Old News: AARP Collects royalties for Endorsements

But now Congress wants the IRS to look into Not for Profit Status

AARP (formerly the American Association of Retired Persons, but now known more commonly by its acronym) is a non-profit, non-government interest group which, according to its web site mission statement, is “dedicated to enhancing quality of life for all as we age,” by providing “a wide range of unique benefits, special products, and services for our members.” AARP acts as a member advocate, and is a powerful lobbying group. It also sells insurance, investment products, and endorses certain insurance companies.

Sounds good, yes? But by virtue of its habit of endorsing insurance companies, AARP has recently come under fire. The Kaiser Family Network recently revealed that AARP’s endorsements don’t come cheaply – 43% of the revenue the supposedly non-profit, independent advocacy group collected in 2007 came from royalties and fees the organization took from insurance companies – as payment for endorsements.

Doesn’t sound too much like consumer advocacy, does it.

 

AARP Endorsements Equal Higher Insurance Costs for Consumers

AARP advertising claims that by choosing AARP-endorsed insurance, AARP members will save money. But as it turns out, those AARP-endorsed insurers often charge higher premiums. And the reason for the higher price is at least in part because the insurers add the cost of AARP’s fees and royalties to the price that consumers pay.

Under AARP insurance plans, the organization collects the premiums from AARP members, and pays the insurance companies. And the insurance companies then return a portion of that fee to AARP, in the form of those royalties and fees. So AARP is telling people to purchase insurance from certain companies, and this supposedly ‘independent’ organization is taking a cut of the premiums. In 2007, this earned AARP a cool $500 million.

There’s more, of course. When AARP receives payments from its members, it holds that money in its own accounts for up to a month before paying the insurers. And that month is enough investment time for the company to have earned a further $40 million in interest from its own members.

Now obviously, that’s not illegal. But it’s clear that there’s a conflict of interest here. And this has been noted in the past, too, with BusinessWeek saying that many of the insurance and finance products endorsed and sold by AARP are actually no better than products that seniors could get on their own or through the government – and in some cases may even be worse.

via AARP Collects Fat Fees for Endorsements, Kaiser Network Reports | Health Care Today.

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