OVER $165 MILLION CIVIL PENALTY HANDED OUT IN MASSACHUSETTS: Deceptive Insurance Marketing Scamming Vulnerable Consumers

Everyone in marketing loves to be creative and is looking for that edge to one-up the competition. But keep in mind that the more creative the message is and the more it moves the consumer away from the truth of what you are selling, the more problems you will have. For instance, let’s take a look at a new order out of a Massachusetts Superior court brought by the state AG’s office against three insurance companies, owned by UnitedHealth Group since 2019, HealthMarkets, Inc. and its subsidiaries, The Chesapeake Life Insurance Company, and HealthMarkets Insurance Agency, Inc. f/k/a Insphere Insurance Solutions, Inc. Their creativity crossed the line into consumer deception and will now cost them not only their reputation but a pretty penny to the tune of $165,237,562.07. They are ordered to pay $50,095,562.07 in restitution and $115,142,000 in civil penalties. WOW.

This issue had been ongoing, HealthMarkets, Inc. and two of its subsidiaries were already under a prior consent judgment out of the same court. Very brazen of them to think that they could continue to get away with this and now it is clear their actions were very intentional. Which is why there was no mercy shown in one of the largest civil penalties brought by the Massachusetts AG office.

Back in 2020 when the complaint was filed the AG at the time Healy was quoted as saying “Their business model was to dupe consumers into buying supplemental health insurance products, which they did not know about, did not want, or were misled into thinking were necessary or valuable… The misconduct here is even worse, because HealthMarkets is a repeat offender. We are suing to recover the money taken from Massachusetts residents and ensure that this never happens again.”

The 2020 complaint alleged:

• That sales agent deceptively passed off supplemental insurance as major medical insurance or as part of major medical insurance, including by hiding it in bundles with major medical insurance.
• Illegally advertising their agents as insurance advisors, when they were not licensed as advisors;
• Targeting consumers who had low incomes and were Medicaid-eligible;
• Unlawfully selling supplemental health insurance as a substitute (rather than a supplement) for major medical insurance;
• Making incomplete or unfair comparisons relating to their supplemental health insurance; and
• Deceptively manipulating consumers’ emotions in order to sell supplemental health insurance.

The court used assumed reliance in arriving at their Restitution Decision. It is stated in the order that a presumption of actual reliance requires proof that: (1) the Present Defendants made material misrepresentations; (2) the misrepresentations were widely disseminated, and (3) consumers purchased the Present Defendants’ product.  While the order acknowledges there was not enough evidence presented to show all of the acts in the complaint met the requirements outlined, the ones that were proven, were enough to be “particularly egregious”.

All states have consumer protection laws to help safeguard against these types of practices. Make sure you stay up to date on the requirements not only for your state but your industry as well. The FTC also provides a ton of readily available general marketing resources.  Be sure your creative marketing stays on the right side of the law. Check with your legal team or seek outside counsel. Read the order HERE.