Benefytt will refund $100 million to customers who purchased fake health insurance

A Florida-based business was ordered by the Federal Trade Commission (FTC) to refund $100 million to customers who were given fake health insurance plans that included services they did not request.

The FTC claimed in a press release on Monday that Benefytt Technologies, two of its subsidiaries, former Chief Executive Gavin Southwell, and former Vice President of Sales Amy Brady misled consumers "about their sham health insurance plans" and used "deceptive lead generation websites to lure them in." In addition, Benefytt made it challenging for users to cancel orders for services and plans they had not placed.

According to a complaint made by the FTC in U.S. District Court for the Middle District of Florida, sales representatives from Benefytt and a significant subsidiary misled customers about the health plans offered, and Benefytt and Southwell were repeatedly warned about this by the company's compliance specialists. The complaint claimed that those cautions were disregarded. The FTC claimed that the actions started as soon as Southwell, a former chief risk officer for a sizable independent global wholesale and reinsurance brokerage, joined the firm.

Benefytt is accused of using deceptive websites between 2016 and 21 to lead customers to believe they were purchasing Obamacare-compliant health insurance plans from the federal government. Instead, phony healthcare plans that were unrelated to or not supported by Obamacare were sold to them. Later, the business misrepresented the connections between its healthcare plan offerings and "Trumpcare," a platform for healthcare that the FTC noted in its complaint does not exist.

The FTC claimed that the company routinely disregarded requests from the compliance department to review sales scripts or conduct onsite inspections in order to improve practices. Brady's assurances regarding third-party vendor Simple Health were allegedly false and unfair sales tactics were "becoming a daily joke" in 2016, according to an email from a Benefytt compliance executive to Southwell, according to the complaint.

According to the FTC, Brady continued to obstruct Benefytt compliance staff from determining whether the sales scripts used by Simple Health were compliant. "Not until the FTC sued Simple Health in 2018 and obtained a temporary restraining order putting the company out of business did defendants finally terminate their relationship with the distributor," the agency claimed.

A further allegation against Benefytt is that it "refused to implement processes that … would enable them to root out their agents’ misconduct," like gathering the complete recordings of sales calls.

Internal complaint data and reviews of specific sales representatives supported the scope of issues with the firm's misleading and deceptive practices, but the complaint claimed that no steps were taken to address them.

In order to resolve allegations made by the Securities and Exchange Commission, Health Insurance Innovations, which later changed its name to Benefytt, and Southwell agreed to pay $12 million in June. The SEC had claimed that the two parties had misrepresented the strength of the company's compliance program while also deceiving investors about the volume of customer complaints it had received.

Benefytt did not comment.

By fLEXI tEAM