NewRetirement Retirement News Digest : Insurance

Seniors get new health options

jberman — Tue, 10 Nov 2009 10:25:00 GMT

Detroit Free Press, November 9th, 2009

Seniors looking to buy supplemental Medicare policies may have to do more work to learn about them. They often aren't widely advertised by leading insurers.

But several companies new to the business hope to capitalize on complaints that the state's leading insurer, Blue Cross Blue Shield of Michigan, doesn't widely advertise its money-losing Medigap policies.

"We have real customer service with low wait times," said Joan Budden, chief marketing officer for Priority Health, which has new supplemental Medicare, or Medigap, plans.

Aetna and Blue Care Network, a Blue Cross subsidiary, also have new Medigap plans for 2010.

Medicare supplemental plans are policies that help pay for doctor visits and medical services not typically covered by basic Medicare Part A and B coverage.

Their appeal is that they usually have no co-pays, and they pay for care in broader areas of a state or in another state where a person may live part of the year.

Medigap policies "are good for people who are frail and who have high medical needs," said Jennifer Houghton, a Medicare specialist with the Area Agency on Aging 1B in Southfield.

Insurers take on Blue Cross

George Williston considered buying a Blue Cross Blue Shield of Michigan supplemental Medicare policy. But he had such trouble finding information about the plans on the company's Web site that he decided to keep looking.

"I consider it a disgrace for a nonprofit organization," said Williston, 82, of Hastings, a retired nonprofit executive.

This year, Williston and other seniors will have more choices as insurers introduce new Medigap products to compete with Blue Cross, which is seeking a 36.7% rate hike to offset mounting losses selling the Medicare product.

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Big Jump Seen In Health Costs For Employees

jberman — Thu, 15 Oct 2009 08:20:00 GMT

The Wall Street Journal, October 14th, 2009

As companies begin unveiling their workplace benefits for next year, many employees are learning they will have to dig even deeper into their pockets for health coverage.

Such price increases have become a fact of life during open-enrollment season, when workers sign up for their health plans. But the jump is expected to be steeper in 2010 than this year, as employers struggle with the impact of the recession and continually rising insurance costs. Employees will pay $4,023 on average in premiums and out-of-pocket charges next year, up 10% from 2009, according to a projection from Hewitt Associates, a benefits-consulting firm. In dollar terms, it's the biggest boost since the firm started keeping track of the data a decade ago.

For workers, that will mean larger payroll deductions, as well as spending more on co-payments and other fees tied to care. Companies also are expected to prod more employees into cheaper coverage by getting them to sign up for high-deductible health plans. And many employers are trying to rein in the expense of covering workers' families, sometimes by making insurance for kids and spouses pricier.

As a sweetener, some companies are offering new benefits, such as life insurance and long-term-care insurance, that employees can opt to buy for themselves. But workers need to look closely at such offers, because some people may be able to purchase these benefits more cheaply on their own.

Workers like Katha Rogers are already feeling the pinch. Ms. Rogers, 46, is a customer-service representative for Burton Metal Finishing Inc., a small family-owned company in Columbus, Ohio. She and other employees started paying sharply increased premium contributions this July. The firm had to ask them to chip in more because its health-insurance costs have been going up 10% to 20% a year, while the economic downturn hit its revenues, says co-owner Victoria Burton.

Ms. Rogers and her husband, who also works at Burton Metal Finishing, now pay $120 a month combined, up from nothing two years ago. They also face bigger co-payments and deductibles. Partly because of that, the family is trying to save money, including not taking any vacation trips. They've also canceled some doctor visits to avoid the new $50 co-pay. "You have to decide where you're going to cut next," says Ms. Rogers. Still, she says, she's grateful to have coverage in this difficult economy.

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Medicare Advantage at a disadvantage in health debate

jberman — Sat, 10 Oct 2009 09:59:00 GMT

Market Watch, October 8th, 2009

Senate Finance Committee Chairman Max Baucus promises that the huge health-care reform bill his committee will vote on next week will protect Medicare benefits for seniors. But not everyone agrees, and a fight is brewing as lawmakers prepare to take the legislation to the floors of the House and Senate.

At issue is Medicare Advantage, a popular federal government-subsidized program that allows seniors to choose health plans run by insurance companies. Currently about 10 million people - close to a quarter of the 45 million seniors getting Medicare - have signed up for Medicare Advantage.

Members typically get all their Medicare-covered health care through the plans, and the coverage can include prescription drug benefits. There are generally lower co-payments than in regular Medicare -- although enrollees may have to pay a monthly premium to get the extra benefits. Read more from Medicare.gov.

But proposed cuts to the Medicare Advantage program have health insurers and some seniors worried, and at least one amendment to the finance panel's overhaul bill seeks to cushion the blow as money for private plans faces the chopping block. Whether the amendment, offered by Sen. Bill Nelson, D-Fla., makes it into a final bill is now an open question. House legislation also proposes cuts to the program.

A vote on the Senate Finance Committee's bill is set for Tuesday, Senate Majority Leader Harry Reid, D-Nev., said Thursday. The measure costs $829 billion over 10 years, reduces the deficit by $81 billion and covers 94% of Americans. See full story.

