'Sham' CA Health Insurers Must Return $800K To Consumers

CALIFORNIA — Two companies accused of selling "sham" health insurance plans to Californians have been ordered to return $800,000 to their customers for failing to comply with consumer safeguards.

On Friday, California Attorney General Rob Bonta's office announced the $1.3 million settlement between Sedera, Inc. and Sedera Medical Cost Sharing Community.

The companies reportedly billed 2,000 California customers monthly in exchange for the payment of medical services, which Bonta's office says they falsely advertised as "non-insurance" that was offered at a lower cost and did not cover essential services.

"We welcome businesses in our state, but we will not allow them to prey on our people," Bonta said.

Following an investigation conducted by the California Department of Justice, the agency determined that Sedera and SMC were in fact operating health plans. However, the companies failed to comply with many state consumer protection laws. Among other protections, those laws require health insurers to cover all essential health benefits, including preventative care — which Sedera and SMC did not.

"Sedera and SMC were able to sell their sham health insurance plans at lower costs precisely because those plans were a sham and failed to comply with state law," Bonta said.

SMC and Sedara will no longer be permitted to sell, market or operate health plans in California, according to the state. The companies will also be banned from moving its California clients to another plan or directing them to any other "cost-sharing" entities.

What's more, the companies must delete their customer lists and provide clients with termination notices. Of the $1.3 million settlement, $560,000 must be paid in civil pentalities, Bonta's office said.

This isn't the first time a company has attempted to snare Californians with deceptively cheaper health plans. In 2021, customers of HCSM reported that their health plans refused to cover treatments and pay their medical bills, Bonta's office said. In 2022, Bonta filed a lawsuit, which was settled in March of 2023 for $2.1 million.

"To my fellow Californians: please do your research and first consider applying for affordable, reliable coverage through Covered California," Bonta said.