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FTC cracks down on health insurance scam; bans bogus trade association

Insurance Forums Staff

A group of marketers who allegedly tricked consumers into buying phony health insurance are permanently banned from selling healthcare-related products under a settlement with the Federal Trade Commission.

The settlement, announced by the FTC on Oct. 14, resolves claims that the defendants, who operated as the bogus trade association Independent Association of Businesses (IAB), preyed on consumers who sought health insurance.

Consumers submitted their contact information to websites purportedly offering quotes from health insurance companies. They paid an initial fee ranging from $50 to several hundred dollars, and a monthly fee ranging from $40 to $1,000 purportedly for comprehensive health insurance coverage, but instead they were enrolled in an IAB membership. The program included purported discounts on services such as identify-theft protection, travel, and roadside assistance, as well as certain purported healthcare related benefits, including limited discounts and reimbursements on visits to certain doctors or hospitals, subject to broad exclusions and limitations.

In 2012, the FTC charged the IAB defendants and those who ran IAB’s largest telemarketing operation with violating the FTC Act and the FTC’s Telemarketing Sales Rule (TSR). A federal court halted the operation until the case was resolved. A settlement order announced in 2013 bans the telemarketing defendants from selling healthcare-related products.

The settlement order announced today permanently bans the remaining defendants from selling healthcare-related products. They are 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, his sons, James J. Wood and Michael J. Wood, and his brother, Gary D. Wood. It also resolves the FTC’s claims against relief defendant Tressa K. Wood, James C. Wood’s wife, who benefitted from but did not participate in the alleged scheme.

The order also prohibits the defendants from violating the TSR, misrepresenting material facts about any goods or services, and selling or otherwise benefitting from consumers’ personal information.

The order imposes a $125 million judgment that will be partially suspended once the defendants surrender assets valued at almost $2 million, including $502,000 in IRA funds and personal property that includes five luxury cars (a Lamborghini, two Mercedes, a Porsche, and an MG Roadster). A separate settlement order requires relief defendant Avis. K. Wood to pay $60,000 from an IRA account that was funded by the defendants’ allegedly unlawful activities.

The Commission vote approving the proposed stipulated final order was 5-0. The order was entered by the U.S. District Court for the Northern District of Texas, Dallas Division on October 10, 2014. The Commission vote approving the proposed stipulated final order against Avis S. Wood was 5-0, and it was entered by the U.S. District Court for the Northern District of Texas on August 8, 2014.

To learn more about these kinds of scams, read the FTC’s Discount Plan or Health Insurance?



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