‘Outright lies’ duped insurance customers

Investigation uncovers Simple Health scam

The ads promised affordable health insurance, and distressed consumers — many who had just lost their jobs and couldn’t afford spiraling premiums for Obamacare — clicked on them and left their names and phone numbers.

What they didn’t know was that providing their contact information or calling a number on a legitimate-looking website opened the door to being victimized by a sophisticated South Florida-based marketing scam built on phony compassion, slippery language, and outright lies, according to a

months-long investigation by the Federal Trade Commission.

Details of the alleged deceptions fill 1,631 pages filed in U.S. District Court in Miami documenting the FTC’s investigation into Hollywood-based insurance agency Simple Health Plans LLC and its numerous satellite companies.

The pages tell story after story of Simple Health’s sales reps leading customers to believe they were buying health insurance plans that covered pre-existing conditions and visits to primary care doctors and specialists, and provided co-pays for procedures, prescription drugs and other essential health benefits as required under the Affordable Care Act.

Instead, what consumers received were a package of discount plans and limited-benefit hospital indemnity coverage that paid a maximum of $3,200 a year.

On Oct. 31 — just as Simple Health Plans was gearing up for the Nov. 1 start of open enrollment for legitimate insurance — the FTC obtained a preliminary injunction seizing the company’s assets and shutting it down while the agency pursues a civil suit seeking its permanent closure.

Masterminded by highliving Steven J. Dorfman, the company has collected more than $150 million in commissions from products sold to tens of thousands of customers since 2013, the FTC is charging.

Dorfman, in court filings and a November statement to the South Florida Sun Sentinel, denied the FTC’s charges and said he looks forward to defending himself.

Documents filed by FTC in open court in support of the injunction include affidavits from bilked customers, interviews with former employees, an analysis by a health insurance expert, transcripts of sales pitches with undercover FTC investigators posing as customers, and the sales script that convinced consumers to provide their credit card information for what they believed was real health insurance.

As a whole, the documents lay out a formula to mislead customers.

The lure

Consumers searching the Internet would turn up websites claiming to provide information about obtaining comprehensive health insurance, using terms such as ACA (Affordable Care Act), Medicare, Obamacare, and Obamacare Marketplace.

Simple Health owned many of the sites, while others were third-party sites that earned commissions through referrals. Some included logos of major health insurance providers such as Blue Cross Blue Shield, Aetna and Cigna, while at least one carried the headline, “We Quote ALL Major Health Insurance Carriers.”

Once consumers submitted their contact information, Simple Health Plans’ sales reps would quickly reach out by phone.

The reps knew the consumers were ripe for exploitation, according to Terena Baker, one of about 50 agents who worked in the company’s Hollywood call center.

“Virtually every consumer I spoke to while employed at Simple Health was in search of a major medical insurance policy as well as some assurance that the policy would cover various pre-existing conditions and medications,” Baker said in a signed declaration.

Consumers that Baker spoke to believed they could obtain ACA-qualified insurance from Simple Health but “as far as I knew, Simple Health did not offer ACA-qualified plans,” Baker said. “Moreover, most consumers I spoke to would not be able to afford a major medical insurance policy or qualify for one.”

The script

On April 10, undercover FTC investigator Kenneth Hawkins told a Simple Health salesman named “Frank” he wanted a “full medical health insurance policy” for him and his wife.

Frank responded, “What I’m going to try to help you find is a PPO. A PPO is going to allow you to keep your doctors, go to any hospitals you want, and so you won’t be referred or see a specialist. You get a plan that has prescriptions and lab coverage … and we can get you also a policy with a low outof-pocket expense, that will be a plus.”

After placing Hawkins on hold, Frank returned to the line with “good news.”

“We got you approved as a PPO with an A-plus-rated carrier, which is going to be through First Health. It’s a nationwide PPO, so you can virtually use it at any inpatient or outpatient facilities nationwide.”

“What you receive with the policy is going to be doctor visits, diagnostic testing, so blood and lab work. Medications will be covered, medical, surgical, and hospital coverage. The good thing with this PPO is that it has a zero deductible, so you don’t have to come out of pocket before your plan kicks in. It’s a first-dollar coverage plan.”

He went on to quote dollar amounts, including a monthly premium of $313.63.

While closely following a sales script provided by Simple Health, few of the statements by Frank — or other sales reps whose pitches were transcribed in the investigation documents — were true, according to an affidavit by Dr. Brian Miller, an adjunct assistant professor at the KenanFlagler School of Business at the University of North Carolina at Chapel Hill and an internal medicine resident at MedStar Georgetown University Hospital.

Simple Health’s plans “are not PPO insurance,” Miller wrote. “In a PPO, the plan contracts with a broad range of providers [physicians, health systems], designated as the ‘preferred’ network. A plan member can use any of the preferred providers, typically with favorable co-insurance, copay, and count towards a deductible.

