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Did You Get Scammed by Benefytt?

The Federal Trade Commission is taking action against healthcare company Benefytt Technologies, two subsidiaries, former CEO Gavin Southwell, and former vice president of sales Amy Brady, for lying to consumers about their sham health insurance plans and using deceptive lead generation websites to lure them in. According to the FTC complaint, Benefytt also illegally charged people exorbitant junk fees for unwanted add-on products without their permission. The proposed court orders require Benefytt to pay $100 million in refunds and prohibit the company from lying about their products or charging illegal junk fees. Southwell and Brady will be permanently banned from selling or marketing any healthcare-related product, and Brady will also be banned from telemarketing.

“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.”

Benefytt Technologies, based in Tampa, Florida, sells association memberships and other healthcare-related products to consumers, often through a network of telemarketing companies and lead generators. Southwell was Benefytt’s President and CEO from 2016 to 2021. Brady served as a vice president of sales for more than a decade, before also leaving in 2021.

The FTC’s complaint alleges that the defendants and their third-party partners operated a series of deceptive websites like “Obamacareplans.com” that targeted consumers who were searching for comprehensive health insurance plans qualified under the Affordable Care Act. Qualified plans must provide certain benefits like preventive care, cover people with pre-existing conditions without charging more for the plan, and cap consumers’ out-of-pocket medical costs. When consumers navigated the websites, they were often led to a sales agent who would pitch them Benefytt’s unqualified, sham plans. Even though they were led to believe they were buying comprehensive health insurance, people often were charged hundreds of dollars per month for Benefytt products and services that left them unprotected in a medical catastrophe.

The FTC’s complaint alleges that Benefytt’s deceptive sales process violated the FTC Act, the Telemarketing Sales Rule (TSR) and the Restore Online Shoppers Confidence Act (ROSCA), harming consumers in multiple ways:

  • Lying about the nature of the plans: The FTC alleges that the defendants frequently tricked consumers into buying an inferior healthcare plan. Consumers who spoke on the phone with a Benefytt agent were often met by high-pressure sales tactics. Agents often claimed the plans they were pitching were equivalent to qualified plans, when in fact they were not even comprehensive health insurance at all. Benefytt’s sales agents also told consumers that Benefytt’s products would cover things like pre-existing conditions or prescription drugs when they did not.
  • Bundling and charging junk fees for unwanted products without consent: The FTC alleges that Benefytt regularly bundled with the deceptively sold healthcare plan multiple unwanted products, such as life or accident insurance plans, telemedicine access, and fitness programs. The separate cost of these bundled products typically was not disclosed clearly, so that consumers were often unaware they were purchasing any additional products. At times, Benefytt continued to charge consumers for these additional products even after consumers canceled their core healthcare plan.
  • Making it hard to cancel: The FTC alleges that after deceiving consumers into purchasing inferior plans and charging them junk fees, Benefytt made things worse by making it hard for consumers to cancel their plans, even going so far as to transfer consumers who were calling to cancel back to the sales agents who deceived them in the first place.

The complaint alleges that Benefytt, Southwell, and Brady were aware of their agents’ misconduct, but continued to profit from it. Indeed, rather than acting to stop the conduct, Benefytt and its officers instead took steps to disguise and further the deception. For example, the complaint details how the defendants assisted and facilitated the fraud of one of Benefytt’s historically largest distributors, Simple Health Plans. Despite knowing of widespread compliance problems with the sales practices of Simple Health, Benefytt did not terminate its large distributor until the FTC sued Simple Health in October 2018.

Enforcement Actions

Benefytt and two of its subsidiaries have agreed to a propose court order that would require them to:

  • Pay $100 million for consumer redress: Benefytt will be required to pay $100 million to the FTC, which will be used to provide refunds to consumers harmed by the defendants’ practices.
  • Inform current customers and allow them to cancel: Benefytt must contact customers who are currently paying for Benefytt’s plans, inform them of the FTC’s complaint against the company, and allow them to cancel their enrollment. Benefytt also must provide refunds for payments made after the order is entered directly to customers who cancel right away.
  • Sell all products without misleading consumers: Benefytt will be prohibited from misleading consumers about the features of their products, including whether they are compliant with the ACA, and must disclose important facts like total costs and limitations before any purchase. They will also be required to get consumers’ express informed consent before billing them for anything, clearly communicate with consumers about what they are being charged for, and provide a simple and easy-to-use cancellation method.
  • Closely monitor other companies who sell their products: Benefytt will be required to closely monitor all companies selling their products to ensure they are not using deceptive or misleading tactics to entice consumers to buy Benefytt products.

Separate proposed court orders for Southwell and Brady include similar prohibitions on misrepresentations, and would also permanently prohibit them from playing any role in the sale or marketing of any healthcare-related product or service. Southwell’s order further prohibits him from engaging in deceptive or abusive telemarketing practices, and Brady’s order prohibits her from participating in any telemarketing whatsoever in the future.

The proposed court orders would resolve the FTC’s claims against all five defendants.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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