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AARP Rakes In Cash from Seniors’ Insurance

February 12, 2009 | 53,300 views

elderly, seniors, insuranceMany seniors think they are saving money when they buy AARP insurance. However, they may be paying twice as much as they would with a competing product.

AARP brought in nearly half a billion dollars in 2007 from fees insurers pay for AARP endorsement. It also gained about $40 million from holding the clients’ premiums for a month and investing them. The revenue helps to pay for the $200 million bond debt that funded the organization’s brass and marble headquarters in Washington, D.C. -- a site that is closed to visitors.

“I was kind of shocked,” said one member, who found out he was paying more than $1,000 above the cost of a Mutual of Omaha auto insurance policy for similar AARP insurance. “They’re making money on the backs of old people.”
 

Dr. Mercola's Comments:

Many might be shocked to hear this news, as AARP is the third most trusted large advocacy group in the United States, according to a 2007 Harris poll, behind only Consumer Reports and the American Red Cross. With 40 million members and offices in all 50 states, Washington D.C., Puerto Rico and the U.S. Virgin Islands, AARP is also considered the most powerful interest group in the United States.

For $12.50 a year, anyone over the age of 50 can become an AARP member, and in exchange receive a newsletter, magazine, and supposed discounts on travel, shopping, insurance and more.

It’s also widely known that AARP employs more than a handful of lobbyists to sway key pieces of legislation -- legislation that its members typically know little about. It’s because of the sheer size of their membership base that they hold so much political clout, yet more than once the organization has been accused of betraying their members’ interests for financial gain.

For instance, AARP lobbied for the Medicare prescription drug benefit, which allowed it to increase profits by expanding its contract with UnitedHealth Group, the company that underwrites its Medicare supplemental insurance plan.

In fact, when AARP was founded in 1958 by a retired high school principal named Ethel Percy Andrus, it was for the primary purpose of selling health insurance to the elderly!

At that, they have been very successful, earning revenues of $1.2 billion in 2007, 40 percent of which came from royalties, according to this New York Times article. AARP also profits from many other business services, from mutual funds to credit cards, offered to members.

This would be all well and good if the products they offered truly did benefit their members. But as this article from the Association of American Physicians and Surgeons revealed, seniors are often paying far more than they need to for AARP’s insurance. A BusinessWeek analysis a few years back also found that AARP products are not all they’re cracked up to be. They wrote:

“Many of the funds and insurance policies that AARP markets provide considerably less benefit than seniors could get on their own.”

Looking Out for Your Own Best Interests

This report serves as a reminder that even an organization like AARP, which appears nearly flawless on the surface, may have a hidden agenda underneath. So know what you’re getting into before you sign on the dotted line, and always do your research. Compare products and prices before you buy anything, especially when it comes to major expenses like insurance.

And as always, make sure you’re taking good care of your health now, as that will help you to avoid the need for costly medical treatments down the road.

If you’re looking for a lower cost health insurance option, you could also carefully analyze options such as HRAs and HSAs if you live in the United States. The basic concept here is to provide protection against medical catastrophes, but to have a high deductible to lower your costs. If you stay healthy, the premium savings would more than pay for the higher deductible -- IF you ever need it.

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