Misleading ads play key role in schemes to gin up unauthorized ACA sign-ups, lawsuit alleges

The government is giving away money! So say ads on a variety of social media platforms. Consumers, the ads claim, can qualify for $1,400 or even $6,400 a month to use on groceries, rent, medical expenses, and other bills. Some mention no-cost health insurance coverage.

But that’s not the whole story.

And here’s the spoiler — no one is getting monthly checks to help with these everyday expenses.

Such ads are now under scrutiny for the role they may play in helping rogue insurance agents and companies sign up tens of thousands of consumers for Affordable Care Act coverage — or switch them from their existing ACA plans — without their express permission.

The Centers for Medicare & Medicaid Services, which oversees the federal ACA marketplace, also known as Obamacare, has reported at least 90,000 complaints about unauthorized enrollment or plan-switching in the first quarter of the year.

Those numbers have also caught the attention of House Republicans, who on June 28 requested investigations by the Government Accountability Office and the Office of Inspector General at the Department of Health and Human Services.

Fraud — including from unauthorized switches by brokers, as reported by KFF Health News in recent months and noted in the congressional requests — might be part of the problem, House members wrote. They cited an analysis from a conservative group that estimated that millions of people — or their brokers — reported incorrect financial information to qualify for large ACA tax credits.

Whether advertising efforts will be part of any such investigation is unknown.

Details on how an alleged scheme used misleading ads are included in a Florida lawsuit filed in April. The suit claims that several marketing and insurance sales firms used misleading ads as part of a collaborative effort to gin up questionable, commission-earning business. The firms named in the case say the allegations are meritless.

“Telling someone they are going to get $6,400 a month in a cash card for rent or groceries or whatever else, that is a lie, that’s fraud, even if you put in a small boilerplate on the bottom trying to say something different,” said Jason Kellogg, one of two attorneys who filed the complaint in U.S. District Court for the Southern District of Florida.

Here’s how it worked, according to the suit and interviews with the attorneys who filed it: When consumers responded to the ads by phone, they were not connected with a government program. Instead, they were linked directly to insurance call centers, which paid the lead-generating firms placing the ads to transfer the calls.

At best, consumers who respond to the ads might find out they qualify for ACA tax credits, which vary in size, to help offset the premiums for zero-cost or low-cost coverage. Those payments, though, are sent directly to insurers. At worst, according to allegations in the lawsuit, consumers wind up with coverage they didn’t select and that might not meet their needs, or their existing coverage is switched to a new plan, which might have a different network of doctors and hospitals or higher deductibles and copays. The suit alleges much of this was accomplished without consumers’ “proper knowledge and consent.”

Depending on how it’s done, creating ads and gathering names to sell to insurance sales firms is not illegal, but deceptive ads are.

The Federal Trade Commission defines a deceptive ad as one that “contains a misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances to their detriment.”

Even that isn’t always clear-cut.

“I get into talks with attorneys all the time,” said Bonnie Burns, a consultant with the nonprofit California Health Advocates. “Is this language I’m seeing that I think is fraudulent — does it actually meet that test? It’s frustrating and maddening as hell.”

After looking at several ads that have appeared recently on social media — but not specifically the ones included in the lawsuit — one marketing expert had no doubt.

“This clearly crosses the line to deception,” said Charles R. Taylor, a professor of marketing at Villanova University. “It is a form of bait and switch, by leading people to think they are going to get cash payments.”

In the U.S., oversight of advertising historically falls to the FTC.

“Investigating deceptive lead generation and marketing practices is a big part of what we do around consumer protection,” said Elizabeth Scott, an FTC attorney who has worked on several recent cases, including a $195 million judgment against Florida-based Simple Health Plans, which the FTC alleged used misleading advertising and sales tactics to sell consumers low-quality coverage when they thought they were buying comprehensive health insurance.

