American Retired Seniors

Crack opens with Senate Finance Committee’s ranking member demanding answers to questions about misleading marketing of insurance by AARP.  Reported by http://www.seniorjournal.com/Nov. 19, 2008. The wheels may be about to come off the AARP train that has pulled millions of older Americans along the path of believing the organization is their benefactor and exists only to protect their welfare. The challenge came quietly in a news release from the office of Senator Charles (Chuck) E. Grassley (R-Iowa) on Nov. 3, the day before the election. As a result the $1.2 billion dollar a year institution has announced some of the insurance products it hypes to members have been taken off the market and it has hired an independent expert to investigate the charges by Sen. Grassley.

According to a New York Times report yesterday, the AARP makes about 40 percent of its money from royalties it is paid for endorsing products, which normally bear its name. Sen. Grassley’s office found some of the insurance programs marketed by AARP with UnitedHealth Group too deceptive in their marketing.

Sen. Grassley has asked the AARP to account for the way its marketing materials for a product it calls health insurance fails to limit policy holders’ exposure to the potentially high cost of a serious illness. Grassley said the AARP materials include examples of medical expenses, but the examples are “misleading and do not reflect how the policy would actually work in a typical situation.”

“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,” Grassley said.

“Individuals shopping in the health insurance marketplace shouldn’t be taken advantage of. A big time advocate for health security should not target under- and un-insured Americans with misleading marketing. Consumers deserve better. It’s not better than nothing to encourage people to buy something described as ‘health security’ when there is no basic protection against high medical costs.”

Grassley has also written to state insurance commissioners to ask if they’ve received complaints about the AARP policies or other limited benefit policies. Twenty-nine states recently entered into a settlement with the Mega Life and Health Insurance Company for actions related to the misleading marketing of those policies which are also limited benefit policies similar to AARP’s.

The ranking member of the Senate Finance Committee said his inquiry was prompted by the experience of a cancer patient treated at M.D. Anderson Cancer Center in Houston, who was forced to produce tens of thousands in payments up front before she would be treated.

Lisa Kelly’s health policy was an AARP limited benefit policy. Grassley said his review of the health policy led to the conclusion that the marketing materials are misleading and would cause an average person to believe he or she is buying real insurance when the coverage is not insurance.

“At issue are insurance plans that were sold by UnitedHealth and carry the AARP brand. More than a million people have bought the policies, which have names like AARP Medical Advantage, Essential Plus and Hospital Indemnity Plan,” according to the New York Times Report by .Robert Pear.

Questions about non-profit status

Another crack in the AARP dam emerged this morning with an opinion piece by Des Moines Register, published in Grassley’s home state of Iowa, which said “Hallelujah” in referring to the senator’s challenge.

But, that newspaper is not satisfied with just the questioning about these insurance policies and adds, “And once Grassley gets to the bottom of these health plans, he should look into the group’s nonprofit status.“

“AARP’s Web site describes the group as ‘a nonprofit, nonpartisan membership organization’ that works in the interest of older Americans. Yet every time you turn on the TV, AARP is advertising an insurance product, making it look more like a business than an entity worthy of tax-exempt status,” the opinion piece adds.

Many have questioned the claim that AARP is a “membership organization,” too. Many older Americans think they have a membership – like a membership in the Rotary Club – but actually it is paid membership like shoppers pay at Costco or Sam’s Club for the privilege of shopping there. When is the last time you voted on the president of AARP?

“Ensuring the protection and keeping the trust of our members drives all that we do at AARP,” said AARP’s CEO Bill Novelli, in his response to the Grassley investigation.

AARP is also known as a large and powerful lobby in Washington and many state capitols. The recent New York Times article even referred to the group as, “the lobby for older Americans.”

Yet, no one seems to question how they got this authority from the older Americans. Some are, however, beginning to question if these lobby activities are primarily aimed at keeping their giant commercial activity flourishing. This giant business, which claims to represent all Americans age 50 and older, markets many types of insurance, travel services, mutual funds, medical supplies, credit cards, magazines and more.

AARP’s Novelli said, “We have extremely high standards for the provider products that carry the AARP name. No one cares more about helping people stay healthy and secure as they age than AARP. Our organization was founded to serve older Americans and help them get access to the health care they need. That mission continues to drive this organization today through our public interest work, our membership services and our leadership in the marketplace.”

