FTC Acts to Halt Medical Plan Scheme that Targeted Vulnerable Consumers
Oct 10, 2012 - 3:12:21 PM
IAB Scheme Allegedly Bilked Millions of Dollars from Consumers Seeking Health Insurance
(HealthNewsDigest.com) - The Federal Trade Commission charged a telemarketing operation with bilking millions of dollars from thousands of consumers by tricking them into buying what they believed was comprehensive health insurance, when in fact they had paid for something decidedly less. At the FTC’s request, a federal court stopped the defendants from marketing or selling any products or services related to medical discount plans or health-related insured benefits, pending resolution of the case.
“The FTC is committed to cracking down on those who prey on vulnerable consumers, including the unemployed, uninsured, and consumers with pre-existing medical conditions, by falsely claiming to offer coverage that is generally accepted by medical providers across the nation,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection.
According to the FTC’s complaint, the defendants contacted consumers who had submitted their contact information to websites that purported to offer quotes and plan information from health insurance companies. They charged consumers an initial fee ranging from $50 to several hundred dollars, and a monthly fee ranging from $40 to $1,000. But instead of providing comprehensive health insurance, the defendants sold consumers membership in an obscure “trade association” called Independent Association of Businesses or IAB, that provides purported discounts on services, including golf, travel, and limited health care services, and some type of insurance benefits, such as hospitalization and disability insurance.
In recent instances, the defendants behind the telemarketing scheme allegedly falsely stated that their medical benefits plan is affiliated with state-sanctioned healthcare programs, or that it is a qualified health insurance plan under the Patient Protection and Affordable Care Act.
The FTC complaint alleged that the defendants’ telemarketers called hundreds of thousands of telephone numbers on the National Do Not Call Registry and did not pay the required fee for access to numbers listed on the Registry. They also allegedly failed to promptly connect consumers to a sales representative and delivered prerecorded messages to consumers who had not agreed in writing to receive such calls. The telemarketers also failed to clearly disclose the seller’s identity or inform consumers that they were selling association memberships, and repeatedly called consumers who had told them to stop calling, according to the complaint.
The defendants who sold the supposed health insurance are IAB Marketing Associates LP, Independent Association of Businesses, HealthCorp International Inc., JW Marketing Designs LLC, International Marketing Agencies LP, International Marketing Management, LLC, and Wood LLC, each also doing business as IAB, and the individuals who controlled them, James C. Wood and his sons, Michael J. Wood and Michael J. Wood, and his brother, Gary D. Wood. Their co-defendants, who ran IAB’s largest telemarketing operation, include Health Service Providers Inc., Magnolia Health Management Corporation, Magnolia Technologies Corporation, and Fav Marketing Inc., each also doing business as Health Service Providers, and the individuals who controlled them, Roy D. Hamilton and his wife, Judy M. Hamilton. The defendants are charged with violating the FTC Act and the FTC’s Telemarketing Sales Rule.
The complaint stated that in a similar case in August 2011, the FTC and the State of Tennessee charged several defendants with fraudulently marketing bogus medical plans, which led to a shutdown of United States Benefits (USB), a Nashville, Tennessee, telemarketing company. As stated in the complaint announced today, evidence in that case showed that USB was a key telemarketer of the IAB “plan” that generated millions of dollars for the defendants who controlled IAB.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.
To learn more about these kinds of scams, read the FTC’s Medical Discount Plans and Is It Really Health Insurance? Making Sure You Get What You Pay For.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. The case will be decided by the court.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call
1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
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