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Ways and Means Goes After AARP

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Three House Ways and Means Committee Republicans say an AARP affiliate has control over the pricing and marketing of the AARP-endorsed Medicare supplement (Medigap) insurance policies sold by a unit of UnitedHealth Group Inc.

The affiliate, AARP Services Inc., Washington, also oversees the AARP-UnitedHealth Medigap marketing campaigns, and it oversees and monitors the agent certification process for the program, the Ways and Means Republicans say.

“ASI has consultation, review and consent rights related to any proposed plan design changes including but not limited to, annual budgets, premium levels and rates, and sales and distribution plans,” the lawmakers say in a letter about the AARP Medigap program that was sent to Internal Revenue Service (IRS) Commissioner Douglas Shulman.

AARP Services can review and modify UnitedHealth Medigap contracts with other vendors when the value of a contract exceeds $250,000, and the annual incentive program for senior executives at UnitedHealth, Minnetonka, Minn. (NYSE:UNH), depends in part on UnitedHealth’s success at meeting AARP and AARP Services goals, the lawmakers say.

The lawmakers – Rep. Wally Herger, R-Calif., the chairman of the panel’s health subcommittee; Rep. Charles Boustany Jr., R-La., the chairman of the panel’s oversight committee; and Rep. Dave Reichert, R-Wash., a committee member – focused in a hearing earlier this year on allegations that AARP is more heavily involved in insurance distribution than a nonprofit organization ought to be.

Herger has argued that AARP supports the Patient Protection and Affordable Care Act of 2010 (PPACA) because AARP Services will profit from PPACA.

Representatives for AARP were not immediately available for comment. In the past, AARP executives have denied Herger’s allegations and said that they support PPACA because they believe that PPACA will eliminate provisions in the current program that, they say, subsidize coverage for Medicare Advantage plan enrollees at the expense of people who enroll in the traditional Medicare program and buy Medigap coverage.

The lawmakers say they came up with the information about the relationship between AARP, AARP Services and UnitedHealth in the new letter recently, by getting the “opportunity to review three redacted contracts” that were signed in January 2008 and are still in effect.

“These contracts suggest that AARP’s relationship with United is much more than agreement to license the AARP name,” the Ways and Means Republicans say.

The lawmakers say the UnitedHealth contracts and other documents filed in court in connection with a hearing aid company bankruptcy “seem to suggest a pattern of business partnerships and activities that permit AARP to engage in for-profit businesses under the cover of its tax-exempt status,” the lawmakers say.