President Barack Obama and congressional Democrats want to cut as much as $500 billion from Medicare over the next 10 years to help pay for insuring more Americans.

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How To Beat Insurers At The Annuity Game

jberman — Fri, 28 Aug 2009 08:03:00 GMT

Forbes, August 26th, 2009

Many variable annuity skeptics are taking a second look at these complex insurance-investment hybrids that hold your money in a mutual fund look-alike, have a life insurance death benefit and offer income-for-life guarantees. The income guarantee is appealing to people whose retirement accounts have been reduced by the stock market and whose net worth has been reduced by the real estate collapse.

Annuity marketers are tapping into this trend with television ads hinting at a worry-free retirement solution: Give us your $100,000 and we'll give you $5,000 a year for as long as you live! There are solid arguments for people in certain situations to consider annuities now, but for many investors the instant income-for-life option is not the compelling benefit insurers would have us believe.

A way to get the most from a variable annuity investment is to do exactly the opposite of what insurance companies want, which is for people to buy an annuity and start taking the income right away. While it may be the right choice for some investors, it's almost always the right choice for the insurance company because once you start taking the income, you lose certain guarantees on the growth of your principal and thus the growth of your income. When people choose this option, the insurance company has very little downside and the annuity owner loses most of the upside.

Instead, the longer an annuity holder waits to start taking the income, the greater the chance the advantage will shift. Many VA contracts guarantee that as long as you don't trigger the income option, your income basis will double in 10 years, a 7% annualized compound rate of return. Over time, the balance of power shifts: The insurance company ends up with the downside and the annuity holder has the upside, with the added guarantee that the contract value available for income will never decline.

This explains why some of the major insurers that bet heavily on variable annuity sales during the past few years are now suffering wicked hangovers. The principal players got into a kind of guarantee arms race that never figured on a historic market crash. When that crash came, annuity holders who had waited to take their income realized that even though the market was in the pits, the insurance company had guaranteed to pay them on the basis of the last high-water mark.

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House Health Plan Outlines Higher Taxes on Rich

jberman — Thu, 16 Jul 2009 03:34:00 GMT

The New York Times, July 14th, 2009

House Democratic leaders took a big step toward guaranteeing health insurance for most Americans on Tuesday as they unveiled a bill that detailed how they would expand coverage, slow the growth of Medicare, raise taxes on high-income people and penalize employers who do not provide health benefits to their workers.

A day after President Obama pressured Democratic leaders to speed work on his top domestic priority, three House committees announced plans to begin voting on the measure this week.

Starting in 2011, a family making $500,000 would have to pay $1,500 in additional income tax to help subsidize coverage for the uninsured. A family making $1 million would have to pay $9,000.

Employers who do not provide health insurance to workers would generally have to pay a fee or penalty to the government. The fee would be equal to 8 percent of wages for an employer with an annual payroll of more than $400,000.

After months of setbacks and uncertainty, House Democrats were jubilant as they introduced their proposal to achieve a goal that has eluded presidents for six decades.

“This is indeed a happy day, for today we are introducing historic and transformative legislation that will benefit all Americans, a health insurance act for the great middle class of America,” Speaker Nancy Pelosi said.

President Obama hailed the House bill, which he described as a product of “unprecedented cooperation” by three House committees.

Speaking from Warren, Mich., Mr. Obama said, “Don’t be fooled by folks trying to scare you by saying we can’t change the health care system. We have no choice but to fix the health care system because right now it’s broken for too many Americans.”

The surtax would apply to any adjusted gross income exceeding $280,000 a year for an individual and $350,000 for a couple filing a joint return. The tax rates would range from 1 percent to 5.4 percent.

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When an insurance company denies long-term-care benefits, there's another way to get its attention

jberman — Sat, 11 Jul 2009 10:31:00 GMT

Dallas Star-Telegram, July 10th, 2009

Nancy Morrow was angry that her parents paid tens of thousands of dollars in long-term-care insurance premiums, but when her parents needed care, CNA Insurance Companies refused to pay.

The family hired a senior advocate for help, but that didn’t work. It also hired a lawyer.

I urged her to cut to the chase: Notify the Texas Department of Insurance.

The department is staffed with "a whole floor of people" in Austin who take calls from Texas consumers every day, a spokesman says. When it opens a case file, executives at insurance companies are quick to notice.

"Not to brag, but whenever we get involved, it catches the company’s attention," says Marilyn Devine, a senior complaints specialist at the department.

Catching a company’s attention will be easier in Texas after Sept. 1, when a new law gives the state insurance commissioner power to approve or disapprove long-term-care premiums and rate increases. Previously, the state accepted rates without the ability to reject them.

This increased regulation comes as companies that sell policies are raising premiums and increasing existing rates on longtime policyholders.

In the case of Morrow’s 83-year-old parents, Talmage and Vada DeWitt of Lubbock, the couple filed claims with CNA to cover payments for home helpers. He is blind, and she is disabled. CNA cited these reasons in rejecting the claims: The long-term care they were receiving was not in a facility. And their medical records were incomplete.

