Benefytt Technologies: $100 Million for Sham Health Plans Sold Through Lead Generators and Telemarketers

The bottom line: a seller that profits from its distributors' and lead generators' misconduct, and knows about it, is exposed to liability for it.

Here is what happened

The case was filed in the U.S. District Court for the Middle District of Florida (case no. 22-cv-1794). Benefytt sold association memberships and other healthcare-related products, often through telemarketing companies and lead generators. According to the FTC:

• Benefytt and third-party partners ran deceptive websites, such as "Obamacareplans.com," targeting consumers searching for Affordable Care Act (ACA) qualified plans.
• Consumers were routed to sales agents who used high-pressure tactics and claimed the plans were equivalent to qualified plans, or covered pre-existing conditions or prescriptions, when they did not.
• Benefytt bundled unwanted products, such as life or accident insurance, telemedicine and fitness programs, without clear disclosure, and sometimes kept charging after the core plan was canceled.
• Consumers calling to cancel were sometimes transferred back to the agents who sold them.
• Agents, distributors and lead generators called numbers on the National Do Not Call Registry and placed prerecorded calls to pitch the company's products or connect consumers with Benefytt agents.

The FTC alleged that the company and the two executives knew of the misconduct and continued to profit from it. It said that Benefytt did not terminate Simple Health Plans, one of its largest distributors, until the FTC sued Simple Health in October 2018.

The charges were brought under the FTC Act, the Telemarketing Sales Rule (TSR) and the Restore Online Shoppers' Confidence Act (ROSCA).

Read the FTC's complaint against Benefytt Technologies.

The settlement

The orders require Benefytt to:

1. Pay $100 million for consumer refunds.
2. Notify current customers of the complaint and let them cancel.
3. Disclose total costs and limitations before purchase, and stop misrepresenting products, including ACA compliance.
4. Get express informed consent before billing, and provide a simple cancellation method.
5. Closely monitor all companies that sell its products.

Former CEO Gavin Southwell and former vice president Amy Brady are permanently banned from selling or marketing any healthcare-related product. Brady is banned from all telemarketing. Southwell is barred from deceptive or abusive telemarketing.

In March 2024, the FTC mailed nearly $100 million in refunds to 463,629 consumers.

The law in plain English

Under the TSR, a seller can be liable for causing others to place prohibited calls on its behalf, including prerecorded calls without written consent and calls to Registry numbers. It also prohibits providing substantial assistance to telemarketers while knowing, or consciously avoiding knowing, that they are violating the rule. ROSCA requires clear disclosure and express informed consent before charging consumers online.

What this means for you

1. Audit your lead generators' websites, not just your own.
2. Monitor distributor calls and act on complaints promptly.
3. Disclose every bundled product and its price, and get consent for each.
4. Let customers cancel easily, without routing them back to the agent who sold them.