FTC Obtains $195M Judgment Against Simple Health For Selling ‘sham’ Insurance

Dive Brief:

• The government has obtained a $195 million judgment against Simple Health after a federal judge agreed that the Florida company deceived tens of thousands of consumers into purchasing “sham” health insurance.
• The Federal Trade Commission filed a complaint against Simple in 2018, arguing that the issuer misled consumers into believing they were purchasing comprehensive insurance coverage that would cover preexisting medical conditions, prescription drugs, hospital care and other important medical services. Instead, consumers paid as much as $500 a month for what was essentially a medical discount membership with limited benefits, leaving them on the hook for thousands of dollars in unexpected bills.
• A federal judge found in favor of the FTC last week and banned Simple, its CEO Steven Dorfman and related entities from selling or promoting healthcare products in the future.

Dive Insight:

The Florida district court judge’s decision closes a case that’s wound on for half a decade, though Simple and Dorfman could still appeal.

In the order, Judge Darrin Gayles called Simple’s actions a “classic bait and switch scheme — aided by rigged internet searches, deceptive sales scripts, and predatory practices.”

In the case, the FTC successfully argued that Simple and its affiliates used deceptive marketing to entice people searching for health insurance to sign up for its shoddy products, including websites that included the logos of trusted and well-established insurance brands like Blue Cross and Blue Shield.

Simple’s telemarketers also used sales scripts that lied about what the company would provide, and were purposefully written to create a sense of fear and urgency in consumers, according to the order.

From 2014 to 2018, Simple brought in $180 million in commissions from the “premiums” consumers paid for their plans, the FTC found. But consumer harm extended beyond money paid, Gayles concluded. Many Simple customers couldn’t afford medication or medical procedures and suffered as a result, while others incurred medical expenses “sometimes in the hundreds of thousands of dollars,” according to the order.

One of the defendants, Simple Health’s chief compliance officer Candida Girouard, agreed to settle the charges against her in February 2021.

However, litigation against Simple Health, five related entities and Dorfman continued until Friday.

Along with banning Simple and Dorfman from participating in the business of healthcare, the court also ordered all of Simple Health’s assets — which have been frozen since 2018 — be liquidated and turned over to the FTC.

The government said it would use the money to refund Simple Health’s customers.

It’s the latest government action against the now-defunct Simple. During its time in operations, the company was investigated, issued cease and desists or censured by regulatory bodies in Florida, Indiana, Nebraska, Montana, Pennsylvania and Massachusetts. And, in February 2022, Dorfman, Girouard and Simple’s head of sales were indicted for conspiracy to commit fraud in Illinois.

The judgment against Simple hits at the heart of criticism against association and short-term health plans, which Republicans argue is a valuable alternative to pricier coverage that complies with the Affordable Care Act’s consumer protections.

The Trump administration in 2018 made it easier for consumers to stay on the coverage for a longer period of time.

Opponents of the coverage, including Democrats and many state governments, point to evidence the plans discriminate against people with preexisting conditions and women, and frequently mislead consumers as to the breadth of the coverage they’re getting for their money. The Biden administration proposed a rule to roll back the increased duration of short-term plans last year, though that rule is not yet final.