AARP/UnitedHealth bait and switch
AARP collects royalties, fees from insurers it endorses
By Gary Cohn and Darrell Preston
The Boston Globe
December 5, 2008
(AARP) collects hundreds of millions of dollars annually from insurers who pay for AARP’s endorsement of their policies.
The insurance companies build the cost of these so-called royalties and fees, which amounted to $497.6 million in 2007, into the premiums they charge AARP members, according to AARP’s consolidated financial statement for that year (all insurance products, not just health).
Nowhere were AARP’s conflicting roles more evident than in its lobbying in support of a 2003 bill proposed by President Bush to expand Medicare, the federal health insurance program for people older than 65.
After the Medicare bill was signed into law by Bush in December 2003, AARP was able to expand its contract with Minnetonka, Minnesota-based UnitedHealth Group Inc., which underwrites AARP’s Medicare supplemental insurance plan.
AARP advertises that its Medicare supplemental insurance can save people thousands of dollars. While every type of supplemental policy sold by all companies must offer the same exact coverage under federal rules, AARP doesn’t sell the least expensive.
The AARP/UnitedHealth basic policy costs $582 a year more than a lower-cost competitor in New York and $428 more in Los Angeles, according to data on Medicare’s webpage.
Comment:
By Don McCanne, MD
This is yet another example of the profound administrative waste that characterizes health care financing in the United States. Beyond the administrative excesses of AARP’s insurer, UnitedHealth, AARP has inserted itself as another middleman, providing yet another layer of administration, with none of those extra funds going to pay for health care.
A prime example of this excess administrative waste is found in the AARP/UnitedHealth Medigap plans. Congress recognized that the insurers were ripping off our senior citizens by selling Medigap policies that were impossible to compare. Congress then passed legislation requiring that each plan provide the exact same benefits so that it was possible to compare value based on the premium charged for each plan. The Boston Globe article demonstrates that the AARP/UnitedHealth plans have premiums that are about $500 higher, presumably because of the insertion of AARP as a superfluous middleman.
Plan F is the most common Medigap plan selected by Medicare beneficiaries, which is the plan my wife and I have. To see how much more the AARP/UnitedHealth Plan F would cost us compared to our current coverage, I went to their website to get a quote. I found out that the quote for both of us was about $500 less than we are paying! So what gives?
Looking more closely at the table of rates on the AARP/UnitedHealth website, it turns out that these are “first year early enrollment discount rates” that apply only to “new AARP Medicare Supplement Plan enrollees.” Nowhere was there any indication nor any link that would tell you what the second year rates would be. AARP/UnitedHealth has used a classic bait and switch scam to deceive our seniors and circumvent the intent of Congress to provide transparency in the purchase of Medigap plans.
Those currently crafting health care reform tell us that we need an “American solution” using the private insurance industry, and all we need to do is regulate the insurers so that their products will provide us with value. Congress has already regulated the Medigap plans, and what did we get? Even greater administrative waste, but worse, a profoundly dishonest bait and switch scam.
The private insurers have failed this test. No matter how much we regulate them, the private insurers will always find other ways to stick it to us. Their institutional investors will demand that they do so. It’s time time to dump them and adopt a publicly-administered and publicly-financed single payer system that is designed specifically to help patients instead of investors.