AARP May Face Serious Challenges to Its Integrity,
Non-Profit Status, Membership Claim
Crack opens with Senate Finance Committee’s ranking
member demanding answers to questions about misleading marketing of
insurance by AARP
Nov. 19, 2008 – The wheels may be about to come off
the AARP train that has pulled millions of older Americans along the
path of believing the organization is their benefactor and exists only
to protect their welfare. The challenge came quietly in a news release
from the office of Senator Charles (Chuck) E.
Grassley (R-Iowa) on Nov. 3, the day before the election. As
a result the $1.2 billion dollar a year institution has announced some
of the insurance products it hypes to members have been taken off the
market and it has hired an independent expert to investigate the charges
by Sen. Grassley.
According to a New York Times report yesterday, the
AARP makes about 40 percent of its money from royalties it is paid for
endorsing products, which normally bear its name. Sen. Grassley’s office
found some of the insurance programs marketed by AARP with UnitedHealth
Group to be deceptive in their marketing.
Sen. Grassley has asked the AARP to account for the
way its marketing materials for a product it calls health insurance
fails to limit policy holders’ exposure to the potentially high cost of
a serious illness. Grassley said the AARP materials include examples of
medical expenses, but the examples are “misleading and do not reflect
how the policy would actually work in a typical situation.”
“The pitch for these products should be straight up
and informative, instead of designed to leave the impression of being
comprehensive when the product is, in fact, very limited and leaves
consumers seriously in debt if they need intensive medical care,”
Grassley said.
“Individuals shopping in the health insurance
marketplace shouldn't be taken advantage of. A big time advocate for
health security should not target under- and un-insured Americans with
misleading marketing. Consumers deserve better. It’s not better than
nothing to encourage people to buy something described as ‘health
security’ when there’s no basic protection against high medical costs.”
Related Stories Off Site
New York Times
AARP Orders Investigation Concerning Its
Marketing
By ROBERT PEAR
Published: November 18, 2008, New York Times
WASHINGTON - After a Senate inquiry found evidence
of deceptive marketing, AARP, the lobby for older Americans, has hired
an outside investigator to look into sales of some of its popular health
insurance products.
AARP and UnitedHealth Group, one of the nation’s
largest insurers, have voluntarily suspended sales of the policies,
which pay fixed cash benefits — often much less than consumers had
expected — for selected services.
The investigation will be conducted by Elizabeth
Rowe Costle, who was the insurance commissioner of Vermont from 1992 to
2003, when Howard Dean was governor.
Opinion: - The Des Moines (Iowa) Register, November
19, 2008
Health plans should offer real coverage
The headline on a recent press release from Sen.
Chuck Grassley's office proclaims: "Grassley asks AARP about misleading
marketing of product called health insurance."
Hallelujah. Because what Janice and Gary Clausen of
Audubon purchased through AARP shouldn't be considered health insurance
-- not when it left them owing $250,000 in medical bills.
Grassley has also written to state insurance
commissioners to ask if they’ve received complaints about the AARP
policies or other limited benefit policies. Twenty-nine states recently
entered into a settlement with the Mega Life and Health Insurance
company for actions related to the misleading marketing of those
policies which are also limited benefit policies similar to AARP’s.
The ranking member of the Senate Finance Committee
said his inquiry was prompted by the experience of a cancer patient
treated at M.D. Anderson Cancer Center in Houston, who was forced to
produce tens of thousands in payments up front before she would be
treated.
Lisa Kelly’s health policy was an AARP limited
benefit policy. Grassley said his review of the health policy led to the
conclusion that the marketing materials are misleading and would cause
an average person to believe he or she is buying real insurance when the
coverage is not insurance.
“At issue are insurance plans that were sold by
UnitedHealth and carry the AARP brand. More than a million people have
bought the policies, which have names like AARP Medical Advantage,
Essential Plus and Hospital Indemnity Plan,” according to the New York
Times Report by .Robert Pear.
Questions abut non-profit status
Another crack in the AARP dam emerged this morning
with an opinion piece by Des Moines Register, published in Grassley’s
home state of Iowa, which said “Hallelujah” in referring to the
senator’s challenge.
But, that newspaper is not satisfied with just the
questioning about these insurance policies and adds, “And once Grassley
gets to the bottom of these health plans, he should look into the
group's nonprofit status.”
“AARP's Web site describes the group as ‘a
nonprofit, nonpartisan membership organization’ that works in the
interest of older Americans. Yet every time you turn on the TV, AARP is
advertising an insurance product, making it look more like a business
than an entity worthy of tax-exempt status,” the opinion piece adds.
