"Either you're a voice for the elderly or you're an insurance company-choose one....They put themselves forward as non-biased observers, but they're very swayed by business interests."
- Independent consultant Dean Zerbe, quoted in Washington Post expose
Press reports indicate that AARP may endorse Speaker Pelosi's health care bill as soon as Thursday. However, even as AARP teams up with Democrats to challenge a recent study demonstrating that premiums would rise under Democrats' government takeover of health care as an "insurance industry hatchet job" that's not "worth the paper it's printed on," an analysis of the organization's operations reveals that it functions as a de facto insurance company-one that has participated in ethically questionable dealings:
· A letter from AARP admits that during the years 1999-2008, AARP received an average $339.7 million dollars per year in "royalty fees" from licensing its brand name to various insurance products. Extrapolating this average over the entire decade, AARP received nearly $3.4 billion in windfall profits from selling health insurance and other similar products.
· Moreover, a review of its financial statements finds that relying on average "royalty fees" over the last decade significantly underestimates AARP's existing revenue base, as the organization has focused heavily on increasing its "royalties" in the past few years. In 2008 alone, AARP received more than half a billion dollars in revenue from selling products like Medigap supplemental insurance policies-$652.7 million in direct "royalties and fees," an increase of more than 31 percent from $497.6 million in similar fees in 2007. While royalty revenues now comprise more than half-60.3 percent-of all AARP revenues, a Bloomberg news analysis published in December found that in 1999, royalties comprised only 11 percent of the organization's total revenues.
· AARP's financial statements also note that of the $657.2 million in "royalty fees" received in 2008, 63 percent-more than $414 million-came from United Health Group, an insurance company which markets AARP-branded Medigap and Medicare Advantage supplemental insurance policies. Nearly 40 percent of AARP's 2008 revenue came from United Health Group-more than it received in membership dues, grants, and private contributions combined.
Most concerningly, the growth in "royalty" revenues has resulted in a series of business practices and controversies which AARP members and independent outside observers questioning whether the organization is serving its members, or its own bottom line:
· The Bloomberg article highlighted what one observer called AARP's "dirty little secret"-overcharging its senior members, many of whom who felt betrayed after paying hundreds of dollars above market price for AARP-branded coverage. One of its own members noted that "AARP has great buying power, and people should be able to get the best deal....This is unconscionable, what AARP has allowed to happen." Another disillusioned senior wrote to the organization's leadership asking whether AARP had a "‘special relationship' with [insurance carriers] by which it receives commissions, incentives, rebates, or dare I say ‘kickbacks?'"
"There's an inherent conflict of interest....They're ending up becoming very dependent on sources of income."
- Former AARP Executive Marilyn Moon, quoted in Bloomberg article
· While the AARP website claims that the organization supports "guaranteeing that all individuals and groups wishing to purchase or renew coverage can do so regardless of age or pre-existing conditions," a review of the New York State Insurance Commissioner's website finds that AARP-branded Medigap coverage imposes a six-month waiting period for individuals with pre-existing conditions. Some may therefore question whether the AARP's desire to sell insurance coverage bringing the organization high "royalty fees" is interfering with its mission to serve seniors, including those in most need of medical coverage.
· In November, news sources reported that AARP suspended the sale of "limited-benefit" health insurance policies, largely as a result of pressure from Republican Members of Congress concerned that the organization was selling policies advertised as a "smart option for the health care insurance you need," even though the policies would only pay up to $10,000 for surgery costs. However, the fate of the more than 1 million policy-holders who purchased limited-benefit coverage from AARP remains unclear-and the organization has made no public offers to return the "royalty fees" on the "bare bones" policies it sold under questionable pretenses.
While the Pelosi bill includes strict restrictions on virtually all other forms of insurance, it includes no additional restrictions on Medigap policies-thus allowing AARP to continue making billions of dollars in "kickbacks" by overcharging seniors for insurance policies and denying access to seniors with pre-existing conditions. With Speaker Pelosi calling insurance companies "immoral villains," and Sen. Jay Rockefeller deriding them as "rapacious," many may question why Democrats are so quick to rely on an organization that has received billions of dollars in windfall profits from those same insurers as an "independent" source to support their government takeover of health care. More importantly, a fundamental question presents itself: With its own members believing that AARP is "making money on the backs of old people," who should believe that the organization is looking out for seniors' interests and not its own?