The American Association of Retired Persons (AARP) was founded to represent the interests of close to 40 million seniors. Over time, the group has become one of the most powerful lobbying interests in the country. And you’ve got to hand it to them—for an organization that bills itself as an advocacy group for the elderly, it sure knows how to rake in the profits, making billions off the backs of the very people it purports to help.
From 2010 through 2018, the AARP received approximately $5 billion in profits selling Medigap supplemental insurance to seniors. Ironically enough, however, AARP doesn’t expend much effort “selling” that product at all. Instead, the organization contracts with UnitedHealthGroup, the nation’s largest health insurer, to offer Medigap policies to seniors under the AARP brand.
Even though UnitedHealthGroup does virtually all of the work to market and sell Medigap insurance policies to seniors, AARP gets a 4.95 percent “royalty fee” on every premium dollar paid. This percentage-based “royalty fee” means AARP and United have an incentive to sell seniors the most expensive policies—and to get seniors to buy insurance policies they don’t need—because AARP makes more money for every additional dollar of insurance it sells.
The National Association of Insurance Commissioners recommends that insurance companies or brokers relying on percentage-based commissions—one in which the salesman gets paid more for selling more expensive policies—explicitly disclose that fact to would-be customers. Yet AARP does not disclose its “royalty fee” scheme to its members in a transparent manner. In fact, multiple members have sued AARP, claiming that its practice of taking money from seniors, and not acting in a transparent manner while doing so, constitutes fraud.
When defending itself against this corrupt scheme, AARP often uses the argument that it is not an insurance company, and does not sell insurance. That claim is entirely true. An insurance company could actually lose money if medical claims paid out exceed premium payments paid in.
By contrast, AARP bears no financial risk. It can just sit back and watch seniors fork over billions of their hard-earned dollars via “royalty” payments that most seniors don’t even know they are paying.
As for UnitedHealthGroup, it continues to rake in profits as well. During the second quarter of 2020, it posted more than $6.6 billion in net revenue—“by far the conglomerate’s highest quarterly profit ever.” Because many patients delayed or deferred medical care during the coronavirus pandemic, United profited by receiving far more in premiums than it paid out in medical claims.
Just as AARP has its own sordid history of acting against its members’ interests, so too UnitedHealthGroup has faced repeated claims of swindling doctors and its members.
In 2009, the company settled a lawsuit and a complaint by the New York state attorney general related to a database maintained by one of its subsidiaries. That database contained flaws that artificially lowered the payments United made to out-of-network doctors—inflating UnitedHealthGroup’s profits.
The 2009 case echoes a more recent lawsuit that also alleges UnitedHealthGroup continues to underpay doctors. In June, a federal district court judge in Nevada ruled against United’s motion to dismiss the case, allowing the lawsuit, filed under the federal anti-racketeering statute, to proceed.
Seniors deserve quality health insurance provided by names and organizations they can trust, particularly during a pandemic. Given their long history of shady and non-transparent actions, neither AARP nor UnitedHealthGroup fit the bill. If seniors want to do business with organizations that look out for their needs and interests, they should look elsewhere.
In that sense, AARP is not unique. Like so many other organizations that began in the service of a reasonable—even noble!—cause, AARP has become merely an excuse to enrich a handful of executives. An old and predictable story, perhaps, but one that should be exposed while those responsible for it are held to account. Instead, we see it being tolerated as though it were simply business as usual.