Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Health Insurance Telemarketers Settle FTC Charges, (Feb 20, 2013)

By William Zale, J.D.

Telemarketers who allegedly tricked consumers into buying purported health insurance are permanently banned from selling healthcare-related products under a settlement with the FTC. The case is part of the FTC’s ongoing efforts to crack down on those who prey on vulnerable consumers seeking health insurance, including the uninsured, the unemployed, and those with pre-existing medical conditions.

In its September 2012 complaint, the FTC charged Roy D. Hamilton and his wife, Judy M. Hamilton, and their companies, Health Service Providers, Inc., Magnolia Health Management Corp., Magnolia Technologies Corp., and Fav Marketing Inc. (HSP defendants), with fraudulently selling bogus health insurance for the Independent Association of Businesses (IAB). The HSP defendants allegedly called consumers who had submitted their contact information to websites that claimed to offer quotes for traditional health insurance or equivalent coverage. According to the FTC, after paying an initial fee ranging from $50 to several hundred dollars and a monthly fee ranging from $40 to $1,000, consumers eventually learned they had not purchased comprehensive health insurance, but were deceived into buying an IAB membership that supposedly provided discounts on services such as golf, travel, and some limited health related services and insured benefits.

In addition to the ban against selling healthcare-related products, the settlement order prohibits the HSP defendants from misrepresenting material facts about any goods or services, selling or otherwise benefiting from consumers’ personal information, and from violating the FTC’s Telemarketing Sales Rule, including calling consumers on the Do Not Call Registry. The order also imposes an $11.8 million judgment that has been suspended following the HSP defendants’ surrender of assets to the FTC.

Litigation continues against the remaining defendants behind the allegedly fraudulent health insurance scheme: IAB Marketing Associates LP, Independent Association of Businesses, HealthCorp International Inc., JW Marketing Designs LLC, International Marketing Agencies, LP, International Marketing Management LLC, Wood LLC, James C. Wood, James J. Wood, Michael J. Wood, and Gary D. Wood. The FTC has also sought to amend its complaint against the remaining defendants in the case, adding two individuals as relief defendants who allegedly benefitted from the scheme but did not participate in it.

The Commission vote approving the consent order and authorizing the staff to file the amended complaint was 4-0-1, with Chairman Leibowitz not participating. The FTC filed its motion to amend the complaint on February 13, 2013, and the consent order was entered by the U.S. District Court for the Southern District of Florida on February 19, 2013.

Companies: Health Service Providers, Inc.; Magnolia Health Management Corp.; Magnolia Technologies Corp.; and Fav Marketing Inc.

News: ConsumerProtection FederalTradeCommissionNews