February 26, 2024

Florida ‘sham’ health insurer hit with guilty verdicts, $195 million verdict

Two men accused of running a Hollywood-based health insurance company that defrauded more than 400,000 customers have been found guilty in a federal court in Illinois.

The ruling comes just five days after a federal judge in South Florida handed down a $195 million judgment against the company, Simple Health Plans LLC, and its CEO Steven J. Dorfman in a separate civil lawsuit.

A jury in the Southern District of Illinois found Dorfman and the company’s executive vice president, John A. Sand, guilty of 13 counts each of several counts of conspiracy to commit mail and wire fraud, as well as mail and wire fraud.

Prosecutors in the 11-day criminal trial argued that Simple Health Plans generated more than $190 million in revenue between 2012 and 2018 by tricking consumers into purchasing “sham” health insurance plans that they were told met Affordable Care requirements. Care Act.

The date of the sentence will be determined in the future. The men face a maximum prison sentence of 30 years for conspiracy and 20 years for mail and wire fraud.

The South Florida ruling stemmed from a 2018 complaint by the Federal Trade Commission that the defendants violated the Telemarketing Sales Rule. The ruling bans Simple Health, Dorfman and five related entities from telemarketing and from marketing, promoting, selling or offering health care products.

Samuel Levine, director of the FTC’s Bureau of Consumer Protection, praised the ruling in a prepared statement. “We are pleased that the court recognized this blatant bait-and-switch and ordered the company and its CEO to turn over the money they took from consumers,” the report said.

The FTC said in a news release that it planned to use the assets frozen in the case to issue refunds to Simple Health’s customers.

Dorfman and Sand denied wrongdoing in the criminal case, and Dorfman has been fighting the FTC charges since 2018.

A third defendant, Simple Health Chief Compliance Officer Candida Girouard, agreed to settle the FTC’s charges in February 2021 and entered a guilty plea in the criminal case last November. Her sentencing is scheduled for May 15.

Prosecutors say the company used a deceptive sales script to trick people into buying what they later discovered were limited indemnity plans with a low ceiling on the amount of medical costs they cover. After these caps are reached, prosecutors say, patients will be responsible for paying 100% of remaining medical costs.

But sales representatives had to tell potential customers that they were purchasing low-cost insurance that covered pre-existing medical conditions, prescription drugs, primary and specialty care, inpatient and emergency hospital care, surgical procedures, and medical and laboratory tests.

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According to FTC documents, Simple Health lured customers by creating a network of deceptive lead generation websites that claimed to provide comprehensive information about government-sponsored health insurance plans. The sites misleadingly displayed the logos of AARP and well-known insurers such as Blue Cross Blue Shield, but the defendants were not affiliated with such entities, the FTC said.

Customers were sold “PPO” plans that could cost up to $500 per month. They were told that the plans were widely accepted by physicians in their geographic area and that in many cases they did not require any copayments or deductibles, the FTC said.

Customers only found out they had been scammed after undergoing expensive medical procedures and discovering they were not covered, the FTC said.

A federal judge in South Florida shut down the operation by issuing a temporary restraining order on November 1, 2018, when open enrollment for ACA health insurance began.

The judge’s ruling in the FTC case said Wednesday that Dorfman was “well aware of the deceptive conduct.” Dorfman, the order said, “wrote, reviewed and trained employees” on the telemarketing scripts. He also listened to sales calls, was aware of customer complaints and monitored negative online reviews, the order said.

He also instructed employees to purchase “burner phones” to create false positive reviews that they could submit to the Better Business Bureau, the order said.

How much of the $195 million Simple Health had to repay can be recovered is questionable. A court-appointed receiver reported in October that he had amassed $28.9 million by liquidating various company assets.

Thirteen pieces of jewelry and two luxury cars still need to be sold with the proceeds of the operation: a 2013 Land Rover Range Rover and a Rolls-Royce Wraith, the curator said.

In 2019, against Dorfman’s wishes, the trustee canceled the lease on a 2012 Lamborghini Aventador that Dorfman and his then-bride Izabella Frietas were photographed in front of during a $300,000 wedding ceremony in Bal Harbor in March 2018, records show the receiver. . Court records show the couple filed for divorce in May 2020.

In a 2022 agreement with the FTC, Benefytt Technologies, the provider of the plans sold by Simple Health Plans, agreed to reimburse customers $100 million without admitting or denying allegations that the company participated in “ misleading, unfair and abusive acts’.

Benefytt continued to sell association memberships and Medicare Advantage plans marketed on cable news channels by aging celebrities like Joe Namath, William Shatner and Jimmie “JJ” Walker.

But the $100 million payment, combined with $27.5 million paid to settle a class action lawsuit and $11 million paid to settle Securities and Exchange Commission claims related to the company’s role in the operation, contributed to cash flow problems that forced Benefytt to file. for bankruptcy protection from creditors last year, the company said in its bankruptcy filing.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.

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