Long-term-care policies — which cover services needed when you can’t care for yourself because of a prolonged illness or disease, such as Alzheimer’s — have a strict set of requirements for paying claims. Meeting the requirements takes a lot of legwork, which is often difficult for elderly people to do on their own.

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Retirement Plans From Hell

jberman — Thu, 02 Jul 2009 08:23:00 GMT

Insurance News Net, June 30th, 2009

Early this year the woman overseeing the 401(k) plan for a rural Oregon company gathered her 25 colleagues together to hold an election. At stake: whether to continue paying AIG an annual 1.25% of assets to manage their 401(k) plan as part of an insurance contract, or switch to mutual funds costing a third less. No surprise that the proposal to convert passed easily.

Then the nasty surprises started popping up. As she sought to unwind the plan, the administrator discovered that AIG had been tacking on a variety of fees all along. One nicked employees for 2% annually when they borrowed money from their own 401(k)s--work the new plan was willing to do for a flat $50 a year.

To top it off, AIG said that many of the employees would have to wait five years to get back their entire nest eggs, with no choice but to keep paying the fees. AIG says such lockups are disclosed in its plan contracts and are shorter than the ones many other insurers impose.

The company's frustrated administrator, who agreed to talk only anonymously, says she's still baffled by the complex annuity contract. "We still don't have a good handle on what they're charging us," she says.

Like the Oregon outfit, lots of mostly small companies are finding out the hard way that the 401(k) plans they bought from insurance companies, usually set up as "group annuities," came with a variety of hard-to-find charges and lockups. Or, more aptly, the plans they were sold by people motivated by lavish commissions. Many hyped the product as a low- or no-cost proposition for employers while glossing over the fees charged to employees. A successful ruse it is. All told, insurers have lured 18,000 companies into parking $185 billion of 401(k) assets inside group annuities and similar insurance contracts, according to an analysis by Larkspur Data Resources of plans with under $250 million in assets.

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Health Care Costs During Retirement

jberman — Fri, 29 May 2009 01:18:00 GMT

The National Center for Policy Analysis, May 27th, 2009

Many people assume Medicare will cover most of their health care costs when they retire, and that Medicaid, the health care program for the poor, will cover them if they need nursing home care. However, neither program guarantees a low-cost ride through retirement.

Research has shown that seniors can expect Medicare to cover only about half of their medical expenses, on average. According to Fidelity Investments, the average senior retiring at age 65 this year will need $240,000 to pay the out-of-pocket costs of health care for the rest of his or her life.

Seniors and Out-of-Pocket Expenses. Seniors spend more per capita on out-of-pocket health care expenses than any other age group. The 2004 National Health Expenditure Survey found that:

Seniors age 65 and over spent an average of $4,888 per capita annually out of pocket for deductibles, copayments, premiums and other health care expenses not covered by insurance.
Their spending is more than twice as high as the average nonelderly adult.
The largest expenditures occurred among those 85 and older, who spent an average of $8,304, compared to $5,066 for seniors ages 75 to 84, and $3,851 for those 65 to 74.

Seniors and Medicare. There are three potential cost components to the Medicare program for seniors. Part A, which covers inpatient hospital stays and rehabilitation, is paid for through all employees' payroll taxes, but seniors still face copays and deductibles. Part B mainly covers physician services and is partially paid for through premiums deducted from seniors' Social Security benefits checks.

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A Moderate Plan for Health Care

jberman — Wed, 13 May 2009 05:33:00 GMT

The New York Times, May 11th, 2009

One of the most contentious issues in the Congressional debate over health care reform is over whether to create a new public plan to compete with private insurers. Senator Charles Schumer of New York is making strenuous efforts to forge a compromise that ought to appeal to political moderates who are not reflexively opposed to a government-run program or beholden to private insurers concerned about profit margins.

Any competition between a new public plan and private plans would be waged on a regulated field of battle within a new health insurance exchange. Most reform proposals envisage the exchange as a place where individuals unable to obtain coverage at work and ineligible for existing public programs like Medicaid could buy policies that would be available to everyone without regard to pre-existing medical problems. Low-income people would get subsidies to help buy a private or public plan.

Opponents of a new public plan have raised the specter that it might have unfair advantages that would enable it to draw customers from private insurers and ultimately drive them out of business, leaving virtually all Americans enrolled in a full-fledged single-payer system, like Medicare. That prospect could be mitigated by appropriate ground rules.

The insurance industry is so desperate to avoid competition that it has already pledged numerous reforms and called for tighter regulation of the private market to expand coverage and control costs. But even with tighter regulation, Congress should include a public plan option to give consumers broader choice, provide a refuge for people who don’t trust private insurers to have their best interest at heart and serve as a yardstick for judging the performance of private plans.

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Let Insurers Compete

jberman — Tue, 12 May 2009 09:21:00 GMT

The New York Times, May 11th, 2009

Re “Schumer Points to a Middle Ground on Government-Run Health Insurance” (news article, May 5):

Republican “moderates” who oppose the public option in President Obama’s health care reform plan are concerned that insurance companies “can’t compete” with a government program like Medicare. Isn’t that simply an admission that private, profit-driven health care is an abject failure?

