The Complaint brought forth claims for violations of the Securities Exchange Act of 1934 against Health Insurance Innovations, Inc. (“HIIQ,” or the “Company”), and certain of its senior executives. The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired HIIQ common stock during the Class Period.
HIIQ, a Delaware corporation with its headquarters in Tampa, Florida, develops, distributes, and sells short-term “medical discount plans,” “limited benefit indemnity plans,” and other “health insurance products.” These HIIQ supplemental insurance products merely defray a fraction of a consumer’s out-of-pocket medical costs and are subject to strict regulation by state and federal authorities.
Specifically, the Complaint alleges Defendants: (1) falsely assured investors that HIIQ and its call centers adhered to purportedly exceptional compliance standards, claiming a compliant rate of “0.00%” on HIIQ policies and specifically attributed this exceptional performance to their “laser focus” on customer service; (2) repeatedly represented in multiple investor presentations, conference calls, press releases, and securities filings that the Company was “best-in-class,” “upholding the highest standards,” and “market leading” in compliance and customer service and that it was purportedly so strong that it was a “significant barrier to entry” to current and potential competitors; and (3) engaged in insider trading of their own HIIQ shares before the truth of their fraudulent insurance scheme was revealed. In reality, a significant portion of HIIQ’s business depended on—and stemmed from—a complete and utter fraud. An extraordinary enforcement action by the Federal Trade Commission (“FTC”) announced on November 2, 2018, and related federal court receivership proceedings have recently revealed that HIIQ’s most lucrative call center, known as “Simple Health”—which was responsible for as much as 50% of the Company’s revenue—through deceptive advertising, boiler room sales tactics, and outright lies, was “a classic bait-and-switch scam” misleading consumers into believing that they were purchasing a comprehensive Preferred Provider Organization medical insurance policy (“PPO”) that was compliant with the Affordable Care Act (“ACA”), when in fact, it was not. In truth, these plans left tens of thousand of people uninsured with thousands of dollars in unpaid medical bills and penalties for being non-compliant with the ACA. Internal HIIQ emails and other evidence also revealed thousands upon thousands of consumer complaints regarding its call centers’ deceptive sales practices demanding refunds once these customers learned the truth about HIIQ’s virtually worthless products. The news of the FTC obtaining a court order shutting down Simple Health’s operations and freezing its asset sent HIIQ’s stock price to a more than 20% free fall. A subsequent report on November 27, 2018, by the research firm Aurelius Value titled: “HIIQ Boiler Rooms, ‘Worthless’ Policies and Defrauded Families,” resulted in a further stock price decline. After the FTC shuttered Simple Health in November 2018, a series of subsequent disclosures through April 12, 2019 further detailed HIIQ’s and Simple Health’s deceptive scheme and the falsity of Defendants’ prior assurances to investors. In total, the disclosures wiped out nearly $550 million in shareholder value, as HIIQ’s stock price plummeted from its Class Period high of $63.13 per share, to a low of $23.83 per share—a decline of more than 60%. The fallout from the fraud continues to this day, as a Congressional investigation into Defendants’ fraudulent conduct is currently pending.
On May 13, 2019, the Court appointed the Oklahoma Municipal Retirement Fund and the City of Birmingham Retirement and Relief System as Lead Plaintiffs and Saxena White P.A. as Lead Counsel.
Lead Plaintiffs filed a Consolidated Class Action Complaint on July 19, 2019. Defendants filed a Motion to Dismiss on August 28, 2019, Lead Plaintiffs filed an Opposition on October 7, 2019, and Defendants filed a Reply on October 28, 2019. The Court denied the Motion to Dismiss in its entirety on November 4, 2019, stating: “the Complaint alleges an ongoing fraudulent scheme in which HIIQ developed lead-generating websites that led consumers in search of comprehensive health care plans to call center agents that HIIQ hired and trained to mislead and deceive consumers into purchasing HIIQ plans that consumers believed were ACA-compliant policies, but, in fact, were not.” Additionally, the Court stated: “Plaintiffs’ Complaint alleges an elaborate scheme to deceive consumers in which Defendants were not only involved but, to a great extent, orchestrated,” further noting the allegations of insider trading by certain Defendants before disclosure of the alleged fraud. Then on December 19, 2019, Defendants filed an Answer to the Complaint.
The briefing scheduled for Lead Plaintiffs’ Motion for Class Certification, Appointment of Class Representatives, and Appointment of Class Counsel was concluded on August 13, 2020. A telephonic hearing for this motion was held on August 25, 2020. On August 28, 2020, the Court issued an Order granting the motion.
After extensive negotiations, Saxena White successfully negotiated a settlement for $11,000,000.00 in cash, an outstanding result for the Class. The Court preliminarily approved the settlement on December 3, 2020. At the March 23, 2021 final settlement hearing, the Court granted the motions for final approval of settlement, plan of allocation and attorneys’ fees.
The deadline to submit claims is May 11, 2021.