FTC secures $195 million judgment against Hollywood-based company over ‘sham’ health insurance

More than five years after it was shut down, a Hollywood-based health insurance agency has been permanently banned from telemarketing and selling health-care products.

The Federal Trade Commission announced that it has obtained a $195 million judgment against Simple Health Plans LLC and its CEO Steven J. Dorfman over charges they deceived customers into purchasing “sham” insurance plans that they were falsely told complied with Affordable Care Act requirements.

A federal judge in Miami on Wednesday granted an FTC motion for summary judgment in the case. The judgment, based on the FTC’s charges that the defendants violated its Telemarketing Sales Act, bans Simple Health, Dorfman and five related entities from telemarketing and from marketing, promoting, selling or offering any healthcare products.

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

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

Meanwhile, Dorfman, and John A. Sand, the company’s former vice president of sales, are currently on trial in the Southern District of Illinois facing felony charges mail and wire fraud related to the operation.

An indictment issued on Feb. 23, 2022, alleges that Simple Health sold policies to more than 400,000 people across the country, generating revenue of more than $190 million between 2012 and 2018.

According to court records, the jury was scheduled to convene on Monday after the plaintiffs and defense made final arguments on the 10th day of the trial.

Dorfman and Sand have denied wrongdoing in the criminal case, and Dorfman fought against the FTC charges since 2018.

A third defendant, Candida Girouard, Simple Health’s Chief Compliance Officer, agreed in February 2021 to settle the FTC’s charges 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 found out were limited indemnity plans that have a low cap on the amount of medical expenses they cover. After those caps are reached, prosecutors say, the patients are responsible for paying 100% of remaining medical expenses.

But sales representatives were required to tell prospective customers that they were buying low-cost insurance that would cover preexisting medical conditions, prescription drugs, primary and specialty care treatment, inpatient and emergency hospital care, surgical procedures, and medical and laboratory testing.

According to FTC filings, Simple Health lured customers by creating a network of deceptive lead generation websites that claimed to provide comprehensive information about government-sponsored health insurance policies. The sites misleadingly featured the logos of the 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 cost up to $500 a month. They were told the plans were widely accepted by doctors in their geographic areas and, in many cases, required no copays or deductibles, the FTC said.

Customers learned they’d been scammed only after they underwent expensive medical procedures and found out they weren’t covered, the FTC said.

A federal judge in South Florida shut down the operation by issuing a temporary restraining order on Nov. 1, 2018, as open enrollment for ACA health insurance plans was getting underway.

The judge’s order in the FTC case on Wednesday stated 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, according to the order.

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

How much of the $195 million that Simple Health was ordered 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, including three luxury automobiles purchased with proceeds of the operation.

Those included a 2013 Land Rover Range Rover and a Rolls-Royce Wraith and 2012 Lamborghini Aventador that Dorfman and his then-bride Izabella Frietas were photographed in front of during a $300,000 wedding ceremony in Bal Harbour in March 2018, records submitted by the receiver show. 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 repay customers $100 million while neither admitting or denying allegations it participated in “deceptive, 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 “J.J.” Walker.

But the $100 million payment, combined with $27.5 million paid to settle a class-action lawsuit and $11 million paid to settle claims by the Securities and Exchange Commission 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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