The private component of American health care is so expensive and inefficient that American health care costs twice as much as many government-backed plans around the world. More to the point, exorbitant health care bills are the leading cause of bankruptcy in this country.

Republicans who oppose the public option, and Democrats who seek to water it down, appear more concerned about insurance companies going bankrupt than about the thousands of Americans who lose everything they own, and never get the medical attention they deserve, because of private insurers’ predatory practices.

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Doctors Are Opting Out of Medicare

tsaleen — Fri, 03 Apr 2009 21:54:00 GMT

The New York Times - April 1, 2009

EARLY this year, Barbara Plumb, a freelance editor and writer in New York who is on Medicare, received a disturbing letter. Her gynecologist informed her that she was opting out of Medicare. When Ms. Plumb asked her primary-care doctor to recommend another gynecologist who took Medicare, the doctor responded that she didn’t know any — and that if Ms. Plumb found one she liked, could she call and tell her the name?

Many people, just as they become eligible for Medicare, discover that the insurance rug has been pulled out from under them. Some doctors — often internists but also gastroenterologists, gynecologists, psychiatrists and other specialists — are no longer accepting Medicare, either because they have opted out of the insurance system or they are not accepting new patients with Medicare coverage. The doctors’ reasons: reimbursement rates are too low and paperwork too much of a hassle.

When shopping for a doctor, ask if he or she is enrolled with Medicare. If the answer is no, that doctor has opted out of the system. Those who are enrolled fall into two categories, participating and nonparticipating. The latter receive a lower reimbursement from Medicare, and the patient has to pick up more of the bill.

Doctors who have opted out of Medicare can charge whatever they want, but they cannot bill Medicare for reimbursement, nor may their patients. Medigap, or supplemental insurance, policies usually do not provide coverage when Medicare doesn’t, so the entire bill is the patient’s responsibility.

The solution to this problem is to find doctors who accept Medicare insurance — and to do it well before reaching age 65. But that is not always easy, especially if you are looking for an internist, a primary care doctor who deals with adults. Of the 93 internists affiliated with New York-Presbyterian Hospital, for example, only 37 accept Medicare, according to the hospital’s Web site.

Two trends are converging: there is a shortage of internists nationally — the American College of Physicians, the organization for internists, estimates that by 2025 there will be 35,000 to 45,000 fewer than the population needs — and internists are increasingly unwilling to accept new Medicare patients.

In a June 2008 report, the Medicare Payment Advisory Commission, an independent federal panel that advises Congress on Medicare, said that 29 percent of the Medicare beneficiaries it surveyed who were looking for a primary care doctor had a problem finding one to treat them, up from 24 percent the year before. And a 2008 survey by the Texas Medical Association found that while 58 percent of the state’s doctors took new Medicare patients, only 38 percent of primary care doctors did.

Currently, about 40 million Americans have Medicare insurance, according to medicare.gov. Coverage is provided to those 65 or older, some younger disabled people and people of all ages with end-stage renal disease.

Those approaching Medicare eligibility should talk to their doctors. Even doctors who won’t take new Medicare patients may be willing to allow their existing ones to remain in their care. If they are not, it’s advisable to start looking around. But the search will be easier for people who start early.

“If you have just moved into town and are 64,” said Dr. Jeffrey P. Harris, an internist and the president of the American College of Physicians, “it is easier for you to see a doctor than if you had just moved into town and are 65.”

Before giving up on a doctor who will not accept Medicare, a patient should ask about signing a private contract that stipulates the patient will be responsible for paying the doctor’s fees and lists exactly what those fees are and what they cover. Some doctors may be willing to negotiate and tailor prices to what patients can afford.

For example, a doctor who charges younger patients with employer health coverage $250 for an office visit might be willing to accept $175 from an older patient who pays cash and requires no insurance claims.

“I have a lady of 93 who pays me $5 a visit, and for her that’s real money,” said Dr. Steven D. Knope, an internist and private contract doctor in Tucson. “I charge her because then she listens to what I say.”

How do you find a doctor who accepts Medicare? The Web site www.medicare.gov provides a list of enrolled doctors. Other sources are state medical societies and local hospitals, most of which have online directories of doctors. But that’s no guarantee they will see new patients.

Other options are also available. Roughly 18,000 walk-in, stand-alone urgent care centers in the United States are staffed with doctors who set simple fractures, take X-rays, do minor surgery, diagnose ailments and write prescriptions. By far the majority of these centers take Medicare.

Although they were never intended to provide continuing care, “our primary care practice is growing more than anything else,” said Dr. Franz Ritucci, who is medical director of the American Academy of Urgent Care Medicine and practices at America’s Urgent Care in Orlando, Fla., a chain of walk-in centers that also has clinics in Columbus, Ohio.

The centers are open 12 to 18 hours a day and patients do not need an appointment, though they may have to wait. Some centers allow appointments to see a specific doctor for follow-up.

“If you can hook up with a primary care provider in an urgent care center who is willing” to provide continuing care, said Dr. J. James Rohack, a cardiologist who is president-elect of the American Medical Association, “then yes, it’s an option.”

