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Benefytt Technologies to Pay $100M Over Fake Health Plans

Analysis  |  By Marie DeFreitas  
   April 01, 2024

Scams are on the rise and health insurance is no exception.

Picture this: you have a medical emergency, you head to a hospital, only to discover that your health insurance that you pay hundreds for each month doesn’t even exist.

The FTC is now sending out nearly $100 million in refunds to consumers that purchased fake health plans from Benefytt Technologies. The company and its third-party partners marketed and operated deceptive plans that targeted consumers searching for a comprehensive plan under the Affordable Care Act (ACA).

 A 2022 FTC complaint details how Benefytt sales agents made telemarketing calls pitching their sham health plans that were not ACA-qualified. When consumers navigated the company’s websites, they were often led to a sales agent who would pitch them Benefytt’s unqualified, fake plans. Consumers were led to believe they were purchasing comprehensive plans for hundreds of dollars each month that in reality, left them with no protection in a medical emergency.

The Tampa-based company has been ordered to pay $100 million in refunds to consumers which included illegally charged junk fees for unwanted add-on products without their permission. In the settlement, Benefytt was also prohibited from lying about its products and charging these immense junk fees.

According to the FTC’s complaint, Benefytt’s deceptive sales process violated the FTC Act, the Telemarketing Sales Rule and the Restore Online Shoppers Confidence Act. All of these harmed consumers in numerous ways, such as: lying about the nature of the plans, bundling and charging junk fees for unwanted products without consent, and making it hard to cancel.

In separate court orders, Benefytt’s former CEO Gavin Southwell and former vice president of sales Amy Brady were permanently banned from selling or marketing any healthcare-related product. The former VP was also banned from telemarketing. Southwell acted as Benefytt’s president and CEO from 2016 to 2021 and Brady served as vice president of sales for more than a decade, before also leaving in 2021.

The complaint also alleges that Benefytt, Southwell, and Brady all were aware of their agent’s misconduct, but rather than stopping it, continued to profit from it and took steps to further conceal the deception. One example the complaint offered details how Benefytt assisted and facilitated the fraudulent offerings of one of their largest distributors, Simple Health Plans. Benefytt allegedly knew of the prevalent compliance issues with Simple Health’s sales practices, and failed to terminate the distributor until FTC sued Simple Health in October 2018.

Benefytt and two of its subsidiaries have agreed to a proposed court order that will require them to: pay $100 million for consumer redress, inform current customers and allow them to cancel, sell all products without misleading consumers, and closely monitor other companies who sell their products.

From an FTC press release: “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.”

Scams such as these are obviously dangerous and take advantage of consumers looking for comprehensive coverage. Payers should be aware of these events and do their best to educate their consumers of the dangers of online health insurance scams, as well as how to spot and avoid them.

The FTC offers a resource on their website to help consumers spot and avoid health insurance scams.

Marie DeFreitas is an associate content specialist at HealthLeaders.


Benefytt Technolgies has been ordered by a court to refund $100 million to consumers over the selling of fake health plans and products

The company allegedly misled consumers to believe they were purchasing comprehensive coverage under the Affordable Care Act.

General scams are on the rise and payers should take to educating their members about the dangers of health insurance scams

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