Are AARP Discounts and Products the Best Deals?

Americans can count on receiving an invitation to join AARP when they reach age 50. The Washington DC-based giant advocacy group has 40 million members who get discounts on hotels and rental cars and become eligible for vetted products like cobranded Medicare supplemental insurance from UnitedHealth, automobile and homeowners insurance, life insurance, and long-term care insurance.

The AARP brand is one of the most well-known and respected names in the country. Some 82 percent of Americans say they trust information that comes from AARP, according to a Harris Poll conducted in November 2008, behind only Consumer Reports (92 percent) and the American Red Cross (88 percent).

But a recent Bloomberg television special report questions whether the products AARP recommends are the best deal for consumers. “The members of AARP don’t understand that AARP gets significant dollars, double the dollars they receive from their members, by endorsing these products,” Tom Orecchio, past chairman of the National Association of Personal Financial Advisors, told Bloomberg. “They have an inherent conflict of interest in recommending these products to their members.”

A related Bloomberg article reports that royalties and fees, often negotiated by insurance companies and other businesses in exchange for endorsements by AARP, made up 43 percent of AARP’s $1.17 billion in revenue in 2007, up from 11 percent in 1999. The article also profiles several older Americans who saved as much as $1,000 a year by switching away from AARP-endorsed insurance plans.

 AARP says its branded products are not always the cheapest option, but offer quality and value to their members. AARP CEO Bill Novelli responded to the Bloomberg article with this letter:

“The article's presumption that the cheapest product is the best is problematic, rarely accurate, and potentially dangerous. AARP has been working on behalf of older Americans for 50 years to ensure lifetime health and financial security. We do this through our advocacy efforts in Washington and in every state legislature and by licensing our name to providers offering quality products and services tailored to the needs of people 50 and older.”

Sen. Chuck Grassley (R-IA) asked AARP to account for how its AARP insurance products are marketed, sold, and managed in November 2008. “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 and leaves consumers seriously in debt if they need intensive medical care,” Grassley said in a statement about AARP limited-benefit health plans. Grassley said his inquiry was prompted by the experience of a patient with an AARP limited benefit policy who was forced to produce tens of thousands of dollars in payments up front before she would be treated at a cancer center in Houston.

In response, AARP and UnitedHealthcare voluntarily suspended the marketing and sales of the products in question and began an independent review of the advertising. Current members of the plans will continue to be served by them.

Tell us, what are your experiences with AARP products?