Many have questioned the claim that AARP is a
“membership organization,” too. Many older Americans think they have a
membership – like a membership in the Rotary Club – but actually it is
paid membership like shoppers pay at Costco or Sam’s Club for the
privilege of shopping there. When is the last time you voted on the
president of AARP?
“Ensuring the protection and keeping the trust of
our members drives all that we do at AARP,” said AARP’s CEO Bill
Novelli, in his response to the Grassley investigation.
AARP is also known as a large and powerful lobby in
Washington and many state capitols. The recent New York Times article
even referred to the group as, “the lobby for older Americans.”
Yet, no one seems to question how they got this
authority from the older Americans. Some are, however, beginning to
question if these lobby activities are primarily aimed at keeping their
giant commercial activity flourishing. This giant business, which claims
to represent all Americans age 50 and older, markets many types of
insurance, travel services, mutual finds, medical supplies, credit
cards, magazines and more.
AARP’s Novelli said, ” “We have extremely high
standards for the provider products that carry the AARP name. No one
cares more about helping people stay healthy and secure as they age than
AARP. Our organization was founded to serve older Americans and help
them get access to the health care they need. That mission continues to
drive this organization today through our public interest work, our
membership services and our leadership in the marketplace.”
There may be more of this for AARP to explain in
the future but for now they must answer the following questions from
Sen. Grassley by November 24.
The Questions for AARP
1. The AARP marketing materials for the
supplemental limited benefit policies describe them as “essential
benefits you deserve,” as “best-in-class products for people age 50 and
over,” “the security you want,” and “a good option for anyone unable to
afford or qualify for major medical insurance.”5
a. Please describe the extent to which AARP markets these policies,
particularly the supplemental policies, to those who have no other form
of insurance coverage.
b. Please provide AARP’s rationale for marketing limited service
coverage to this population and what steps, if any, that AARP takes to
ensure that potential purchasers of these products are not misled or
left with the impression that these policies provide comprehensive
coverage.
c. Please provide any scripts, manuals, or other guidance given to AARP
employees or other individuals responsible for answering calls to AARP
regarding insurance policies.
d. Please explain why two of three AARP representatives presented this
coverage as the only plan choice to the committee’s investigations staff
and why they characterized this coverage as “good health insurance.”
e. Please explain what coverage these policies are intended to “bridge”
and what AARP means by that term.
f. Please explain why AARP representatives would suggest, as their first
recommendation to a person seeking comprehensive health insurance, a
policy AARP describes as “supplemental” coverage.
2. Please provide a detailed description of any
sales commissions, inducements, incentives, or other compensation
offered to agents for the sale of each of the AARP insurance products.
3. Please provide to the Committee a list of
complaints received by AARP by purchasers of either the Gold, Silver,
and/or Bronze EPHIP/MAP policies from the time of their inception.
Please be sure to describe the nature of the complaint, the current
status of the complaint, and the resolution reached, if any.
4. According to the AARP website and other
materials, AARP markets a number of health insurance policies to its
members.
a. Please provide a complete list of those policies, the number sold
each year from inception to the present, the monthly premium cost in
each of those years, and the revenues that AARP receives for the sale of
each type of policy.
b. Please also provide a breakdown of the number of policies sold by
state for each of those years and provide a description of the
characteristics of those who purchased these policies including their
age, gender, annual income (if available), and whether the policyholders
are known to carry other health coverage in addition to the AARP policy
itself (e.g., Medicare). How many of these specific policies were sold?
Please provide a state-by-state distribution of the sales of these
policies.
5. Please describe in detail whether and to what
extent AARP benefits financially from the sale of these policies and, if
so, please provide the annual gross and net revenues to AARP from the
point in time when the policies were first marketed up to the present.
6. The AARP “HIP” policies are marketed to
individuals who are over age 65 and enrolled in Medicare. My
understanding is that these policies offer cash payments to Medicare
beneficiaries when they obtain medical care and that these cash payments
are made in addition to Medicare’s payment for services and in addition
to Medicare supplemental or Medigap coverage the beneficiary may have
purchased. So, for example, if a beneficiary with a type C standard
Medigap policy is hospitalized for three days, that Medigap policy
covers the beneficiary’s out-of-pocket costs in full for that hospital
stay and then the AARP “HIP” policy makes a cash payment to the
beneficiary on top of that. In a case like this the beneficiary would
incur a net financial gain from seeking medical care.
a. Please provide the rationale for marketing these policies to seniors
who may already have purchased a Medicare supplemental policy and the
policy rationale for offering such a product.
b. In addition, as surveys conducted by America’s Health Insurance Plans
(AHIP) indicate that purchasers of Medicare supplemental policies are
disproportionately rural and of low or moderate incomes, please provide
a description of what safeguards, if any, that AARP has in place to
prevent vulnerable seniors from needlessly purchasing and incurring
costs for duplicative coverage.
c. Provide a breakdown of the number of policies sold to seniors over
age 65 in each of the previous five years.