Type “urgent care centers” into a search engine and thousands come up. In June, the Academy of Urgent Care Medicine plans to add a list of centers it has accredited to its Web site, www.aaucm.org.

Another, more expensive option is concierge or “boutique” care, which comes in two forms. In the most popular kind, doctors accept Medicare and other insurance, but charge patients an annual retainer of $1,600 to $1,800 to get in the door and receive services not covered by Medicare, like annual physicals. Before signing up and paying the retainer, patients should get a written agreement spelling out which services the doctor will bill Medicare for and which the retainer covers. And always check carefully for double-billing.

The other form of concierge medicine — doctors who have opted out of Medicare — is more expensive still. Fees range as high as $15,000 a year and cover office visits, access to the doctor when care is needed, referrals to specialists and thorough annual physicals.

Dr. Knope, the author of “Concierge Medicine: A New System to Get the Best Healthcare,” has this kind of practice in Tucson. His patients sign a contract agreeing to pay $6,000 a year for individuals and $10,000 a year for couples. The fee covers office visits, physical exams and phone consultations, and Dr. Knope will meet patients in the emergency room, see them in the hospital and occasionally make house calls.

A list of about 500 concierge doctors throughout the country is available on Dr. Knope’s Web site, www.conciergemedicinemd.com.

Is the care worth the money? Harold and Margret Thomas, who are in their mid-70s and live in Cincinnati, spend the winter in Tucson. After many phone calls, the couple were unable to find an internist in Tucson who took new Medicare patients, so they signed with Dr. Knope in 1996. Five years ago, when Mrs. Thomas developed a blinding headache, her husband called the doctor at 8 o’clock one night, and he, suspecting an aneurysm, insisted they get to the emergency room immediately.

The doctor met them and ordered an M.R.I. and a CT scan. The tests revealed an aneurysm, and Dr. Knope found a surgeon who quickly operated. Medicare paid for the emergency room, the surgery and the hospital stay.

“If there were a concierge practice in Cincinnati, I’d be part of it there, too,” Harold Thomas said.

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Walgreens giving free care to jobless and uninsured

tsaleen — Fri, 03 Apr 2009 21:48:00 GMT

Yahoo News - March 31, 2009

Drugstore operator Walgreens will offer free clinic visits to the unemployed and uninsured for the rest of the year, providing tests and routine treatment for minor ailments through its walk-in clinics — though patients will still pay for prescriptions.

Walgreens said patients who lose their job and health insurance after March 31 will be able to get free treatment at its in-store Take Care clinics for respiratory problems, allergies, infections and skin conditions, among other ailments. Typically those treatments cost $59 or more for patients with no insurance.

Hal Rosenbluth, chairman of the Take Care Health Systems division, described the plan as something close to an experiment: He said Walgreens isn't sure of patient demand or how much providing the services might cost the company.

It's likely to generate more attention for the clinics, however. Rosenbluth said a typical Take Care patient tells eight other people about his or her experience. So far, about 30 percent of Take Care patients were new customers to Walgreens.

The program is expected to last through the end of 2009. Walgreens runs 341 Take Care clinics in 35 markets around the country, including Chicago, Atlanta, Miami and Cleveland.

Free services will be offered only from 11 a.m. to 3 p.m. Monday through Friday. Walgreens said it will not offer free checkups, vaccinations or other injections because it is focusing on providing services patients might otherwise get at an urgent-care center or even an emergency room.

Patients must present proof they are unemployed, including a federal or state unemployment determination letter and an unemployment check stub. They will have to sign a form at the clinic saying they have lost their jobs and health benefits. If they find a new job or get new health insurance, they will no longer be eligible for free care.

Spouses and children are also eligible for free services if they don't have insurance of their own.

Medical lab operator Quest Diagnostics is participating in the program by offering free tests for step throat and urinary tract infections.

Walgreens bought the Take Care clinics in May 2007. Take Care says it has seen about 1.2 million patients since its launch in November 2005 and estimates that up to 30 percent of them were uninsured.

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AARP’s Stealth Fees Often Sting Seniors With Costlier Insurance

tsaleen — Sun, 15 Feb 2009 19:15:00 GMT

Bloomberg - December 4, 2008

Arthur Laupus joined AARP because he thought the nonprofit senior-citizen-advocacy group would make his retirement years easier. He signed up for an auto insurance policy endorsed by AARP, believing the advertising that said he would save money.

He didn’t. When Laupus, 71, compared his car insurance rate with a dozen other companies, he found he was paying twice the average. Why? One reason, he learned, was because AARP was taking a cut out of his premium before sending the money to Hartford Financial Services Group, the provider of the coverage.

Laupus stumbled onto something that many members of the world’s largest seniors’ organization don’t know: The group, formerly called American Association of Retired Persons, collects hundreds of millions of dollars annually from insurers who pay for AARP’s endorsement of their policies.

The insurance companies build the cost of these so-called royalties and fees, which amounted to $497.6 million in 2007, into the premiums they charge AARP members, according to AARP’s consolidated financial statement for that year.

AARP uses the royalties and fees to fund about half the expenses that pay for activities such as publishing brochures about health care and consumer fraud -- as well as for paying down the $200 million bond debt that funded the association’s marble and brass-studded Washington headquarters.

