AARP Catching Heat for Cash-Cow Insurance Policies

Well it is not only government that we need to watch, it is appears that AARP retirees may be experiencing being overcharged on policies and other services to covers royalties and fees "kick-backed" to AARP for the use of their name and endorsement. The following article was posted on the website of the Galen Institute, an organization that focuses on health and tax policy. Hat tip to Barbara Linde, Ph. D. , Lakeview, AR submitting to this information to ARRA News:

by Amy Menefee: "AARP Catching Heat for Cash-Cow Insurance Policies" - This was doubtless overshadowed by the election, but the media are noticing now: AARP is in trouble. It has come to light that the seniors' lobby group, which took in $1.2 billion last year, makes more than 40 percent of its revenue from royalties and fees -- up from 11 percent in 1999, Bloomberg reported. The source of that money? The higher prices it charges its members for AARP-endorsed insurance policies.

Bloomberg's December 5 story cited one customer who bought an AARP-endorsed auto insurance policy, while The New York Times reported on health insurance policies November 18. Customers bought the policies under the impression the AARP endorsement meant a good deal, but they discovered otherwise. The auto insurance consumer found he was paying twice the average rate, while the health insurance consumer was shocked to get a hospital bill for tens of thousands of dollars not covered by her policy.

The day before the November election, Sen. Charles Grassley (R-IA) sent a letter to AARP CEO Bill Novelli and letters to insurance commissioners in the 29 states where the health plans in question were sold. “The pitch for these products should be straight up and informative, instead of designed to leave the impression of being comprehensive when the product is, in fact, very limited and leaves consumers seriously in debt if they need intensive medical care,” Sen. Grassley said.

Sen. Grassley demanded answers about AARP's marketing practices, which prompted Mr. Novelli to call for a suspension of the policies' sales and an investigation. Bloomberg reported that Novelli "has expanded AARP's marketing to include 17 types of insurance," and that "AARP holds clients' insurance premiums for as long as a month and invests the money, which added $40.4 million to its revenue in 2007."

Journalist Gilbert Cranberg wrote that he has previously questioned AARP's arrangement with partner UnitedHealth Group and was "stonewalled." "Senator Grassley shouldn't have to do the press's work for it," Cranberg wrote. "AARP has some 40 million members. It is a powerhouse. The press should have been all over this issue long ago. The least it can do now is pay close attention to the answers Grassley gets" from AARP and the state insurance commissioners, he said. . . . [Full article]

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