7. According to AARP materials, the “HIP” policies,
which are marketed to Medicare beneficiaries, provide a prescription
drug benefit that covers 50 percent of the cost for medications provided
after a hospital stay up to an annual maximum of $500.
a. Please provide an explanation of how these policies are marketed and
sold to Medicare beneficiaries and whether the coverage pays cash for
prescription drugs that may otherwise be covered under Medicare Part D.
b. Please provide what steps, if any, that AARP takes to comply with the
true out of pocket (TrOOP) limits established under Part D.
Thank you very much for the briefing provided to
staff members of the United States Senate Committee on Finance
(“Committee”) regarding AARP-sponsored health insurance policies that
have been sold to about 500,000 Americans. That briefing was very
informative and shed much needed light upon the disturbing chain of
events suffered by Ms. Lisa Kelly, a purchaser of an AARP-sponsored
insurance product. As was apparent from the investigation of the Lisa
Kelly case, underinsurance is a significant and growing problem for
Americans. As part of ongoing work related to the uninsured and health
care reform, I am seeking more information about the policies AARP sells
to better understand whether they contribute to these problems in the
way they are marketed and what they cover.
My investigation of tax-exempt hospitals has led me
to examine further how these hospitals treat indigent patients. I have
looked into an April 28, 2008, Wall Street Journal article, “Cash
Before Chemo: Hospitals Get Tough,” which chronicled the challenges
faced by a patient at M.D. Anderson Cancer Center in Houston, Texas
(M.D. Anderson).1 The patient,
Lisa Kelly, also described her experience to the Finance Committee at a
hearing on health reform held on June 10, 2008.
The Wall Street Journal story reported, and
Ms. Kelly’s subsequent Congressional testimony confirmed, that she was
initially diagnosed with leukemia by her personal physician in Lake
Jackson, Texas. She was then immediately referred to M.D. Anderson due
to its superior facilities in treating patients with leukemia. When
scheduling her first appointment, Ms. Kelly was instructed to bring a
cashier’s check for $45,000 to the appointment because M.D. Anderson
would not honor her health insurance policy. The article went on to
illustrate some disturbing practices that reportedly occurred, including
an instance in which the hospital staff refused to change Ms. Kelly’s
chemotherapy IV until her husband demonstrated clear proof of payment.
During the course of my inquiry, I learned that Ms.
Kelly purchased an AARP Medical Advantage Plan (MAP) policy. It was this
policy that M.D. Anderson refused to honor. The MAP policy as I
understand it is a supplemental indemnity plan that pays a flat amount
to plan holders for out-of-pocket health care costs, rather than a
“major medical” health insurance policy that covers significant
percentages or portions of health care costs.
With supplemental indemnity plans, the plan holder
is responsible for the difference between the flat amount and the costs
charged by the healthcare provider. So, in the case of Ms. Kelly, she
was required by M.D. Anderson to pay most of her medical costs up front
and then AARP would pay her directly a maximum of $7,500 per procedure –
a far cry from the hundreds of thousands of dollars that her
chemotherapy and other treatment would cost.
It is apparent from interviews conducted with Ms.
Kelly, and her congressional testimony, that she believed that, while
the policy did not provide comprehensive coverage, it would cover much
more than it ended up covering. Instead, when she was diagnosed with
cancer, she discovered her policy was so inadequate that M.D. Anderson
would not even accept assignment for any of the minimal cash payments
that the plan would apparently provide. In light of this, I initiated an
inquiry into why Ms. Kelly found herself in the circumstances that led
her to testify before Congress. Set forth below are a number of my
observations regarding the marketing of AARP health insurance products
as well as a number of questions.
Supplemental Indemnity Plans as Described by
AARP Materials
First I would like to discuss some of the
information that those seeking affordable insurance would learn if they
go to AARP’s website. Specifically, AARP’s website,
http://aarpmedadvantage.com, describes MAP as a “smart option for the
health care insurance you need.”2
In a smaller font that could be illegible for an elderly individual, the
MAP policy is described as “an indemnity plan that pays you fixed cash
benefits for covered doctor’s appointments, prescriptions, hospital
stays, surgeries, outpatient lab tests, emergency room visits and more –
even though it’s not a major medical plan” (emphasis added). The
website goes on to instruct individuals to apply for MAP if they “don’t
have health coverage,” need “a ‘bridge’ to Medicare or until other
coverage is available,” or “need to lower [their] medical expenses.” The
website directs potential customers to call a toll-free number if they
have additional questions.
