Insurance Agent Forum

[Newby]

For anyone who hasn't read the history of AARP, here is a short version from Andy Rooney of 60-minutes.


THERE'S GOLD IN THE OLD

There's big money in old folks if you get enough of them to buy your product. No organization knows this better than the AARP, the American Association of Retired Persons, with thirty-five million members.

I'm plenty old enough to belong to the AARP—they've reduced the age requirement to fifty—but I've never joined. I'm prejudiced against the AARP because of the bad start it got. People tell me all that is in its dark past and I know it's unfair but my negative feeling about the gigantic association won't go away.

The AARP was started in 1958 by an insurance salesman named Leonard Davis after he met an elderly woman named Ethel Percy Andrus, who had been working to help teachers with medical insurance through an organization called The National Association of Retired Teachers.

Davis recognized a good thing when he saw it and realized the market for insurance sales to old people wasn't limited to teachers. He wanted to expand it to include "persons" so he put up $50,000 to establish the AARP.

This was not an eleemosynary institution. Andrus's interest was old people; Davis's interest was money. He put together the Colonial Penn Insurance Company which he made certain, through several legal maneuvers, was in firm control of the AARP. He then started using it, through its magazine Modern Maturity, as a sales tool for insurance policies.

Leonard Davis made hundreds of millions of dollars from the sale of insurance policies to AARP members. For several years, Colonial Penn was the single most profitable company in the United States, even though the policies it sold to AARP and NRTA members were rated "poor."

Davis's plan was a deviously ingenious sales scheme. The AARP was not much more than a front for his insurance company. At local AARP meetings around the country, volunteers set up desks to sell insurance. They didn't even have to pay salespeople. They conned members into thinking they were doing charitable work. The AARP office in Washington did not even have a list of its own members. That membership was kept under lock and key in the offices of the Colonial Penn Insurance Company.

After a 60 Minutes report exposing all this was broadcast in 1978, the AARP got rid of Colonial Penn and signed up with the Prudential Insurance Company.

Just last week the AARP ended its eighteen-year association with Prudential and has given its 64 billion contract to the United Health Care Corporation. I know nothing about the arrangement except you can bet that the AARP will be taking a 3 percent kickback from every single premium its members pay. Nothing illegal there. It's just that I still have a bad taste in my mouth.

People have told me of the good things the AARP does and I believe them. Cyril Brickfield, a lawyer and an important part of the Leonard Davis machine that so efficiently ran the AARP for its own profit, finally left a few years ago with an exit fee so large the AARP won't say what it was.

The AARP's current executive director is a former Catholic priest and longtime AARP employee named Horace Deets. He was hired twenty years ago by Harriet Miller, then the director, who was fired when she openly disapproved of what Leonard Davis was doing.

She won a $445,000 lawsuit against the AARP and is now, of all things, mayor of Santa Barbara, California. Leonard Davis lives in Florida. I don't think they exchange greeting cards.

People speak highly of Deets but I am not at ease with anyone who accepted the heavy hand of Leonard Davis for so long.

The most prickly thorn in the AARPs side now is Sen. Alan Simpson. The AARP enjoys tax exemption and nonprofit mailing privileges that amount to millions of dollars a year and Simpson has tried to have them taken away. He claims that AARP publications and mailings are ads for their many business enterprises and should be taxed and that their mailings should bear stamps like any other for-profit company's mail.

The AARP does have a lot of income-producing sidelines. As a small example, AARP members get a reduced rate if they rent a car from Hertz or Avis and the AARP, in turn, collects 5 percent of what members pay the rental company. It's still a good deal for members.

Simpson's opponents claim his is a political vendetta being waged against the AARP because he feels the organization has generally supported Democratic causes. In view of this criticism, which they don't to want to spread and ruin their lobbying efforts in Congress, the AARP has been neutral to the point of paranoia during the current Presidential race.

Maybe I'll join the AARP when they lower the age limit to forty-five.

[somarco]

AARP is, and has been, nothing more than a super marketing firm. Most of the products endorsed by AARP are mediocre at best.

[Kimber]

Saw this today and thought he made an interesting point...

