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Senior Citizen Politics

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.

Jump to these reports on this page:

Letter: Sen. Grassley to AARP CEO Bill Novelli

Letter: Sen. Grassley to State Insurance Commissioners

Public response from AARP CEO Bill Novelli

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.

>> More of the story at New York Times


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.

More at - The Des Moines (Iowa) Register


Read more on
> Politics for Senior Citizens
> Medicare
> Medicare Drug Program

 

 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.


Sen. Grassley’s Letter to William D. Novelli, CEO, AARP

Dear Mr. Novelli:

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.


Sen. Grassley’s Letter to State Insurance Commissioners

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:

  ● Grassley asks AARP about misleading marketing of product called health insurance
  ● Senator Grassley’s letter to the AARP
  ● Attachments to the letter to the AARP
  ● Senator Grassley’s letter to state insurance commissioners

  ● Senate Finance Committee

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