Committee staff also reviewed AARP’s promotional
materials for these plans. One AARP publication for potential enrollees
is titled, “Let me tell you how your plan works!”3
This document is provided by AARP to potential enrollees and
includes examples of how the “Essential Plus Health Insurance PLAN”
(EPHIP) plan would function in a series of examples. EPHIP, according to
AARP materials, is a plan that is the same or closely similar to the MAP
policy that Lisa Kelly purchased.4
The first section of this document provides two examples under the
heading “Surgery Benefit.” The first example explains how the EPHIP plan
would cover an outpatient diagnostic colonoscopy performed at an
ambulatory surgery center, which the document describes as costing
$2,320 less provider discounts of $348. In this example, the EPHIP plan
benefit to the enrollee is cited as $1,413, for a remaining
out-of-pocket cost of $559, with EPHIP covering 76 percent of the cost.
The second example explains how the EPHIP plan would cover an outpatient
diagnostic colonoscopy performed in an outpatient hospital setting.
In this example, the document outlines a total cost
of $3,730, no provider discount. In this example, the EPHIP plan benefit
to the enrollee is still cited as $1,413, and the remaining
out-of-pocket cost is $2,317, with EPHIP covering 38 percent of the
cost. The document offers no other examples of how the EPHIP benefit
works for a surgery other than the two described here for a relatively
lower cost procedure, diagnostic colonoscopy, which is not typically
referred to as surgery. Moreover, the AARP document provides not a
single example of how the benefit would apply to an inpatient hospital
stay.
In contrast to the examples provided by AARP in
this document, the cost of a surgery would commonly cost thousands more.
For example, the cost of a typical surgery such as a laproscopic
gallbladder removal on an outpatient basis can range from $6,000 to
$13,000 and the cost of an inpatient surgical procedure like knee
replacement can cost around $32,000. Nowhere in the “Let me tell you how
your plan works!” document is there an example of a more realistic cost
of a surgery and the amount the benefit would provide.
September 11, 2008 Briefing on AARP Supplemental
Indemnity Plans
As mentioned earlier, I greatly appreciate the
September 11, 2008 briefing provided to my staff by those AARP staff
members who are most experienced regarding the insurance products
marketed nationally by AARP. Representatives from AARP discussed AARP’s
supplemental indemnity plans and the situation regarding insurance like
that purchased by Lisa Kelly. These representatives emphasized that
indemnity plans, like the one purchased by Lisa Kelly for nearly $200
per month, were designed to be purchased in addition to other
health insurance, and that the MAP policy was, at least, “better than
nothing.” They went on to say that they believed that these fixed
indemnity plans, which are targeted to people between 50 and 65 years of
age, are purchased mostly by those who have no other health insurance.
Clearly these two representations are inconsistent.
The representatives noted further that some of the
products were underwritten, while others were not, and that even in the
underwritten policies the underwriting was less stringent than what had
been the industry standard. Finally, my staff learned from the AARP
representatives that the plans had been sold through AARP telephone
representatives and that a decision was recently made to utilize
insurance brokers in the future.
Calls to AARP Toll-Free Number Regarding Health
Insurance Options
To learn more about AARP’s insurance products,
Committee staff called the website’s toll-free number on September 10
and 12, 2008. On September 10, my staff called and inquired about
purchasing health insurance for a 51-year-old male living in Iowa whose
health insurance plan was expiring. The AARP representative told my
staff that “major medical” wasn’t available in Iowa, and EPHIP was
presented as an alternative.
The AARP telephone representative went on to tell
the caller that the plan, which is substantially similar to that
purchased by Ms. Kelly, was an “excellent choice” for someone seeking a
“less expensive option” to “major medical.”
Asked twice, the AARP representative reiterated to
the caller that the plan was indeed “health insurance” and went on to
explain that the plan would be accepted at most hospitals, and only
after direct questioning did the representative say that the caller
would be responsible for any difference between the fixed amount and the
charges. Explaining the range of benefits, the representative only
informed the caller of payment amounts for “Level 3,” the highest
amount, even though the caller was later told that he would probably be
approved for Level 1.
