A Tampa-based health insurance distributor accused by the Federal Trade Commission of misleading consumers into buying “sham” health insurance plans has filed for Chapter 11 bankruptcy protection.
Benefytt Technologies, which has offices in Fort Lauderdale and Sunrise, last year settled a Federal Trade Commission complaint that it participated in “deceptive, unfair and abusive acts” in connection with the sale and marketing of its memberships and related health products, including short- term medical plans, limited benefit plans and medical discount plans.
According to the FTC, the company targeted customers searching for insurance that complied with the Affordable Care Act. In agreeing to the settlement, Benefict agreed to pay $100 million to refund consumers but neither admitted nor denied the allegations.
That $100 million payment, combined with $27.5 million the company paid to settle a class-action lawsuit over related allegations and $11 million paid to settle claims by the Securities and Exchange Commission, contributed to a cash-flow problem that nearly forced the company to cease operations, Benefytt disclosed in its bankruptcy filing on Tuesday.
In addition to paying the $100 million, Benefit’s settlement with the FTC includes its agreement not to lie about its products, tell customers its plans to comply with the ACA, or charge “illegal junk fees.” The company’s former CEO and former vice president of sales were permanently banned from selling or marketing any health care product.
The SEC’s complaint accused Benefit of concealing consumer complaints about its health insurance products between 2017 and 2020 and falsely telling investors that it held its distributors to high compliance standards.
Benefytt operates a number of subsidiaries, including the direct-to-consumer platform TogetherHealth Insurance, which are all parties to the bankruptcy case. Benefytt currently employs 855 workers and operates in 44 states, its bankruptcy filing states.
Benefict’s restructuring plan, filed Tuesday in