is not comprehensive health insurance. "If you get sick or have to go to the hospital, you may have to pay almost all of your bills," the notice will say.

The consumers will be given 60 days to call Health Insurance Innovations and cancel their plan and have monthly charges stopped immediately. A second notice will be sent 14 days later, the order states.

Consumers who choose to cancel will be entitled to refunds of any payments made after the judge's June 13 order and also will be eligible to buy comprehensive health care plans during a special enrollment period.

Many of the existing customers likely do not know the "true nature" of the products they purchased due to Simple Health Plans' deceptive sales practices, the FTC recently told the court.

A preliminary injunction against Simple Health Plans, approved by Judge Gayles on May 14, gave the FTC authority to contact the company's customers. The injunction extended a court-appointed receiver's control over the company's assets while the FTC pursues a final judgement that would permanently shut down the company.

In a motion opposing the FTC's request to allow his customers to cancel their plans, Dorfman argued it would destroy his company by turning a preliminary injunction into a permanent one before the two sides resolve the case.

But the judge disagreed, finding good cause to believe the customers were deceived.

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