On September 12, Committee staff again called
AARP’s toll-free number. This time, they asked about purchasing health
insurance for a 64-year-old man from Texas. Immediately after asking
about available health insurance, the caller was directed toward EPHIP,
again described as an “affordable option to major medical.” When asked
for the difference between the two, the representative simply said that
the EPHIP “pays a set dollar amount.”
When the AARP representative was asked whether most
hospitals accept the plan, the representative said that at preferred
providers the caller would get “an additional discount,” and if the
caller chose a different provider, the check would be sent directly to
him. The representative insisted that the plan was “good health
insurance,” and that AARP “consider[s] this an excellent option as a
bridge between retirement and Medicare.” The representative also told
the caller that the plan “covers cancer,” as long as it was diagnosed
after the coverage was in effect. Again, the representative informed the
caller only of the highest possible “Level 3” benefits, and not the two
other lower tiers of benefits.
Finally, again on September 12 Committee staff made
a third call to AARP’s tollfree number. This time staff asked about a
59-year old woman in Florida who was retiring and needed to purchase
health insurance. The representative immediately explained that a
variety of plans were available, ranging from major medical to hospital
indemnity plans. After asking about the woman’s circumstances, the AARP
representative transferred the caller to an insurance advisor to discuss
major medical plans.
Based upon a review of, among other things, AARP
sales materials, I am writing to learn more about AARP insurance
products so that I can better understand how they are marketed, sold and
managed. It is my understanding that about 44,000 Americans have
purchased policies identical or similar to the one purchased by Ms.
Kelly and I am concerned. During research on AARP’s Medical Advantage
products, my staff learned that AARP marketed and sold a supplemental
fixed indemnity product to Medicare beneficiaries, even ones who already
had Medicare supplemental insurance.
Therefore, please provide answers to the following
questions:
1. The AARP marketing materials for the
supplemental limited benefit policies describe them as “essential
benefits you deserve,” as “best-in-class products for people age 50 and
over,” “the security you want,” and “a good option for anyone unable to
afford or qualify for major medical insurance.”5
a. Please describe the extent to which AARP markets these policies,
particularly the supplemental policies, to those who have no other form
of insurance coverage.
b. Please provide AARP’s rationale for marketing limited service
coverage to this population and what steps, if any, that AARP takes to
ensure that potential purchasers of these products are not misled or
left with the impression that these policies provide comprehensive
coverage.
c. Please provide any scripts, manuals, or other guidance given to AARP
employees or other individuals responsible for answering calls to AARP
regarding insurance policies.
d. Please explain why two of three AARP representatives presented this
coverage as the only plan choice to the committee’s investigations staff
and why they characterized this coverage as “good health insurance.”
e. Please explain what coverage these policies are intended to “bridge”
and what AARP means by that term.
f. Please explain why AARP representatives would suggest, as their first
recommendation to a person seeking comprehensive health insurance, a
policy AARP describes as “supplemental” coverage.
2. Please provide a detailed description of any
sales commissions, inducements, incentives, or other compensation
offered to agents for the sale of each of the AARP insurance products.
3. Please provide to the Committee a list of
complaints received by AARP by purchasers of either the Gold, Silver,
and/or Bronze EPHIP/MAP policies from the time of their inception.
Please be sure to describe the nature of the complaint, the current
status of the complaint, and the resolution reached, if any.
4. According to the AARP website and other
materials, AARP markets a number of health insurance policies to its
members.
a. Please provide a complete list of those policies, the number sold
each year from inception to the present, the monthly premium cost in
each of those years, and the revenues that AARP receives for the sale of
each type of policy.
b. Please also provide a breakdown of the number of policies sold by
state for each of those years and provide a description of the
characteristics of those who purchased these policies including their
age, gender, annual income (if available), and whether the policyholders
are known to carry other health coverage in addition to the AARP policy
itself (e.g., Medicare). How many of these specific policies were sold?
Please provide a state-by-state distribution of the sales of these
policies.
5. Please describe in detail whether and to what
extent AARP benefits financially from the sale of these policies and, if
so, please provide the annual gross and net revenues to AARP from the
point in time when the policies were first marketed up to the present.
