Washington, D.C.–(Newsfile Corp. – July 20, 2022) – The Securities and Exchange Commission today announced charges against Health Insurance Innovations (HII) and its former CEO Gavin Southwell for concealing extensive consumer complaints about short-term and limited health insurance products HII offered. HII has since changed its name to Benefytt Technologies and become a private company.
According to the SEC’s order, from March 2017 through March 2020, HII and Southwell falsely told investors that HII held its insurance distributors to high compliance standards, which prohibited distributors from making misrepresentations to consumers about health insurance products offered by HII. HII and Southwell also told investors in earnings calls and investor presentations that HII’s consumer satisfaction was 99.99 percent and state insurance regulators received very few consumer complaints regarding HII. In reality, HII tracked tens of thousands of dissatisfied consumers who complained that HII’s distributors made misrepresentations to sell the health insurance products, charged consumers for products they did not authorize, and failed to cancel plans upon consumers’ requests. The order finds that the products provided minimal health benefits, did not cover pre-existing conditions, prescriptions, and hospital care, and were not considered qualifying health coverage under the Affordable Care Act, leaving many consumers with unpaid medical bills when they sought treatment.
“Access to healthcare and consumer satisfaction are increasingly important considerations to investors,” said Stacy Bogert, Associate Director of the SEC’s Division of Enforcement. “It is critical that disclosures are truthful and complete, and we will hold companies and their executives accountable for misleading investors about these factors.”
The SEC’s order finds HII and Southwell violated certain antifraud and reporting provisions of the federal securities laws and Southwell profited by selling HII stock when it was inflated as a result of the misconduct. Without admitting or denying the SEC’s findings and allegations, HII and Southwell agreed to a cease and desist order, HII agreed to pay an $11 million penalty, and Southwell agreed to pay more than $1 million in penalties, disgorgement, and interest to settle the charges.
The SEC’s investigation was conducted by John McNulty, Gosia Spangenberg, and Avron Elbaum with assistance from SEC trial counsel John Timmer, Nicholas Margida, and Olivia Choe. The case was supervised by Lisa Deitch and Ms. Bogert.
The Division of Enforcement’s Climate and ESG Task Force provided assistance in this matter. More information about the Task Force can be found here.