Friday, April 1, 2011

What We Learned Today about AARP and Obamacare

Today the House Ways and Means Committee held a hearing examining a report by several House Republicans indicating that AARP could make more than $1 billion in new Medigap insurance revenues as a result of passage of the health care law.  It’s worth highlighting what we did, and did not, learn about AARP and the health care law itself at the hearing.  Among the disclosures at the hearing:

  • AARP makes approximately $60-90 million per year in interest investing insurance premiums (including Medigap premiums) paid by members before they are transmitted to insurance companies.  AARP – which previously endorsed premium rebates “as an incentive for health plans to reduce administrative overhead” – did not disclose whether or not it uses its nearly nine-figure interest revenues to reduce premiums for seniors.
  • After submitting comments to regulators asking for other insurers to make “their pricing more transparent,” AARP finally agreed to disclose the specific amount of its Medigap royalties.  Of course, AARP has previously made such commitments to Congress before – including at a December 2009 House Energy and Commerce Committee hearing – only to later renege on that commitment.  If AARP follows through on this most recent commitment, seniors will finally have the information about how much of their hard-earned premium dollars are being used on activities other than health care.
  • AARP declined to state that it will not be offering insurance plans in the Exchange – meaning the law could provide yet another potential source of revenue for the organization, over and above a projected increase in Medigap enrollment due to the law’s Medicare Advantage cuts.

Here’s what we did NOT learn about AARP and the law:

  • AARP claims that it would gladly forego profits in exchange for enacting its members’ priorities – and counts an end to pre-existing condition discrimination as a chief goal.  Section 1234 (page 358) of House Democrats’ June 2009 health care discussion draft would have required guaranteed issue for certain individuals under Medigap – achieving one of AARP’s chief goals.  Yet last month the Washington Post claimed that the Medigap provision “was dropped from the legislation during congressional negotiations because it would have increased Medicare costs, according to a House Democratic congressional aide.”  The Congressional Budget Office scored these provisions as costing only $4.1 billion over ten years – far less than the amount of AARP’s “royalty fees” over a similar period.  So why was the provision dropped from the bill, if AARP was so interested in foregoing profits in order to help its senior citizen members?
  • In December 2009, AARP forced Democrats to fully close the “doughnut hole” before they would endorse health care legislation – why didn’t AARP also insist that the legislation end Medigap discrimination before Democrats brought the bill to a vote?
  • How many seniors with pre-existing conditions were subjected to waiting periods in the past year before purchasing AARP Medigap insurance, because the legislation AARP endorsed did not end pre-existing condition discrimination for Medigap plans?
  • What about seniors in Medicare Advantage plans?  The United States Code notes that individuals who have been in Medicare Advantage plans for longer than 12 months LOSE their protections against pre-existing discrimination in the Medigap marketplace.  Does that mean AARP will actively discriminate against all those seniors losing their Medicare Advantage plan as a result of a measure AARP itself endorsed?

The Medicare actuary predicts that 7.4 million seniors will lose access to their Medicare Advantage plan as a result of the law.  Many of those seniors will want or need a source of supplemental insurance coverage – but because the law exempted Medigap insurance from pre-existing condition restrictions, many may not be able to buy and/or afford it.  Thanks to AARP and Democrats in Congress, seniors may soon find themselves faced with a double whammy – losing their Medicare Advantage plan, and locked out of access to Medigap supplemental coverage as well.