In addition, AARP holds clients’ insurance premiums for as long as a month and invests the money, which added $40.4 million to its revenue in 2007.

‘Fatting the Coffers’

“At the end of the day, it’s all about fattening the coffers of the organization,” says Thomas Orecchio, who was chairman of the Arlington Heights, Illinois-based National Association of Personal Financial Advisors until September. AARP, he says, is sponsoring insurance for its members at inflated prices.

“It’s the dirty little secret,” he says.

During the past decade, royalties and fees have made up an increasing percentage of AARP’s income, rising to 43 percent of its $1.17 billion in revenue in 2007 from 11 percent in 1999, according to AARP data.

Laupus, a former teacher in Baltimore, and millions of others joined AARP in the belief it would provide discounts, services and publications. The organization ranks behind only Consumer Reports and the American Red Cross as the most trusted large group that influences U.S. politics and business, a 2007 Harris Poll found.

AARP has helped millions with tax returns, estate planning and health care advice.

‘Turbulent Economy’

With stock markets around the world plunging, savings plans in turmoil and medical costs soaring, older Americans need an organization such as AARP in their corner.

“The turbulent economy puts more people in the difficult situation of being under- or uninsured,” says Iowa Republican Senator Charles Grassley. “That’s why we need to make sure individuals aren’t taken advantage of with misleading marketing, especially by a name brand advocate who carries a high level of trust.”

Grassley sent letters to AARP Chief Executive Officer William Novelli and state insurance commissioners Nov. 3 inquiring into whether the AARP misrepresented what is covered by some health insurance policies it sold. Four days later, Novelli announced AARP would review its marketing and suspend sales of those policies.

AARP’s mission to help seniors has been compromised by its reliance on royalties and fees, says Marilyn Moon, who was director of AARP’s Public Policy Institute from 1986 through 1989.

‘Conflict of Interest’

“There’s an inherent conflict of interest,” she says. “A lot of people there are trying to do good, but they’re ending up becoming very dependent on sources of income.”

Moon is now vice president and director of the health program at American Institutes for Research in Washington.

Novelli, who co-founded a public relations company in 1972, became CEO of AARP in 2001. Since then, the organization has increasingly focused on marketing as a means to increase revenue, Moon says.

AARP officials say the organization always gives priority to the needs of seniors.

“There is no conflict of interest between the marketing of products and services to our members and our policy work,” spokesman Adam Sohn says. “Policy always comes first.”

AARP declined requests to make Novelli available for comment.

‘Benefit From Our Brand’

John Wider, executive vice president of AARP Services Inc., a for-profit subsidiary, says AARP uses royalty revenue to fund its member services. In addition, he says, insurers selling products through AARP find royalty payments are worthwhile because AARP’s endorsement lowers insurance company marketing costs and increases sales.

“There is an efficiency they gain in being able to benefit from our brand,” he says.

Novelli, 67, has broadened AARP’s reach and increased its clout in Washington. The association recently joined with industry and labor groups in a campaign known as Divided We Fail. That effort is seeking ways to ensure health care for all Americans.

Novelli has expanded AARP’s marketing to include 17 types of insurance. The association collects royalties on each of those products. Its membership rose to 40 million from 35 million, and its total revenue grew to $1.17 billion in 2007 from $520 million when Novelli took charge.

Medicare Lobbying

Nowhere were AARP’s conflicting roles more evident than in its lobbying in support of a 2003 bill proposed by President George W. Bush to expand Medicare, the federal health insurance program for people older than 65.

The bill, which for the first time added a prescription drug plan to Medicare, passed by a vote of 220-215 in the House of Representatives and 54-44 in the Senate. Thousands of AARP members complained that the legislation was a bad deal for seniors because it provided incomplete coverage and raised costs for seniors with low income.

After the Medicare bill was signed into law by Bush in December 2003, AARP was able to expand its contract with Minnetonka, Minnesota-based UnitedHealth Group Inc., which underwrites AARP’s Medicare supplemental insurance plan.

AARP increased its annual revenue from royalties by $197 million to $497.6 million from 2003 to 2007.

Not the Least Expensive

AARP advertises that its Medicare supplemental insurance can save people thousands of dollars. While every type of supplemental policy sold by all companies must offer the same exact coverage under federal rules, AARP doesn’t sell the least expensive.

The AARP/UnitedHealth basic policy costs $582 a year more than a lower-cost competitor in New York and $428 more in Los Angeles, according to data on Medicare’s Web page. AARP spokesman Sohn says everyone should shop carefully.

“The products and services AARP makes available are competitively priced,” he says. “Price is not the only factor. Service and features need to be factored in to determine full value.”

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UnitedHealth to Insure the Right to Insurance

tsaleen — Mon, 08 Dec 2008 08:19:00 GMT

The New York Times - December 2, 2008

For these economically uncertain times, the UnitedHealth Group has a “first of its kind” product: the right to buy an individual health policy at some point in the future even if you become sick.