But states also have regulatory authority. They issue licenses to insurance agents and oversee insurance carriers. Most of this crop of ACA ads, however, are from lead-generating companies, which, under some states’ rules, fall into a gray area.

An FTC spokesperson would not comment on whether the agency was looking at any such advertising issues currently.

CMS does not have regulatory authority over marketing entities doing advertising but is working with other federal agencies that do, said Ellen Montz, deputy administrator and director of the Center for Consumer Information and Insurance Oversight at CMS. It does, however, have authority over agents and brokers, who can be barred from using the federal ACA marketplace if they are found to have broken rules, including using “leads generated from advertisements that an agent or broker knows is misleading or coercive,” Montz said.

So far, the Florida lawsuit filed in April remains the most public challenge to the ACA-related advertisements.

The case was filed by Kellogg, along with attorney Jason Doss of Georgia. It alleges that several marketing firms, insurance brokerages, and privately held ACA enrollment websites knowingly relied on misleading advertisements — and told their call center staffers to be vague about the subsidies they promised.

“It’s not about selling people health insurance. It’s about tricking people into enrolling in health insurance,” Doss said.

Consumers often didn’t know they were being signed up for coverage, the lawsuit alleges, and some were switched multiple times. While unscrupulous agents or call centers then gained the monthly commissions, consumers faced a range of financial and other problems, including losing access to their doctors or treatments, the suit claims.

Named as defendants are TrueCoverage and Enhance Health, which operate insurance call centers in Florida and other states; Speridian Technologies, a New Mexico-based limited liability company that owns and controls TrueCoverage; and Number One Prospecting, doing business as Minerva Marketing, which is also a lead-generating company. The lawsuit also names two people: Brandon Bowsky, founder and CEO of Minerva; and Matthew Herman, CEO of Enhance Health.

TrueCoverage spokesperson Catherine Riedel told KFF Health News the firm approves all ads from lead-generating marketing firms and “has not knowingly approved any misleading content.” Furthermore, “in our research, we haven’t found anyone who got enrolled connected to misleading content.”

Olga Vieira, an attorney representing Enhance Health, said in a statement to KFF Health News: “This lawsuit is without legal merit and we will vigorously defend against these baseless claims.” Attorneys representing the other defendants did not respond to requests for comment.

The suit was filed on behalf of agents who lost business when their clients were switched and consumers like Texas resident Angelina Wells, who responded to an advertisement she saw on Facebook in November that touted $6,400 cash cards.

“Wells never received the cash card she was promised,” the lawsuit says, “and she did not recall enrolling into the health plan at all.”

From November to January, call center agents switched Wells at least three times, to three insurance carriers, without her consent, the lawsuit says.

Doss said agents, armed with only a person’s name, date of birth, and state of residence, can make switches through private-sector direct enrollment websites that integrate with the federal healthcare.gov marketplace.

While dozens of these enrollment sites operate with CMS approval, the lawsuit focuses mainly on two: Benefitalign, which was developed by the parent company of the defendant TrueCoverage, and Jet Health Solutions, which was purchased by the other call center defendant, Enhance Health, in mid-2023.

Having access to proprietary enrollment platforms allowed the call centers to sign up “the maximum number of consumers in the shortest amount of time without outside scrutiny,” according to the lawsuit. TrueCoverage spokesperson Riedel said all transactions on private enrollment sites “are audited and logged” by the federal marketplace, so “it is not true” that such transactions lack scrutiny. Enhance Health didn’t provide specific comments on this topic.

The lawsuit says Enhance launched in 2021, not long after receiving a $150 million capital infusion from Bain Capital Insurance, a private investment firm. Initially, it planned to market and sell Medicare Advantage policies, but it switched to ACA policies after rules went into effect in 2022 allowing low-income people to enroll in coverage year-round.

“The biggest problem is that these agencies are trying to do a high-volume ACA business model that targets poor people,” Doss said, based on assertions made in the lawsuit. “In order to get those people to enroll, they have to entice them using false advertisements.