Senator opens investigation into AARP insurance

A prominent member of the Senate Finance Committee is looking into some niche health insurance plans offered to AARP members to see if they mislead purchasers into thinking the coverage is greater than it actually is.

The inquiry by U.S. Sen Chuck Grassley, R-Iowa, part of a wider investigation into health costs and coverage, centers on so-called limited-benefit plans, including some policies offered by Minnetonka-based UnitedHealth Group.

Instead of capping what the policyholder pays, as traditional insurance does, these plans cap what the insurer pays. As a result, a policyholder who needs expensive care, such as major surgery, might wind up liable for thousands of dollars in medical bills if they exceed the insurer's share. The plans generally have lower premiums than traditional insurance with catastrophic coverage.

"The pitch for these products should be straight-up and informative, instead of designed to leave the impression of being comprehensive when the product is in fact very limited," Grassley said in a statement late Monday. "A big-time advocate of health security [AARP] should not target under- and uninsured Americans with misleading marketing."

Grassley sent letters Monday to state insurance commissioners asking if they've received complaints on the plans. He also sent a letter to AARP Chief Executive William Novelli asking how the plans are marketed.

"We're treating the questions raised by Sen. Grassley very seriously," said Adam Sohn, an AARP spokesman. "The indemnity plans are not designed to be comprehensive insurance, nor should they be communicated in this manner."

UnitedHealth spokeswoman Martha Jones said, "We do not market this as major medical catastrophic insurance, or as an alternative to major medical. All advertising materials note the plan offers limited benefits."

UnitedHealth has had a long-standing marketing partnership with AARP. It also offers Medicare Advantage and Medicare Part D drug policies with the AARP name. Those are not part of the Grassley inquiry.

Grassley's interest stems from an earlier investigation into tax-exempt hospitals, which involved a patient in Texas who ran into problems with the coverage limits of her AARP Medical Advantage Plan. In a briefing in September, AARP representatives told Grassley's staff that such policies were designed to be purchased in addition to other health insurance, and that the Medical Advantage Plan policy was, at least, "better than nothing," according to Grassley. However, AARP representatives also said the plans are purchased mostly by those who have no other health insurance, Grassley noted.

The senator's staff went on to examine promotional materials on AARP's website and made calls to AARP's toll-free number to ask about purchasing health insurance. Among other things, they noted that the website used lower-cost procedures as examples for calculating out-of-pocket costs. They also found no examples of how the benefit would apply to an inpatient hospital stay.

The marketing of limited-benefit policies was also the subject of a recent court settlement between 29 states and Texas-based Mega Life and Health Insurance Co.

Grassley has asked AARP to respond to his inquiry by Nov. 24.