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AARP Medigap Insurance Policies Unlicensed Agent Class Action

Does AARP merely receive a “royalty” for the sales of Medigap policies issued in partnership with UnitedHealthcare Insurance Company? Or is it actually collecting a premium commission? The complaint for this class action claims that AARP is violating  Pennsylvania laws by receiving what is actually a commission on the policies, even though it si not licensed as an insurance agent.

The class for this action is all persons in the state of Pennsylvania who bought or renewed an AARP Medigap policy.

AARP, formerly the American Association of Retired Persons, is a non-profit organization for seniors fifty years old and older. It has become known for advocating for the benefit of older persons as well as offering certain benefits. AARP endorses three Medicare-related insurance types: Medicare Part D prescription drug insurance, Medicare Advantage, and Medigap.

Medigap policies provide extra benefits for those who are enrolled in traditional Medicare policies. AARP Medigap is very popular, with over three times as many members as its closest competitor. AARP Medigap is also the only type of Medigap policy issued by UnitedHealth, the largest insurer in the US.

For each new policy or renewal, AARP receives 4.95%. AARP calls this a “royalty” for the use of its intellectual property (presumably its name), but the complaint claims that AARP actually acts as an agent for UnitedHealth because it helps “market, solicit and sell or renew” the policies and administers the Medigap program for UnitedHealth.

The complaint claims that calling the payment a “royalty” has two advantages for AARP. First, it permits AARP to escape oversight by insurance regulators and to remain unlicensed. Second, it permits AARP to avoid paying taxes on the payments it receives.

The amount of money AARP collects from its AARP-branded insurance policies is not insignificant. In 2012, the complaint alleges, AARP received $704 million in so-called “royalties,” which is three times the amount it received in membership fees and 52% of its total operating revenues. Of this $704 million, the complaint claims, $485 or 65% came from sales of UnitedHealth insurance products.

The complaint claims that the 4.95% paid to AARP is an additional charge on top of the cost of the policies, making the policies more expensive for consumers.

Like an agent, the complaint claims, AARP markets and sells policies, collects and remits premiums to UnitedHealth, and generally administers the AARP Medigap program. Under Pennsylvania law, insurance agents must be licensed and must submit to oversight.

The complaint says that AARP and UnitedHealth have violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law and also claims that the companies are guilty of such things as conversion and fraud.

Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

AARP Medigap Insurance Policies Unlicensed Agent Complaint

August 15, 2018

Does AARP merely receive a “royalty” for the sales of Medigap policies issued in partnership with UnitedHealthcare Insurance Company? Or is it actually collecting a premium commission? The complaint for this class action claims that AARP is violating  Pennsylvania laws by receiving what is actually a commission on the policies, even though it si not licensed as an insurance agent.

aarp_unlicnesed_insurance_agent_complaint.pdf

Case Event History

AARP Medigap Insurance Policies Unlicensed Agent Complaint

August 15, 2018

Does AARP merely receive a “royalty” for the sales of Medigap policies issued in partnership with UnitedHealthcare Insurance Company? Or is it actually collecting a premium commission? The complaint for this class action claims that AARP is violating  Pennsylvania laws by receiving what is actually a commission on the policies, even though it si not licensed as an insurance agent.

aarp_unlicnesed_insurance_agent_complaint.pdf
Tags: Deceptive Insurance Practices, Unlicensed to Sell Insurance