Avik Roy explains:
Here’s how it works. AARP isn’t your every-day citizens’ advocacy group. The AARP is also one of the largest private health insurers in America. In 2011, the AARP generated $458 million in royalty fees from so-called “Medigap” plans, nearly twice the $266 million the lobby receives in membership dues.
Medigap plans are private insurance plans that seniors buy to cover the things that traditional, government-run Medicare doesn’t, like catastrophic coverage. Medigap plans also help seniors eliminate the co-pays and deductibles that are designed to restrain wasteful Medicare spending…ObamaCare’s cuts to Medicare Advantage will drive many seniors out of that program, and into traditional government-run Medicare, which will increase the number of people who need Medigap insurance.
- AARP’s lucrative Medigap insurance was exempted in ObamaCare from the ban on pre-existing conditions; medical loss ratio requirements; caps on insurance industry executive compensation; and the tax on all other health insurance plans.
- The Department of Health and Human Services…also exempted Medigap insurance from premium rate review — even though AARP, which carries the plan with the largest market share, earns greater profits the more seniors pay in premiums.
- At a conference hosted by America’s Health Insurance Plans in March 2010, HHS Secretary Sebelius encouraged the insurance industry to give up some of its profits, at a time when health insurance profit margins were about 2 percent. Yet neither Secretary Sebelius nor anyone else in the Administration ever criticized AARP for making a profit margin of nearly 5 percent on its Medigap insurance.