6. The AARP “HIP” policies are marketed to
individuals who are over age 65 and enrolled in Medicare. My
understanding is that these policies offer cash payments to Medicare
beneficiaries when they obtain medical care and that these cash payments
are made in addition to Medicare’s payment for services and in addition
to Medicare supplemental or Medigap coverage the beneficiary may have
purchased. So, for example, if a beneficiary with a type C standard
Medigap policy is hospitalized for three days, that Medigap policy
covers the beneficiary’s out-of-pocket costs in full for that hospital
stay and then the AARP “HIP” policy makes a cash payment to the
beneficiary on top of that. In a case like this the beneficiary would
incur a net financial gain from seeking medical care.
a. Please provide the rationale for marketing these policies to seniors
who may already have purchased a Medicare supplemental policy and the
policy rationale for offering such a product.
b. In addition, as surveys conducted by America’s Health Insurance Plans
(AHIP) indicate that purchasers of Medicare supplemental policies are
disproportionately rural and of low or moderate incomes, please provide
a description of what safeguards, if any, that AARP has in place to
prevent vulnerable seniors from needlessly purchasing and incurring
costs for duplicative coverage.
c. Provide a breakdown of the number of policies sold to seniors over
age 65 in each of the previous five years.
7. According to AARP materials, the “HIP” policies,
which are marketed to Medicare beneficiaries, provide a prescription
drug benefit that covers 50 percent of the cost for medications provided
after a hospital stay up to an annual maximum of $500.
a. Please provide an explanation of how these policies are marketed and
sold to Medicare beneficiaries and whether the coverage pays cash for
prescription drugs that may otherwise be covered under Medicare Part D.
b. Please provide what steps, if any, that AARP takes to comply with the
true out of pocket (TrOOP) limits established under Part D.
Please provide the information and documents
requested above by November 24, 2008. In complying with this request,
respond by repeating the enumerated request, followed by the
accompanying response; attach and identify all relevant documents or
data by title and the number(s) of the enumerated request(s) to which
they are responsive. Secondly, in complying with this request, please
refer to the attached definitions concerning the questions set forth in
this letter. Finally, in cooperating with the Committee’s inquiry, no
documents, records, data, or other information related to these matters,
either directly or indirectly, shall be destroyed, modified, removed, or
otherwise made inaccessible to the Committee.
Any questions or concerns should be directed to
Christopher Armstrong or Kristen Bass of my Committee staff at (202)
224-4515. All correspondence responsive to this request should be sent
electronically in searchable PDF format to
Brian_Downey@finance-rep.senate.gov or delivered to the Committee’s main
office on compact disc. All deliveries should be coordinated with Brian
Downey at (202) 224- 6447, and delivered in accordance with his
instructions.
NOTE: This links to a pdf package of all the
attachments - footnoted in letter – sent by Grassley with the letter –
click here.
The United States Senate Committee on Finance
(“Committee”) has exclusive jurisdiction over the Medicare and Medicaid
programs and, accordingly, the duty to ensure that these programs are
fiscally sound. As a senior member of the United States Senate and
Ranking Member of the Committee, I have a special responsibility to
conduct oversight of these programs and the effects that health
insurance policies have on them. As part of ongoing work related to
these programs, the uninsured, and health care reform, I have been
looking into certain supplemental indemnity plans and how they are
marketed to Americans. As the primary Alabama official responsible for
protecting the interest of insurance consumers, I wanted to share the
following issues with you and invite your perspective on this important
matter.
An April 28, 2008, Wall Street Journal
article, “Cash Before Chemo: Hospitals Get Tough,” chronicled the
challenges faced by a patient at M.D. Anderson Cancer Center in Houston,
Texas (M.D. Anderson).
The patient, Lisa Kelly, also described her
experience to the Finance Committee at a hearing on health reform held
on June 10, 2008. The Wall Street Journal story reported, and Ms.
Kelly’s subsequent Congressional testimony confirmed, that she was
initially diagnosed with leukemia by her personal physician in Lake
Jackson, Texas. She was then immediately referred to M.D. Anderson due
to its superior facilities in treating patients with leukemia.
When scheduling her first appointment, Ms. Kelly
was instructed to bring a cashier’s check for $45,000 to the appointment
because M.D. Anderson would not honor her health insurance policy. The
article went on to illustrate some disturbing practices that reportedly
occurred, including an instance in which the hospital staff refused to
change Ms. Kelly’s chemotherapy IV until her husband demonstrated clear
proof of payment.
During the course of my inquiry, I learned that Ms.
Kelly had purchased an AARP Medical Advantage Plan (MAP) policy. It was
this policy that M.D. Anderson refused to accept. The MAP policy as I
understand it is a supplemental indemnity plan that pays a flat amount
to plan holders for out-of-pocket health care costs, rather than a
“major medical” health insurance policy that covers significant
percentages or portions of health care costs.
With supplemental indemnity plans, the plan holder
is responsible for the difference between the flat amount and the costs
charged by the healthcare provider. So, in the case of Ms. Kelly, she
was required by M.D. Anderson to pay most of her medical costs up front
and then AARP would pay her directly a maximum of $7,500 per procedure –
a far cry from the hundreds of thousands of dollars that her
chemotherapy and other treatment would cost.
