House GOP calls on IRS to probe AARP, details group’s financial windfall from ObamaCare

AARP, the nation’s largest group for older Americans, stands to rake in as much as $166 million in additional revenues by 2014 from selling insurance policies due to the passage of the national health care law it helped to muscle through Congress last year, according to a new report from House Republicans.

The report from the Republican majority on the House Ways and Means Committee comes in advance of a hearing it is holding this Friday that explores the finances and organizational structure of AARP. Authored by Reps. Wally Herger, R- Calif., Dave Reichert, R-Wash., and Charles Boustany, R-La., the report calls on the Internal Revenue Service to investigate the AARP’s tax-exempt non-profit status.

Typically seen as an advocacy group that provides discounts to senior citizens, AARP is actually comprised of a complex web of organizations and contains a non-profit arm as well as a for-profit insurance business. But in 2009, the insurance business accounted for roughly 60 percent of its revenue, while membership dues contributed only 17 percent. There is supposed to be a firewall between the two branches of the AARP, but Republicans charge that it’s a porous one. In fact,
several individuals have served on the boards of both sides.

AARP likes to bill itself as a non-partisan group looking out for the interests of older Americans, but in reality it’s only non-partisan in the sense that it supports both parties attempts to expand the role of government.

To prove its non-partisan chops, AARP will often point to its support for the Bush administration’s Medicare prescription drug legislation. But that law was a tremendous boost to its insurance business. In 2002, the year before the passage of the law, AARP’s insurance royalty revenue was $240 million, according to the report. But by 2009, this revenue had nearly tripled, to $657 million, while growth of other parts of the organization remained relatively flat.

The group stands to receive a further windfall from the passage of last year’s national health care law. Though not an insurer itself, insurers pay AARP royalties for putting its stamp of approval on their products. As a result of the hundreds of billions of dollars in cuts to Medicare Advantage under ObamaCare, many seniors will choose to purchase supplemental, or Medigap, insurance polices — and AARP happens to control 34 percent of that market.

Using different assumptions for the number of seniors who will convert to Medigap policies, the report estimated that AARP could stand to gain anywhere from a low of $55 million to a high of $166 million by 2014, once ObamaCare is fully implemented, based on their current market share.

While AARP does itself sponsor Medicare Advantage policies, according to the report, United Healthcare pays them flat royalties for the use of the AARP name that does not vary by the value of premiums collected, while it’s income does get a boost from increased Medigap sales. Also, people can purchase AARP-sponsored Medicare Advantage plans without being members of the organization, while individuals have to join the group to purchase Medigap insurance.

The bottom line is that the health care law should provide a strong boost both to revenue and membership for AARP, while its current contracts shield it from possible negative consequences. Thus, it’s no surprise that AARP pushed for the passage of the health care law, even though polls showed older Americans were the most strongly opposed to it of any age group.

In addition to its insurance business, AARP was the recipient of $97 million in federal grants in 2009.

AARP not only is a powerhouse on Capitol Hill as a result of its membership base, but as a result of its spending on lobbying. Between 1998 and 2010, AARP spent $198 million on lobbying, just ahead of the drug group PhRMA, according to the report. That’s enough to make it the fourth largest lobbyist during that period.

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