Friday, December 4, 2009

AARP’s Profits

Given AARP’s endorsement of more than $400 billion in Medicare “savings,” it’s worth highlighting the organization’s comparative level of profit from selling Medigap and other insurance policies.  According to its own financial statements from 2008, AARP generated 38 percent of its $1.1 billion in revenue—or more than $414 million—in “royalty fees” from United Health Group.  Forbes lists insurance company profits in 2008, and according to that list the royalty fees (which are pure profit to AARP) would rank the organization fifth on its list of insurance company profits.  Here’s the full breakdown of the rankings by profits (in millions):

United Health Group:    $2,977

WellPoint:                           $2,491

Aetna:                                  $1,384

Humana:                              $647

AARP:                                   $414

Coventry Health:              $382

Cigna:                                    $292

HealthSpring:                     $119

Universal American:       $95

Health Net:                         $95

Centene:                             $84

Ohio Medical Mutual:    $74

Molina Healthcare:          $62

WellCare Health:              $-37

Amerigroup:                      $-51

Note also that ALL of these companies have much higher revenues than AARP.  For instance, United Health Group’s nearly $3 billion in profit was achieved on a base of more than $81 billion in revenue (a profit margin of 3.7%)—versus AARP’s revenue base of $1.1 billion, and profit margin on its “royalty fees” of 100%.