it was something of surprise when AARP announced its support for ObamaCare in the fall of 2009. Why would a financial conglomerate so dependent on insurance-related revenue endorse a bill that promised to wreck the health insurance industry? Then, the penny dropped. One of the ways the Democrats proposed to "pay" for their health care law was by cutting the Medicare Advantage (MA) program by $200 billion. This would inevitably drive many carriers out of the MA market and herd millions of seniors back to the more expensive coverage of traditional Medicare.
How would that benefit AARP? Traditional Medicare imposes much higher deductibles and co-pays on its beneficiaries than does MA, and the vast majority of AARP's revenue derives from sales of "Medigap" policies that purport to cover those out-of-pocket expenses. In other words, the AARP endorsed a law that does real financial harm to seniors in order to reap a crop of new customers when ObamaCare guts Medicare Advantage...
Two members of the Ways and Means Committee, Rep. Wally Herger (R-CA) and Rep. Charles Boustany (R-LA) have announced a hearing to be held this Friday: "AARP is known for being the largest and most well known seniors' organization in the country. But what Americans don't know is… that the AARP brand dominates the private Medicare insurance market"...
Only about 20% of its $1.3 billion in annual revenue comes from membership dues. In other words, AARP earns nearly $1 billion per year by endorsing various products and services sold to its members. More than 65% of that tsunami of cash arrives in the coffers of this "seniors' lobby" in the form of royalty payments "for lending its name to policies sold to its members by private insurers."
Similarly, Catron notes that the AARP was able to receive a much-coveted waiver from strict new insurance payment regulations:
And, although ObamaCare requires MA plans to spend 85 percent of premium revenue on medical claims, the Democrats lowered the bar for AARP's Medigap policies to a mere 65 percent. This is perhaps what the "advocacy group" was getting at when, in response to the announcement of the upcoming hearing, it posted the following statement on its website: "AARP has a long-standing and good working relationship with Congress."
This sort of cronyism government favoritism is inevitable whenever the government exceeds its proper function of protecting individual rights, and instead starts picking economic winners and losers -- in this case, in the health insurance sector.
Thank you, David Catron, for shedding some much-need light on yet another "unintended consequence" of ObamaCare.