[COLOR=#1a548f]AARP and the privatization of Medicare
[/COLOR][COLOR=#9c8d43]ASK THIS | November 02, 2007[/COLOR] Medicare Advantage plans are heavily subsidized, private plans that are luring older citizens away from Medicare. AARP is both criticizing this practice and taking part in it at the same time. What’s AARP up to here, and why aren’t news organizations doing a better job in reporting the drain on Medicare?
Q. People are switching from traditional Medicare to private plans because they think they’re getting a good deal. As more make the switch, what are the ramifications for Medicare itself?
By Gilbert Cranberg
[COLOR=#0000ff]gilcranberg@yahoo.com[/COLOR]
Call it the riddle of AARP. It’s truly puzzling why an organization that represents some 38 million individuals 50 and over, many of whom depend on Medicare, would [COLOR=#0000ff]endorse a Medicare offshoot[/COLOR] – Medicare Advantage – that siphons money from traditional Medicare and is seen by many as part of an effort to privatize Medicare.
AARP says in ads, “Discover the only Medicare Advantage health plan that carries the AARP name.” The plan is provided by UnitedHealthcare, among the nation’s largest for-profit health insurers.
Why should anyone drop out of popular, tried and true government-run Medicare and opt for a private insurance plan? The chief reason is that Medicare has been grossly overpaying the private plans to cover seniors who desert traditional Medicare. The generous payments make it possible to lure seniors with attractive premiums and benefits. In some places they even rebate the $93.50 monthly Part B premium. It’s not unusual for Medical Advantage plans to offer enrollees free health club membership and zero premium for coverage that includes the Part D drug benefit without extra cost.
Of course, there is cost, including profits to the private insurer, but seniors are willing to enroll because it seems like such a good deal and because they may not realize that leaving traditional Medicare in the lurch weakens it for other seniors.
AARP understands all this. [COLOR=#0000ff]It criticizes the over-payments[/COLOR] to Medicare Advantage. It declared recently, “The $54 billion in excess payments private Medicare Advantage plans in Medicare are due to receive should be used to improve the Medicare program by keeping premiums down as access to doctors is preserved...Congress should stop subsidizing private insurance companies in Medicare with excess payments.”
AARP added pointedly that the extra benefits offered by Medicare Advantage plans “are subsidized by taxpayers and through higher premiums paid by ALL Medicare beneficiaries....private insurance plans keep a significant portion of these excess payments for their own profits.”
If you sense a disconnect between what AARP says and what it does by endorsing a Medicare Advantage plan that profits when AARP members enroll, well, as I said at the outset, it’s a puzzle. AARP spokesmen say that the organization is working to eliminate the overpayments and that its mission is to improve the “Medicare Advantage marketplace.”
Perhaps the plan it endorses is a superior product, but AARP in effect is endorsing something it believes is too heavily subsidized. Its endsorsement amounts to a seal of approval for Medicare Advantage despite the serious misgivings AARP has expressed about it.
Reducing or eliminating the overpayments will be an uphill battle. The insurance companies are not only a potent lobbying force, they now have as allies millions of enrollees who benefit from the overpayments and aren’t bashful about defending what they see as their interests. AARP in effect is adding potential lobbyists in support of the insurance companies each time it induces a senior to join its endorsed Medicare Advantage plan.
If AARP succeeds in cutting the overpayments, a likely result could be higher Medicare Advantage charges or reduced benefits, or both, for AARP members who enroll. The plan AARP is touting says enrollees are protected against such changes for a year. Thereafter, those who follow AARP’s advice and buy the coverage could find that the organization’s lobbying on payments to Medicare Advantage has been at their expense.
If you read the small print at the end of AARP’s ad for Medicare Advantage you learn that “UnitedHealthcare pays a fee to AARP and its affiliate for use of the AARP trademark and other services.” I asked the AARP spokesmen how much AARP is paid for its endorsement of the plan. I was told that, as a “private business contract,” it won’t be disclosed. I said that AARP is a membership organization, and that, as a member, I believe I am entitled to the information. It was not disclosed.
Was AARP influenced to endorse a Medicare Advantage plan because of a financial tie-in? I do not know. I do know that the drain of money from Medicare by Medicare Advantage is harmful to a lot of seniors. AARP’s interest in stemming the drain is laudable, but its chances of success are iffy at best. A recent move in the U.S. House to cut the overpayments did not succeed.
I simply cannot fathom why AARP lends itself to what looks all too much like an effort to privatize a prize government program.
Nor do I understand why the press does not regard any of the above as newsworthy. Medicare is important to readers, and AARP has big membership and influence. Yet what you just read came not from accounts in the mainstream press but by simply following up AARP’s ad for Medicare Advantage in my local newspaper.
Perhaps buyouts and the like have so shorn newsrooms of old-timers that few if any are left who relate to the concerns of seniors. If so, and if that explains why AARP and Medicare Advantage are a non-story, it would be a colossal blunder. What seniors lack in demographics that appeal to advertisers they more than make up in loyalty to newspapers as readers.
I recently attended a sales pitch for Medicare Advantage by a private insurance company, Humana, that has made a major effort to switch seniors from traditional Medicare. No one from the press covered it. But then, hardly a day passes without an insurer advertising similar sessions. The implications for Medicare in the drive to undercut it are enormous, and the press is missing the story.
Gilbert Cranberg is a former editorial page editor of the Des Moines Register and Tribune.
E-mail: [COLOR=#0000ff]gilcranberg@yahoo.com[/COLOR]
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AARP Endorsed Medicare Advantage Plan.
Posted by [COLOR=#0000ff]Gary Fox, CPA, CMA[/COLOR] - President, Senior Benefit Services
11/02/2007, 01:14 PM
AARP is endorsing the United Healthcare Medicare Advantage Plan for one reason...money! AARP gets ENORMOUS kickbacks from those insurance products it endorses. Just because a product is ENDORSED
By AARP does NOT mean it is the BEST product.In West Virginia there are 146 different MA Plans for 2008...and the AARP endorsed Plan is NOT the best in our professional opinion. They also "ENDORSE" a Medicare Supplement Plan which is over priced and is EXACTLY the same as Plans offered by other insurance companies. Why??? $$$$$$$ AARP members need to start thinking for themselves a whole lot more than they do now!