It is apparent from interviews conducted with Ms.
Kelly, and her congressional testimony, that she believed that, while
the policy did not provide comprehensive coverage, it would cover much
more than it ended up covering. Instead, when she was diagnosed with
cancer, she discovered her policy was so inadequate that M.D. Anderson
would not even accept assignment for any of the minimal cash payments
that the plan would apparently provide.
AARP’s website, http://aarpmedadvantage.com,
describes MAP as a “smart option for the health care insurance you
need.” In a smaller font that could be illegible for an elderly
individual, the MAP policy is described as “an indemnity plan that pays
you fixed cash benefits for covered doctor’s appointments,
prescriptions, hospital stays, surgeries, outpatient lab tests,
emergency room visits and more – even though it’s not a major medical
plan” (emphasis added).
The website goes on to instruct individuals to
apply for MAP if they “don’t have health coverage,” need “a ‘bridge’ to
Medicare or until other coverage is available,” or “need to lower
[their] medical expenses.” The website directs potential customers to
call a toll-free number if they have additional questions.
Committee staff also reviewed AARP’s promotional
materials for these plans and had a lengthy meeting with AARP
representatives. During that meeting AARP representatives emphasized
that indemnity plans like the one purchased by Lisa Kelly for nearly
$200 per month were designed to be purchased in addition to other
health insurance. They also stated that the MAP policy was, at least,
“better than nothing.” Additionally, they went on to say that they
believed that these fixed indemnity plans, which are targeted to people
between 50 and 65 years of age, are purchased mostly by those who have
no other health insurance.
To learn more about AARP’s insurance products,
Committee staff also called the website’s toll-free number on September
10 and 12, 2008.
After asking AARP representatives about insurance
options for older parents, Committee staff was twice directed toward
purchasing the indemnity plan. One AARP representative told Committee
staff that the plan, which is substantially similar to that purchased by
Ms. Kelly, was an “excellent choice” for someone seeking a “less
expensive option” to “major medical.” Asked twice, the AARP
representative reiterated to the caller that the plan was indeed “health
insurance” and went on to explain that the plan would be accepted at
most hospitals, and only after direct questioning did the representative
say that the caller would be responsible for any difference between the
fixed amount and the charges. Explaining the range of benefits, the
representative only informed the caller of payment amounts for “Level
3,” the highest amount, even though the caller was later told that he
would probably be approved for Level 1.
Another representative insisted that the plan was
“good health insurance,” and that AARP “consider[s] this an excellent
option as a bridge between retirement and Medicare.” The representative
also told Committee staff that the plan “covers cancer,” as long as it
was diagnosed after the coverage was in effect. Again, the
representative informed the caller only of the highest possible “Level
3” benefits, and not the two other lower tiers of benefits.
To summarize, it appears that indemnity plans such
as MAP may be marketed in ways that would lead consumers to believe they
are purchasing conventional insurance plans. If this is the case,
consumers could be left with less coverage than expected when they need
it most or placed into situations where they cannot get the medical care
they need.
I am also aware of the numerous investigations that
took place in many states of HealthMarkets, Inc, and the related
29-state settlement agreement. Like the policies sold by the Mega Life
and Health Insurance Company and its affiliates, the AARP policies are
limited benefit policies. Accordingly, I am interested in learning more
about whether states are continuing to see.
In light of this, I am interested in whether
insurance consumers nationwide are continuing to experience problems
with Mega Life and if they are seeing similar problems with AARP
policies or other limited benefit policies and their marketing
practices, and if so, what is happening on the state level to address
them. As Alabama’s insurance commissioner, you have insight into what is
happening in your state and I look forward to hearing your perspective
on this matter. I would be grateful if you could answer the following
questions and any additional comments on experiences in your state with
respect to fixed indemnity insurance products that are related to health
care events. These questions are for the period of January 1, 2005 to
September 30, 2008.
1. Has your office continued to receive complaints
regarding limited benefit and/or fixed indemnity plans? If so, can you
please quantify the number of complaints received in your state?
2. If so, what were the subjects of the complaints?
Were there complaints about the plans’ coverage limits?
3. Did complaints address the manner in which these
products were marketed, and if so what is the nature of the complaints?
4. Were consumers confused about the products they
had purchased? Did they think they had been misled about these products?
5. Aside from the market conduct exam of the Mega
Life And Health Insurance Company, has your office undertaken any market
conduct exams, or any other official investigation(s), based on
complaints about limited benefit and/or fixed indemnity products? If so,
what was the outcome?
