This FTC Lawsuit Could Help Protect You from Health Insurance Scammers

A man and woman completes health insurance paperwork together at a desk.
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A new lawsuit accuses a Florida-based company of misleading tens of thousands of customers nationwide into thinking they were buying health insurance, leaving the customers on their own to pay sizable medical bills.

The suit was filed against six corporations operating out of the same Hollywood, Florida, address and Steven J. Dorfman, who owned or was affiliated with all of them.

“Defendants prey on consumers who are seeking comprehensive health insurance,” the Federal Trade Commission wrote in the suit.

One woman received $61,000 in hospital bills she was assured her policy would pick up, but not a dime was covered, the Federal Trade Commission alleges.

Simple Health Plans — which operated under a dozen other names — and several other companies were shut down temporarily by a federal judge in South Florida last week after being sued by the commission.

Dorfman’s attorney, Ryan O’Quinn, told the Miami Herald that Dorfman “vigorously denies” the allegations and “looks forward to having an opportunity to defend himself in the appropriate forum.”

How the Alleged Health Insurance Scam Works

The Federal Trade Commission alleges that Simple Health Plans and its affiliates accepted premiums of as much as $500 per month, plus a one-time enrollment fee of up to $175, for sham insurance coverage. The companies have taken in more than $100 million in the past three years, according to the suit.

The commission is asking a judge for a temporary restraining order that would permit a receiver to seize assets the government believes were bought using corporate funds. They include more than $1.1 million in luxury jewelry-store purchases and three cars worth hundreds of thousands of dollars combined.

Simple Health Plans marketed a product it claimed was a PPO (preferred provider organization), deceiving consumers into believing that their plans covered pre-existing conditions as required by the Affordable Care Act, the government alleges. PPOs are health insurance plans that contract with medical professionals to provide care to policyholders at a reduced rate.

In fact, the products sold through Simple Health Plans were not health insurance, but medical discount or wellness program memberships or limited benefit plans — also known as limited benefit indemnity plans — that don’t cover pre-existing conditions or prescription drugs, the Federal Trade Commission says.

A typical plan paid for a maximum of three annual doctor visits at $50 each and a maximum of $100 a day for a hospital stay — both a fraction of the real cost. A telemarketer told an undercover investigator that he would pay between $4 and $12 for a diabetes drug that actually would have cost between $850 and $900, court documents show.

When customers agreed to sign up, they were transferred from a telemarketer to another employee for a “verification process” and pressured to commit even if they didn’t understand contract language that was read or sent to them by email or text, the lawsuit alleges.

“There is a vast difference between what Defendants promise consumers and what consumers actually get,” according to the suit.

Health Benefits One, Health Center Management, Innovative Customer Care, Simple Insurance Leads and Senior Benefits One also are named in the complaint, filed Oct. 28 in the U.S. District Court for the Southern District of Florida.

How to Avoid Falling for Health Insurance Scams

So, how can you protect yourself?

The Federal Trade Commission has advice for spotting a host of health care scams — including medical discount scams, phony insurance agents, con artists who insist you must divulge personal information to get a new Medicare or other health insurance ID card and fraudsters who offer to help you shop for coverage in the Health Insurance Marketplace created by the Affordable Care Act.

If you suspect a health-insurance scam, call the Federal Trade Commission at 877-382-4357 or email the agency.

Shop directly in the Health Insurance Marketplace for coverage under the Affordable Care Act or see The Penny Hoarder guide on how to enroll.

Susan Jacobson is an editor at The Penny Hoarder. She also writes about health and wellness.