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[Mr. Bill]

I would love to know how much United Health is paying the AARP - anyone looked at the financials?

[midwestbroker]

Holy crap.

What kills me is that non of the MA bashing articles mention that MA plans are not this new idea. Gilbert Cranberg who wrote the one article obviously has no idea how the plans work, but he will not let facts get in the way of his opinion.

Lets look at the facts...

They have been out for 15+ years.

In 1997, in the balance budget act, they became Medicare + Choice. Most, if not all were local HMO plans.

A few years later, they started to PPO plans, giving more options to providers, usually at a higher premium.

In 2003, Part D came along and Medicare + Choice became Part C. Also, PFFS plans came to be. They started over funding to provide these plans to seniors in rural markets who could not afford a supplement but wanted additional care.

So, people who live in markets where Part C was not an option are skeptical and pick these plans apart.

People who live in metros that have had these plans prior to 2003, are enjoying lower premiums.

Do they still have Medicare, yes. Read the Medicare and You book. What Medicare does is sit on the back burner and fund the plan for you. If you leave a Part C plan you will default to original Medicare.

That is basically what I tell people when they read articles about MA plans and have questions.

[arnguy]

Midwest, you are absolutely 110% correct. As I have mentioned in prior posts, MA's are a big deal here in the Philadelphia Metropolitan area (Philly and the four surrounding counties). They are inexpensive and have good coverage and some bells and whistles that Original Medicare doesn't cover. The competition to sell MA's is fierce here----particularly betwwen BX and Aetna. And, as you mentioned, should one leave Part C they automatically revert to Original Medicare (because they have been paying Part B premiums). I believe BX is coming out with a "$0" plan again for 2008.

[Kimber]

I agree that it is a shame no one fact checks when they write these articles, but it still has an impact because clients read these articles and just because they are in print, they believe it as gospel.