AARP’s Hundreds of Millions in Insurance Royalties
When you think of AARP (American Association of Retired Persons), what comes to mind? A sweet organization working hard to provide information, a good quality of life and insurance options for the elderly and retired population of the United States? A few older gentleman chatting over a game of chess older ladies laughing over a big jug of lemonade is what comes to my mind. However, a recent report released by the Kaiser Network may change how you think of this organization.
After reading about the scandal of how AARP has been capitalizing off of big insurance at the expense of its members, I now picture money-grubbing people in suits sitting around drinking scotch giggling at their diabolical plan with dollar signs flashing in their eyes. Read on to find out what happened.
Royalties, Fees and a Scandal: Oh My!
Bear with me, because this all might sound a little confusing and convoluted to the untrained insurance eye. It took me a few times of reading it over to fully understand just what happened and how AARP’s insured were effected. In layman’s terms, AARP endorses insurance plans to its members. They claim that these plans will save people more money, when in fact they end up costing more than other plans. Why is this? The companies providing the insurance build hundreds of millions of dollars of royalties and fees into their plans, which get paid to the advocacy group for its endorsement. In other words, because AARP is running around tooting these insurance companies horns’, they get big bucks in fees and royalties for getting people to sign on for these expensive plans.
According to the Kaiser article, in 2007, the royalties and fees totaled $497.6 million, or 43% of AARP’s $1.17 billion in revenue, compared with 11% in 1999. In addition, AARP generates income by holding members’ premium payments for up to one month and investing the money before it pays the insurers. AARP seems to be playing the innocent here, saying that the organization’s mission has been compromised by the reliance on these royalties and fees? Hm, you think? Perhaps if AARP hadn’t been so greedy and manipulative in the first place, they wouldn’t find themselves in a situation in which they had to depend on some very dirty sounding money. AARP has also said that they are trying to “do good” but that they have become “very dependent on sources of income.”
Changing their Insurance Tune
Now that AARP has been called into the spotlight about their actions, they announced that they were suspending sales of these insurance policies and would begin rethinking and reviewing their marketing strategies. Obviously, this is good news, but how can a scandal like this be prevented in the first place? This company has created, in my eyes, a serious violation. An organization that is supposed to serve an elderly and retired population should be highly conscious of their image and effort on behalf of their members.
I have parents who are members of AARP, and although they have health insurance through other sources, I would be screaming livid if they had been affected by this. It is completely out of integrity, and makes me just as upset if another sensitive demographic (say, people with disabilities) had been taken advantage of. I don’t know what types of legal repercussions can and will happen against AARP, but I can say I’m deeply saddened by yet another example of big business’ corruption and people’s desire for the almighty dollar over the welfare of human beings.
photo credit: Roebot
Tags: aarp, commentary, controversy, health insurance, medicare, royalties
May 24th, 2009 at 1:44 am
I know the AARP in Arkansas is nothing but a farce. Herb Sanderson is their advocate and he was the director the division of aging and adult services but did nothing for his $100,000 a year salary and because of his incompetence, the agency was sued of all thing for age and sexual harassment. The AARP arranged for a soft landing for this person who had actively facilitated discrimination. There are allegations about Mr. Sanderson’s so called private life that wasn’t so private either. If the Arkansas AARP was a legitimate organization concerned about civil rights and the rights of older people they would not knowingly hire Sanderson.
Fortunately, he no longer hangs around the bathrooms at the Jonesboro Community Center.