Called UnitedHealth Continuity, the product is not actual medical insurance, but is aimed at people who may have insurance now but are worried they may lose it — and may not be able to obtain replacement insurance on their own. They may expect to retire early, for example, before they qualify for Medicare. Or they are worried about the possibility of losing their job and their health coverage.

People who are already sick will generally not be eligible for the new product. Those who do pass a medical review, will pay 20 percent each month of the current premium on an individual policy to reserve the right to be insured under the plan at some point in the future.

“What this product is designed to do, for a very modest premium, is to essentially protect your insurability for the future,” said Richard A. Collins, the president of UnitedHealth’s individual insurance unit, who says he is the first policy holder. His monthly fee is $50.

Some health policy experts question whether UnitedHealth Continuity is a good way for consumers to spend their money. They acknowledge that people who are forced to buy insurance on their own face a daunting task. If they are not healthy, such people may find any available coverage too expensive. And most states let insurers refuse to sell new individual policies to anyone with a pre-existing medical condition.

But if changes to the health insurance system do occur under the Obama administration, they say, UnitedHealth’s new product may become obsolete.

“As an individual, you’re betting against health reform,” said Peter V. Lee, the executive director of national health policy for the Pacific Business Group on Health, a California group of employers who provide health coverage for their workers.

Mr. Lee notes that there is serious talk in Washington of having private insurers agree to offer individual coverage to anyone, regardless of their health status. People who choose to pay for the UnitedHealth guarantee could find that the insurance industry will eventually be providing the same thing free.

“It’s an attempt to have a market solution to a market failure,” Mr. Lee said.

Mr. Collins says he is unconcerned about the possibility of health reform, given the uncertainties surrounding any government efforts. “Until something happens, this is a really good tool,” he said. UnitedHealth, which announced the UnitedHealth Continuity product Tuesday at an investors’ conference in New York, plans to begin promoting it in coming weeks.

It is initially available in 25 of the 40 states where UnitedHealth currently sells individual insurance, which do not include New York and New Jersey. The company is applying to sell it in the other 15 states, including Connecticut, where it now sells to individuals. The monthly fees for reserving the right to UnitedHealth’s insurance will vary, depending on people’s age and sex, where they live and how generous a coverage plan they select.

A 50-year-old male in Columbus, Ohio, who planned to eventually take an individual policy in which he would be obliged to pay the first $3,500 in medical bills would pay $32 a month for the right to eventually get that coverage — or 20 percent of a policy that now costs $159 a month.

But it is uncertain exactly how he much he could end up paying for the guarantee, or for the medical coverage itself in the future. The premiums, and the monthly fees, are likely to increase over time.

And people attracted to the new product could eventually develop costly medical ailments, experts say, so enrollees might eventually have to pay higher premiums than people able to join plans open only to the healthy. But UnitedHealth says that the upfront monthly fees it collects could help defray some of those higher medical expenses down the road, if they do occur.

People who lose their employer-provided coverage do have other options. Under the federal Cobra law, they can continue their employer-based coverage for a time after losing or leaving their jobs. And some states have insurance programs available even for those who are at risk of incurring high medical bills.

Private insurers are increasingly interested in coming up with new plans that offer coverage even to those individuals with pre-existing conditions, said Bob Vineyard, an insurance broker in Atlanta. He said he expected such plans to be introduced next year.

There are people for whom the new UnitedHealth Continuity product will make sense, Mr. Vineyard said, like someone who expects to work on contract for employers that offer health benefits but who anticipates gaps in that coverage.

But Mr. Vineyard said he did not expect the Continuity plan to have widespread appeal. Many people, he said, especially those who are already struggling in the current economy, may not want to spend the money for the coverage. “I think it’s got very, very limited application,” he said.

Some financial planners are also lukewarm to the idea of spending extra money for a guarantee. Neil Brown, a financial planner for Burkett Financial Services in West Columbia, S.C., compared such a purchase to sleeping with a life preserver for fear of drowning. Some advocates for changing the health insurance system say that rather than expecting individuals to spend hundreds of dollars a year for a guarantee they may not need, the government should do more to make sure everyone has access to coverage.

“This product is taking advantage of the lack of sensible health reform that could easily solve this problem,” said Ron Pollack, the executive director of Families USA, a consumer advocacy group in Washington.

But Mr. Collins of UnitedHealth argues that Continuity is a way for consumers to make sure they can obtain medical insurance that may be better than anything the government comes up with.

“I think it’s a terrific hedge,” he said.

This article has been revised to reflect the following correction:

Correction: December 5, 2008
Because of an editing error, an article on Wednesday about an offer by UnitedHealth Group to guarantee to some customers the right to buy an individual health policy in the future regardless of their health status incorrectly included New Jersey and New York, in some copies, among the states in which the offer is available or could be made available. Because UnitedHealth does not sell individual policies in either state, it will not make the offer.

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Life Insurers Facing Cuts in Ratings

tsaleen — Sat, 22 Nov 2008 19:09:00 GMT

The New York Times

Life insurance companies, hobbled by real estate investments and committed to paying some costly retirement contracts, face more cuts in their credit ratings before the year is up and have little choice but to seek capital in unforgiving markets.