There may be more of this for AARP to explain in the future but for now they must answer the following questions from Sen. Grassley by November 24.

The Questions for AARP

1. The AARP marketing materials for the supplemental limited benefit policies describe them as “essential benefits you deserve,” as “best-in-class products for people age 50 and over,” “the security you want,” and “a good option for anyone unable to afford or qualify for major medical insurance.”5

1. Please describe the extent to which AARP markets these policies, particularly the supplemental policies, to those who have no other form of insurance coverage.
2. Please provide AARP’s rationale for marketing limited service coverage to this population and what steps, if any, that AARP takes to ensure that potential purchasers of these products are not misled or left with the impression that these policies provide comprehensive coverage.
3. Please provide any scripts, manuals, or other guidance given to AARP employees or other individuals responsible for answering calls to AARP regarding insurance policies.
4. Please explain why two of three AARP representatives presented this coverage as the only plan choice to the committee’s investigations staff and why they characterized this coverage as “good health insurance.”
5. Please explain what coverage these policies are intended to “bridge” and what AARP means by that term.
6. Please explain why AARP representatives would suggest, as their first recommendation to a person seeking comprehensive health insurance, a policy AARP describes as “supplemental” coverage.

2. Please provide a detailed description of any sales commissions, inducements, incentives, or other compensation offered to agents for the sale of each of the AARP insurance products.

3. Please provide to the Committee a list of complaints received by AARP by purchasers of either the Gold, Silver, and/or Bronze EPHIP/MAP policies from the time of their inception. Please be sure to describe the nature of the complaint, the current status of the complaint, and the resolution reached, if any.

4. According to the AARP website and other materials, AARP markets a number of health insurance policies to its members.

1. Please provide a complete list of those policies, the number sold each year from inception to the present, the monthly premium cost in each of those years, and the revenues that AARP receives for the sale of each type of policy.
2. Please also provide a breakdown of the number of policies sold by state for each of those years and provide a description of the characteristics of those who purchased these policies including their age, gender, annual income (if available), and whether the policyholders are known to carry other health coverage in addition to the AARP policy itself (e.g., Medicare). How many of these specific policies were sold? Please provide a state-by-state distribution of the sales of these policies.

5. Please describe in detail whether and to what extent AARP benefits financially from the sale of these policies and, if so, please provide the annual gross and net revenues to AARP from the point in time when the policies were first marketed up to the present.

6. The AARP “HIP” policies are marketed to individuals who are over age 65 and enrolled in Medicare. My understanding is that these policies offer cash payments to Medicare beneficiaries when they obtain medical care and that these cash payments are made in addition to Medicare’s payment for services and in addition to Medicare supplemental or Medigap coverage the beneficiary may have purchased. So, for example, if a beneficiary with a type C standard Medigap policy is hospitalized for three days, that Medigap policy covers the beneficiary’s out-of-pocket costs in full for that hospital stay and then the AARP “HIP” policy makes a cash payment to the beneficiary on top of that. In a case like this the beneficiary would incur a net financial gain from seeking medical care.

1. Please provide the rationale for marketing these policies to seniors who may already have purchased a Medicare supplemental policy and the policy rationale for offering such a product.
2. In addition, as surveys conducted by America’s Health Insurance Plans (AHIP) indicate that purchasers of Medicare supplemental policies are disproportionately rural and of low or moderate incomes, please provide a description of what safeguards, if any, that AARP has in place to prevent vulnerable seniors from needlessly purchasing and incurring costs for duplicative coverage.
3. Provide a breakdown of the number of policies sold to seniors over age 65 in each of the previous five years.

7. According to AARP materials, the “HIP” policies, which are marketed to Medicare beneficiaries, provide a prescription drug benefit that covers 50 percent of the cost for medications provided after a hospital stay up to an annual maximum of $500.

1. Please provide an explanation of how these policies are marketed and sold to Medicare beneficiaries and whether the coverage pays cash for prescription drugs that may otherwise be covered under Medicare Part
2. Please provide what steps, if any, that AARP takes to comply with the true out of pocket (TrOOP) limits established under Part D.

 This links to a PDF package of all the attachments footnoted in the letter sent by Grassley click here.

Filed under: Senior Finances and Economy