Which side is the AARP on?

For decades, the AARP (formerly known as the American Association of Retired Persons; now they simply go by the acronym) has advocated for the interest of senior citizens. In the process they’ve become known both as a fearsome lobbying group for older Americans and as a marketing brand whose imprimatur is highly sought after by other businesses who wish to cater to the early-era Baby Boomers and the Greatest Generation. Many of those businesses sell insurance and insurance-related products, so it’s obvious they have a stake in the pending fate of the health care reform some dub “Obamacare”.

And in this health care debate AARP is using the force of their lobbying (and, by extension, their supposed voter base) to enrich themselves as a marketing brand. A large percentage of AARP revenues come from their insurance brokering business, where insurers remit “royalty fees” to AARP as the cost for using their moniker. In fact, the income from licensing the AARP name to just one company – UnitedHealth Group – is now larger than its income from membership dues. UnitedHealth chipped in nearly $400 million to AARP’s coffers last year. By way of comparison, total AARP income from all sources was $1.1 billion.

This key portion of AARP’s revenue comes in large part from the sale of so-called “Medigap” policies, which are designed for those instances where Medicare doesn’t completely cover costs. These policies compete with Medicare Advantage, which leans more on private providers and is a target of cuts in health care reform bills circulating through Congress. Obviously slashing Medicare Advantage could positively impact AARP’s bottom line.

But there are other, less well known benefits to AARP in some of the health care legislation before Congress.

As one example, in H.R. 3200 Medicare Advantage would be required to spend 85 cents of every premium dollar on claims. But Medigap policies such as the ones AARP sells would be required to spend just 65 cents of each dollar for claims. While AARP affiliates offer both, the organization does a larger share of business from Medigap and would stand to make more profit through offering it – their Medicare Advantage insurance offerings could well “wither on the vine.” More importantly, AARP’s support of Obamacare could garner them an exception from the “windfall profits” tax insurers would pay under the legislation. When there’s $3.4 billion over the last decade at stake, being waived from paying a fair share means quite a chunk of change.

Meanwhile, backing Obamacare has driven thousands of former AARP participants to cancel their membership, although the group argues those dissatisfied are a tiny fraction of their overall base and pales in comparison to the number of those who are new or renewed over the timeframe.

The point these former members make, though, is a sound one. They contend that supporting Obamacare is detrimental to seniors in the long run. Much of that argument hinges on seniors’ legitimate fear of rationed care being instituted under the government’s not-so-watchful eye, and they chastise AARP for putting profits ahead of principle in this case. Certainly former AARP CEO William Novelli profited from his tenure, making over $1 million in total compensation last year.

Those who run and profit from the reputation of AARP may regret casting their lot with the Democrats on this issue. While the group bills itself as nonpartisan, they may find themselves on the losing end of both members and lobbying interests should Republicans use the organization’s support of Obamacare to cement the senior vote in the next few election cycles.

Michael Swartz is a Liberty Features Syndicated writer.

Another in my continuing series of LFS op-eds, this originally cleared November 6th.

Author: Michael

It's me from my laptop computer.