6. Do you know the sales incidence of these
products? Are they supplanting more comprehensive coverage in the
individual health insurance market or policies that have stop-loss
coverage? Have the sales of these products continued at the same rate
since the consent agreement was executed as prior to the execution of
the agreement?
7. Do you know the incidence of cancellations,
non-renewals, and discontinuances of limited benefit policies in your
state? If the information is available, please provide the duration of
the policies prior to their discontinuation, cancellation, or
non-renewal, and the reason the policy was discontinued, cancelled, or
not renewed.
I look forward to your thoughts and thank you in
advance for taking the time to share them with me. Of course we are also
available to speak by telephone. If possible, please respond to this
letter by no later than November 24, 2008.
If you have any questions, please direct them to
Christopher Armstrong or Kristin Bass of my Committee staff at (202)
224-4515. All correspondence responsive to this request should be sent
electronically in searchable PDF format to Brian_Downey@financerep.
senate.gov or delivered to the Committee’s main office on compact disc.
All deliveries should be coordinated with Brian Downey at (202)
224-6447, and delivered in accordance with his instructions.
AARP Responds To Senator Grassley, Conducts
Comprehensive Review Of Marketing Of Fixed Benefit Indemnity Products
WASHINGTON - AARP CEO Bill Novelli issued the
following response to a letter from Senator Charles Grassley containing
questions about the marketing and sales of several AARP-branded fixed
benefit indemnity plans administered by UnitedHealthcare.
“Ensuring the protection and keeping the trust of
our members drives all that we do at AARP.”
“Based on Senator Grassley’s letter we have
launched a comprehensive review of the issues he raised. I have
personally assured Senator Grassley that we are moving quickly to
respond to his questions. We are also taking the following steps:
● We are engaging an independent expert to review
the marketing and sales of the fixed benefit indemnity products and make
recommendations as warranted; and
● AARP and UnitedHealthcare have agreed that the marketing and sales
of these fixed benefit indemnity products will be voluntarily suspended
as soon as possible, pending the conclusion of our review. Current
members of the fixed benefit indemnity plans will continue to be served
by the program.
“We have extremely high standards for the provider
products that carry the AARP name. No one cares more about helping
people stay healthy and secure as they age than AARP. Our organization
was founded to serve older Americans and help them get access to the
health care they need. That mission continues to drive this organization
today through our public interest work, our membership services and our
leadership in the marketplace.”
How AARP describes itself:
"AARP is a nonprofit, nonpartisan membership
organization that helps people 50+ have independence, choice and control
in ways that are beneficial and affordable to them and society as a
whole. AARP does not endorse candidates for public office or make
contributions to either political campaigns or candidates. We produce
AARP The Magazine, the definitive voice for 50+ Americans and the
world's largest-circulation magazine with over 34.5 million readers;
AARP Bulletin, the go-to news source for AARP's 40 million members and
Americans 50+; AARP Segunda Juventud, the only bilingual U.S.
publication dedicated exclusively to the 50+ Hispanic community; and our
website, AARP.org. AARP Foundation is an affiliated charity that
provides security, protection, and empowerment to older persons in need
with support from thousands of volunteers, donors, and sponsors. We have
staffed offices in all 50 states, the District of Columbia, Puerto Rico,
and the U.S. Virgin Islands."
Links to originals of the Grassley press materials
released on November 3, 2008:
Nov. 19, 2008 – The wheels may be about to come off
the AARP train that has pulled millions of older Americans along the
path of believing the organization is their benefactor and exists only
to protect their welfare. The challenge came quietly in a news release
from the office of Senator Charles (Chuck) E.
Grassley (R-Iowa) on Nov. 3, the day before the election. As
a result the $1.2 billion dollar a year institution has announced some
of the insurance products it hypes to members have been taken off the
market and it has hired an independent expert to investigate the charges
by Sen. Grassley.
Thank you very much for the briefing provided to
staff members of the United States Senate Committee on Finance
(“Committee”) regarding AARP-sponsored health insurance policies that
have been sold to about 500,000 Americans. That briefing was very
informative and shed much needed light upon the disturbing chain of
events suffered by Ms. Lisa Kelly, a purchaser of an AARP-sponsored
insurance product. As was apparent from the investigation of the Lisa
Kelly case, underinsurance is a significant and growing problem for
Americans. As part of ongoing work related to the uninsured and health
care reform, I am seeking more information about the policies AARP sells
to better understand whether they contribute to these problems in the
way they are marketed and what they cover.