Posted on 11/28/2003 8:05:18 AM PST by raybbr
WASHINGTON (AP) - AARP's fight for legislation giving private insurers a new role in Medicare surprised many Democrats, but in fact the giant retiree group has long been in the health insurance business itself.
In 45 years, AARP has grown from a program founded to insure retired teachers to a more than $636 million-a-year empire that pays its chief executive a half-million-dollar salary and lends its name to things such as pharmacy services and Medicare supplemental insurance, and discounts for hotel rooms, car rentals, shopping and cruises.
AARP bills itself as an advocacy group for older Americans, but draws more than two-thirds of its income from ventures other than its $12.50 membership fee. Its lobbying costs, though in the millions of dollars, are a tiny fraction of its revenue.
Executive director William Novelli says AARP is part business, part senior citizens' advocate and part lobbying group.
"There's no dichotomy in our minds. If you look at why people belong to AARP, here's why they belong. They like the discounts, they value the products and services we offer, they like our publications," Novelli said. "But probably near the very top is the fact that we speak out on behalf of older Americans."
AARP began in 1958, years before the government created Medicare to provide health care coverage for older Americans.
Novelli recounts a colorful history. Retired California school principal Ethel Percy Andrus was so appalled that many educators couldn't afford health insurance in retirement - she reportedly discovered one living in a chicken coop - that she formed the National Retired Teachers Association in 1947. She approached health insurance companies until she found one willing to insure her members at an affordable price.
Looking for more members, Andrus formed the American Association of Retired Persons and expanded the group's offerings to a range of discounted products and services, including mail-order pharmacy services.
In the years since, AARP lowered its membership age to 50 and dropped its original name in favor of the acronym to reflect its broader membership. The latest edition of its magazine features a cover photo of beaming, apparently wrinkle-free actress Lauren Hutton with the tag line "Sixty is the new thirty."
AARP even offers motorcycle insurance for those spry enough to hit the road. A third of its members are under 60, one-third 60-69, and the other third 70 and above.
Aggressive marketing has built AARP into a 35 million-member titan. These days, the first greeting card many Americans get as their 50th birthdays approach comes from AARP in the form of an invitation to join - whether they consider themselves close to retirement or not.
"We have a big satellite system that tracks everybody," Novelli joked, explaining that the group trolls for new members by using public information such as driver's license records. "Some people are put off by it. Other people say, 'Hey, let me see those discounts.'"
Novelli defends his corporate CEO-style salary - $458,468 last year, plus $9,266 for expenses - as appropriate given the organization's size. His predecessor, Horace Deets, has a deferred compensation payout worth $2.65 million.
Novelli said the AARP plows its profits into its advocacy and lobbying work, including legal assistance for the elderly. It is officially nonpartisan and doesn't make campaign donations.
Nonetheless, the group has gained enemies in Washington along the way.
Retired Sen. Alan Simpson, R-Wyo., scrutinized the group's profit-making enterprises while in the Senate in the mid-1990s, questioning how AARP could be entirely tax-exempt when it was making millions. AARP ultimately was forced to move its business side to a for-profit, taxable subsidiary called AARP Services Inc.
Simpson said he joined AARP when he turned 60, "just to see what they did."
"I just couldn't believe it. Everything was about money: 'Send in your dues,'" Simpson said. "The advertising wasn't directed to the little guy. It was how to do resorts and cruises, and special wheelchairs and stairs in your home for five grand."
Simpson tells a different story of AARP's genesis. His inquiry revealed it was started by a teacher and "a defrocked insurance peddler" who thought they could make money on retiree insurance, he said: "And boy, they did."
Simpson is skeptical of the AARP's declaration that it doesn't know whether its health insurance and prescription drug businesses will be helped, hurt or both by the Medicare bill. The recently approved measure, which President Bush is ready to sign, will provide a Medicare prescription drug benefit and give private insurers a new role.
"I never saw the AARP do anything that would hurt their business," Simpson said.
AARP's member health insurance program, administered with major insurance companies United Healthcare and MetLife, reaped at least $161 million for AARP last year, its financial reports show.
Novelli said AARP considered the Medicare bill good public policy, and that its own health care ventures weren't a factor. AARP's push for the bill so angered some in the group that thousands have canceled their memberships.
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