More than 200,000 customers of an alleged health insurance fraud scheme marketed by a Hollywood agency will be able to sign on as class members in a nationwide lawsuit against the agency’s Tampa-based distributor.
Simple Health Plans LLC, founded by Steven J. Dorfman, remains shuttered more than two years after the Federal Trade Commission secured a temporary restraining order halting its operation and freezing its assets. A lawsuit by the FTC seeking to permanently close the company and distribute its remaining assets to purchasers of what the FTC called “junk” insurance plans is continuing. Dorfman has denied the FTC’s charges.
After details of the operation surfaced in the FTC’s complaint, seven consumers who purchased health insurance from Simple Health Plans sued the company’s distributor, Health Insurance Innovations Inc., claiming it directed, aided and abetted the marketing scheme that generated nearly $150 million between 2013 and 2018.
Michael Kosloske, founder of Health Insurance Innovations LLC, is named as co-defendant along with affiliate Health Plan Intermediaries Holdings LLC. Kosloske was terminated by his company’s board in June 2018 just a few months before the FTC sued Simple Health Plans and Dorfman. He left with about $1.06 million in severance pay and more than $40 million from his sale of company stock.
Last March, Health Insurance Innovations Inc. changed its name to Benefytt Technologies Inc., and in August it was acquired by private equity firm Madison Dearborn Partners for $625 million and delisted from NASDAQ.
On Monday, federal judge Raag Singhal certified class action status of the consumers’ suit, clearing the way for it to move forward. In his ruling, Singhal wrote that the plaintiffs met required legal standards for establishing the right of all potential victims to present their claims as a unified class.
The complaint accuses the distributor of developing the limited benefit indemnity and medical discount plans that Simple Health Plans and another agency, Nationwide Health Advisors, sold to consumers as PPO plans compliant with requirements of the Affordable Care Act.
The suit claims that Health Insurance Innovations Inc. funded the agencies’ sales operations, trained their sales agents, reviewed and edited telephone scripts used by the sales team, provided an online platform that the sales team used to quote and sell the products, collected monthly premiums, and distributed “extremely generous commissions” for the sales.
Attorneys for Health Insurance Innovations Inc. did not immediately respond to a request for comment about the certification.
The lawsuit recounts experiences of seven named Simple Health Plans customers who said they found ads for the agency while searching for affordable health insurance plans. Some of the ads included logos of Blue Cross/Blue Shield took users to websites with misleading names such as obamacare-healthquotes.com.
After submitting their personal information, the consumers were contacted by phone by sales agents who assured them their applications were being shopped among numerous PPOs of “A-listed carriers.”
Ultimately, the consumers were persuaded to buy what they were told was major medical coverage but were actually limited benefit indemnity plans and medical discount plans with benefits that paled in comparison to actual ACA-compliant plans.
One of the consumers paid $5,513 in fees and premiums before he was injured in an auto accident and billed $35,000 for medical expenses not covered by the plan he bought.
In a written statement, plaintiffs’ attorney Jason Kellogg of Miami-based Levine Kellogg Lehman Schneider + Grossman LLP, said the marketing activities “targeted the most vulnerable medical patients in the country, leaving devastating financial consequences for the victims in their wake.” He added, “thanks to this ruling, we will be able to move forward in seeking justice on behalf of those victimized.”
Consumers who purchased health care plans from Health Insurance Innovations Inc. won’t have to contact attorneys in the case, Kellogg said. They will receive a notice from the attorneys based on information in the company’s records.