Companies have until Friday to apply for federal help under the Troubled Asset Relief Program, or TARP, but only about half of the life insurance industry will even be allowed to apply. The Treasury has said life insurers must be affiliated with banks or thrifts that are regulated at the federal level.

Some big state-chartered insurers that are interested, like Hartford Financial Group, appear to be shut out. Two other companies, Lincoln Financial, based in Philadelphia, and Genworth of Richmond, Va., have said they were interested, but would not be eligible.

Most life insurers have been unwilling to say whether they want to apply or not, for fear of sending a signal that they might need financial assistance. MetLife, one of the nation’s largest insurers, declined to comment on its interest through a spokesman, but many observers expect the company to apply for federal money, not because it is teetering, but to build a war chest for acquisitions.

The shares of the largest life insurers have been taking a pounding again this week, reaching new lows in some cases, after a report by Goldman Sachs suggested investors sell virtually all of them except for MetLife.

“Longer term, we believe the landscape will be dramatically different,” wrote Goldman’s insurance stock analyst, Christopher M. Neczypor, “as the industry’s problems may ultimately force some of the smaller institutions to exit the business.” He also indicated some of the stronger companies in property and casualty insurance could take advantage of this opportunity.

Hartford Financial’s stock fell to $9.67 a share on Wednesday, a stunning 61 percent decline since last Wednesday. MetLife’s shares, which closed at $28, are down 22 percent in that period. Stock in Prudential Financial, which ended the day at $26.54, is down 32 percent.

Most life insurers need to strengthen their finances because their investment portfolios are sinking along with the stock market, and in some cases because of extensive holdings of mortgage-backed securities. In addition, some have sold consumers what now appear to be very attractive retirement contracts, called variable annuities, that will be costly to fulfill with the markets down.

Weeks ago, help looked more likely from the Treasury. But there was resistance, even from the industry itself and some of its regulators, according to the companies and others close to the industry. Property and casualty insurers generally opposed the idea, because they tend to hedge for big disasters like hurricanes and have not had market losses on the scale that the life insurers have.

Other industries, like the automakers, have pushed their way to the front of the pack, with their dire predictions of mass layoffs resonating in Washington.

As things now stand, the Treasury has said that insurance companies affiliated with thrift institutions could qualify for the TARP money; about 35 insurers fit this description, including Principal Financial, Prudential and Allstate, as well as American International Group, which this week made a second rescue deal that includes the government buying $40 billion of its preferred stock.

Insurers with financial holding companies under Federal Reserve supervision can also apply. These include Allianz, Hancock and MetLife.

MetLife has already raised capital, with a $2 billion stock sale in October. Additional capital is widely viewed as useful for it to bid on assets from weakened institutions. A.I.G., for example, has put many of its insurance subsidiaries up for sale, to raise money to repay its emergency loans from the government.

Though other companies are not saddled with the kinds of financial contracts that A.I.G. has that threatened to ripple through the financial system, their losses are deepening sharply with the stock market downturn.

Goldman Sachs recommended that investors sell their holdings of Lincoln National, Hartford Financial Group, Prudential and Principal Financial. On MetLife, Mr. Neczypor of Goldman issued a neutral opinion.

Mr. Neczypor said he thought insurers’ investments in commercial real estate would continue to deteriorate for the next year or so. He also said insurers’ regulators were apt to be more vigorous, and predicted higher capital requirements for some. If insurers raise capital by issuing stock, their current shareholders’ stakes will be diluted. Those that cannot find help easily in the capital markets may be forced out of business, he said.

Under their regulators’ guidelines, insurance companies have treated their real estate securities like high-quality bonds, even though they are far riskier in reality. Etti G. Baranoff, an associate professor of insurance and finance at Virginia Commonwealth University, has reviewed the mortgage-backed securities holdings of all the big life insurance companies as of 2006. She said their portfolios must be adjusted downward to reflect the real degree of risk in these securities and as a result, some companies would have to raise more capital to satisfy regulators.

In one upbeat note from Goldman, Mr. Neczypor said life insurers that survived the coming shakeout would probably be in a good position to serve baby boomers. He sees a growing demand for financial products, like annuities, to tide them through retirement.

The disappearance of traditional pensions as an employee benefit, and dissatisfaction with do-it-yourself retirement benefits like 401(k) accounts has begun to stir new interest in the kind of retirement products that insurers now emphasize, like annuities. Some life insurers have been aggressively pursuing this market, with variable annuities accounting for as much as a third of their operating income.

But companies that got into the variable annuity market early may suffer, because early pricing models were too optimistic. Variable annuities differ widely, but in general they allow buyers to accumulate savings over a number of years, and then receive a stream of payments in retirement. To gain market share, many insurers added consumer-friendly features, like guaranteed minimum income streams and other guarantees.

With the stock markets shredding equity investors’ retirement accounts, people who bought variable annuities are in the enviable position of winning a bet against an insurance company. The insurers are going to have to make good, even if their own investment portfolios are battered.

“The industry’s ability to manage this growing risk exposure represents one of the most significant risk-management challenges confronting U.S. life insurers,” said Douglas Meyers, an analyst with Fitch Ratings.

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