After a Senate inquiry found evidence of deceptive marketing, AARP, the lobby for older Americans, has hired an outside investigator to look into sales of some of its popular health insurance products.
AARP and UnitedHealth Group, one of the nation's largest insurers, have voluntarily suspended sales of the policies, which pay fixed cash benefits – often much less than consumers had expected – for selected services.
The investigation will be conducted by Elizabeth Rowe Costle, who was the insurance commissioner of Vermont from 1992 to 2003, when Howard Dean was governor.
At issue are insurance plans that were sold by UnitedHealth and carry the AARP brand. More than a million people have bought the policies, which have names like AARP Medical Advantage, Essential Plus and Hospital Indemnity Plan.
The senior Republican on the Senate Finance Committee, Charles Grassley of Iowa, said marketing of the products was often misleading because it suggested that they offered comprehensive coverage.
“In fact,” Grassley said, “there's no basic protection against high medical costs. The products may leave consumers seriously in debt if they need intensive medical care.”
The criticism is potentially embarrassing to AARP because the organization has long taken pride in its role as a champion of its members and consumers in general. It has criticized “hard-sell tactics” of private insurers and has accused the Bush administration of overstating the value of private health plans offered to Medicare beneficiaries.
William Novelli, chief executive of AARP, said he was eager to address Grassley's concerns.
“Ensuring the protection and keeping the trust of our members drives all that we do at AARP,” Novelli said.
Bonnie Burns, an insurance counselor at California Health Advocates, an education and advocacy group, said: “These limited-benefit policies have been a problem for many years. Uninsured people buy them thinking they are equivalent to major medical coverage, but they are not.”
Though known in Washington as a potent lobby, AARP is also a huge business that offers travel services, life and homeowner's insurance, mutual funds and credit cards.
Its operating revenue last year was $1.2 billion, more than 40 percent of which came from royalties, according to its 2007 financial statement.