Phony Health Insurance Company Banned From Selling Health Care Products

An allegedly bogus trade association was banned from selling health care related products under a settlement that the marketing organization entered into with the Federal Trade Commission (FTC). According to an FTC release,  The settlement resolves claims that the organization lied to consumers about the products it sold and misrepresented the nature of its business.


The trade association, Independent Association of Business, allegedly developed a scheme where consumers would submit contact information through websites that appeared to offer health insurance quotes from health insurance companies. In order to obtain the so-called coverage, consumers would pay an initial fee to IAB, which ranged between $50 and several hundred dollars. Additionally, consumers would pay a monthly fee, between $40 and $1000, ostensibly to pay for the health insurance coverage. The scam, according to the settlement, was that IAB was merely selling consumers memberships in IAB and not comprehensive health insurance coverage. The program, which consumers allegedly were enrolled in, included discounts on a variety of services and products. The discounts were for services like “identify-theft protection, travel, and roadside assistance, as well as certain purported healthcare related benefits.”

Past Transgressions

The recent settlement is not the only time that IAB has been the subject of FTC action. In 2012, another group of defendants related to the company, Health Service Providers, Inc. (HSP), was banned from running a telemarketing operation related to the same IAB scheme. The HSP defendants allegedly called consumers with the contact information submitted to the health insurance websites. Under a settlement with the FTC, the HSP defendants were prohibited from selling health care related products and 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.”

IAB Settlement

The most recent IAB settlement imposes the same restrictions on a large group of defendants associated with IAB who either participated in or benefited from the scheme. In addition to the restrictions on trade, the settlement imposes a $125 million judgment.  The significant judgment will be partially suspended when the defendants surrender assets that the FTC says are valued at $2 million. The assets include $502,000 in IRA funds and personal property. The personal property that the defendants will surrender includes five luxury cars: a Lamborghini, two Mercedes, a Porsche, and an MG Roadster.

Health Insurance Scams

In recognition of the threat posed by fraudulent health insurance sales and discount programs, the FTC operates a page on its website devoted to educating consumers about some of the most common varieties of health insurance scams. Specifically, the website details the distinction between health insurance and medical discount plans. The website explains that although a medical discount plan may sound appealing and may even offer real discounts, consumers should not substitute or confuse discount plans with insurance plans. The FTC cautions that if a plan cannot point you to written information before you enroll, as a consumer you should be hesitant. Additionally, pressure to sign up before information is disclosed should be taken as a cue to find coverage elsewhere.  The FTC also warns consumers that some sales pitches are attempts to steal identity information in disguise. The suggestion of the FTC is to check out the reputability of an organization with a state insurance department, a state Attorney General, or a local business bureau before handing over any financial information.