“Simple Health’s plans have no preferred network with favorable contracting terms, are therefore not tiered, and cannot be considered a PPO,” Miller wrote.

As to the sales reps’ claims to be offering its customers health plans with “no deductible, no co-pay and no co-insurance,” the terms are irrelevant because they pertain to health insurance, and what Simple Health was selling was not health insurance, Miller said.

“If it’s not actually insurance, they can say that,” said Donna Rosato, senior editor of the Money team for Consumer Reports who frequently writes about health insurance issues, in an interview with the Sun Sentinel.

Baker said she was one of the few agents “who did not use outright lies and deception to close deals.”

Many agents bragged to each other about their lies, she said. “Management tolerated this conduct and rarely, if ever, disciplined employees for engaging in it,” Baker said.

The switch

Once consumers gave their credit card numbers, they were told the next step was the recorded “verification process.” In that step, the customer was transferred to another representative who read a long series of disclaimers that often contradicted what the sales reps said during the sales stage.

If the customers got to the end of the verification process and still said “yes,” the sale was finalized.

Anticipating that statements in the verification scripts would prompt questions, sale reps coached customers not to ask any questions during the readings, or the lengthy verification recitation and recording would have to be restarted.

A sale rep named “Peter” told one of the FTC’s undercover investigators: “If you can, write down any questions that you have, get through the verification and then give me a call back once you’re done. That would be the easiest way so you don’t have to keep restarting the verification from the beginning.”

Recognizing that what was being described during this stage was not actually comprehensive or ACAcomplaint health insurance, some customers bailed out of their purchase at this point, hoping their credit cards would not be charged.

Others said “yes” to every question, confused by the rapid pace and technical terms, and believing their sales reps’ assurances that the disclaimers were merely a formality.

The realization

After her purchase was complete, Dawn Banski began to open the attachments to the welcome emails she received.

“[I] saw a document that referenced life insurance, which I had no idea I had purchased and certainly did not want to be paying for,” the New Jersey woman said. “This email listed several products that it said I was enrolled in, and none of them sounded like the major medical health insurance I believed I had purchased. “At this point, I was very concerned about my purchase, and began to wonder if I had been the victim of fraud.”

After failing to reach her salesman, Banski contacted her bank, disputed the charge and received a refund.

“I feel that Lee from Simple Health spent time with me on the phone, building up trust, only to lie to me about what the company was selling,” she said.

After her “health insurance” card arrived, Dawn Hill of New Mexico went to Walgreens to fill her prescription. “The pharmacist seemed confused by the card, and after some deliberation with the staff, I was told that this was not valid health insurance, but some sort of discount plan. This card could get me three dollars off the total prescription price, nothing more.”

She left without the medication, which had a retail cost of about $70. When she called the Simple Health rep who sold her the policy, “he never answered my several phone calls or the voicemails I left.”

Told she and her husband would be covered for hospital visits with no copay and no deductible, Gertrude Slawson of California was later shocked when she received bills totaling $61,000 for two emergency room visits. “I discovered that the insurance policy I was sold by Simple Health was considered a gap insurance policy and its terms were nothing like what had been explained by Simple Health.”

According to Dr. Miller, indemnity plans are often used as “wrap” or “gap” plans to provide supplemental coverage for patients with traditional plans with high deductibles and co-insurance. They were never meant to replace traditional coverage.

Simple Health customers were told during the initial sales calls that they could cancel their memberships during their first 30 days for full refunds, and the FTC documents indicate the company did provide refunds when requested — but not without a last-ditch effort to convince them they were giving up valuable insurance.

Lovely Seraphin, who worked in customer service positions in the Hollywood office from January 2015 through May 2017, said her department received between 2,000 and 3,000 complaint calls each day. Nearly all were from consumers “who had been misled about the benefits they would receive.”

“Using a variety of scripted ‘rebuttals,’ we tried to persuade clients that their limited benefit plans were actually better than they seemed,” Seraphin said. “In my opinion, these rebuttals were misleading.”

The solution

Forced to renew health insurance every year in an environment plagued with annual price increases and structural changes, consumers are understandably confused about products and terminology, said Consumer Reports’ Rosato.

Consumers can try to avoid being scammed by doing more homework on the agents that want to sell them insurance.

Several qualifying life events will enable consumers to buy ACA-compliant insurance outside of the open enrollment period, including having a baby, getting married, moving to a different ZIP code or county, or losing employerprovided coverage.

On Healthcare.gov, consumers can search for local agents and brokers under the FindLocalHelp tab, Rosato pointed out.

“If you want to work directly with an insurance broker, ask for recommendations from friends or family,” she said. “Make sure it’s an independent agent who works with a number of insurance companies and isn’t just pushing product from one company. Ask how the agent makes money. Typically they earn commission based on a percentage of the premium you pay. They may make more depending on the plan you choose which may not necessarily be the right one for you.”