FTC: ‘Sham’ insurer siphoned millions
Newly released documents in the Federal Trade Commission’s effort to permanently close what it called a “sham” health insurance marketer assert that the company’s owner diverted millions of dollars from the operation for his own use.
The Hollywood-based operation, conducted under numerous names including Simple Health Plans LLC, is owned by Steven J. Dorfman, according to the FTC.
The commission is accusing the company of marketing healthcare discount plans as comprehensive insurance policies compliant with the Affordable Care Act but that left customers deeply in debt after receiving medical care they thought was covered with no deductibles.
“Deceived consumers are effectively left uninsured and subjected to nearly unlimited financial exposure,” the commission said in its motion for a temporary restraining order against the company, newly posted on the FTC’s website.
“Many of Defendants’ victims only learn that they are still uninsured after incurring tens of thousands of dollars in medical expenses,” it said.
The motion alleges that the operation has caused “well over $150 million in consumer injury.”
Meanwhile, Dorfman, identified by the FTC as “the architect of this scam,” siphoned “millions of dollars of proceeds from defrauded consumers on “lavish spending for himself,” including:
More than $1 million in jewelry
Luxury vehicles, including a Rolls-Royce Wraith and Lamborghini Aventador
Cash transfers of $368,000 to The Cosmopolitan of Las Vegas Hotel and Casino
A $57,000 tab incurred at one nightclub in a single evening, part of $341,000 in total nightclub spending
Rent on his $1.4 million oceanfront condominium
Nearly $300,000 for his recent wedding at The St. Regis Bal Harbour Resort in Miami, “for which Dorfman spent $133,000 on flowers alone.”
Efforts to reach Dorfman were not immediately successful on Monday.
A U.S. District Court in Miami last week approved the FTC’s motion for a temporary restraining order that shut the company down and transferred its assets to a court-appointed receiver. The company has two weeks following Wednesday’s order to tell the court why the FTC should not retain control of the company until the civil case is concluded.
The company’s products were advertised primarily through lead-generation websites typically found in searches for health insurance, the motion states. The websites “deceptively claim that consumers who submit their contact information will receive multiple quotes for comprehensive health insurance from ‘the Nation’s Leading Carriers’ and that these policies will include benefits such as prescription drug coverage, access to doctors and specialists as well as hospital and emergency care — all for ‘low co-pays’ and ‘affordable premiums,’” the brief states.
One website, healthinsurance4me.com, included a “mock breaking news video” announcing that the defendants offer “top quality health insurance for as much as 66 percent less than Obamacare,” the brief states. The video claimed the companies’ policies included “low copays and cover items like doctor visits, access to specialists, prescription benefits, coverage for hospitalization and emergency room visits.”
The announcer closes “with this flagrantly deceptive guarantee: ‘This is not a discount health care; it’s real insurance,’” the brief states.
Another site piggybacked on President Donald Trump’s encouragement of short-term, lower-cost health insurance policies as alternatives to Affordable Care Act policies. The site was called trumpcarequotes.com and prominently featured the Anthem Blue Cross logo along with false claims to be affiliated with Blue Cross and other established insurers, the brief said.
Reading deceptive scripts, telemarketers working for the operation offer “health insurance” for a one-time enrollment fee of up to $175 as well as an ongoing monthly fee of up to $700 or more, the brief states.
Insurance-related terms like “PPOs,” “copay,” “premium” and “deductible” are used that simply do not apply to defendants’ products, the FTC said.
In phone calls with FTC agents posing as customers, telemarketers falsely said their products would cover preexisting conditions, promising one his “medical needs would be covered 100 percent,” the brief states.
But in reality, the FTC said, “the plans exclude coverage of preexisting conditions for a year and provide no coverage for prescription medications.”
Examples of misled consumers cited in the brief included a woman paying $283 a month for what she thought was an ACA-qualified plan, then bringing her “insurance” card to the pharmacy to learn it entitled her to a discount of just $3. Another woman who enrolled in a similarly priced plan tried to make an appointment with her doctor, only to find out her plan covered none of the costs of a visit.
The financial consequences of the company’s misrepresentations have been “ruinous” for consumers, the FTC said. “Consumers often complained about receiving thousands or even tens of thousands of dollars in unreimbursed medical bills, especially for emergency room visits and surgical procedures.”