By Jon Hood

November 11, 2009
AARP is taking more heat over marketing of one of its insurance plans, as a Texas couple files a class action lawsuit claiming that ads led them to believe the group's Medical Advantage Plan -- which is no longer being sold through AARP -- was a primary insurance plan, rather than one providing limited coverage for crucial medical care.

James and Alison Halperin received a packet touting the Medical Advantage Plan in early 2008, and were so excited that they dropped their existing policy and signed up. Shortly thereafter, Alison was diagnosed with breast cancer and informed that she would need costly surgery. In case that wasn't bad enough, the Halperins were treated to another kick in the gut when they found out their new AARP-provided plan wouldn't cover the urgent procedure.

The Halperins' policy, provided by UnitedHealth Group, is a so-called limited benefit plan: its coverage is limited to a specific dollar amount. Typical insurance plans, by contrast, cover a percentage of all health-related costs, regardless of how high the bill ends up being. Unfortunately for the Halperins, AARP's plan is especially stingy in its coverage of surgical procedures, providing anywhere from a few hundred to $10,000, depending on what kind of surgery is needed.

The plan's appeal lies in its relatively low premiums, attractive for consumers who might have trouble attaining a traditional plan or who are struggling in the still-gloomy economy. The plans are targeted to consumers between 50 and 64. An AARP spokesman said the plans were not designed to be comprehensive insurance, nor should they be communicated in this manner.

The Halperins accuse Washington, D.C.-based AARP of violating the city's Consumer Protections Procedure Act. Their complaint alleges that AARP has preyed upon Plaintiffs and thousands of Americans over age 50 by luring unsuspecting consumers in need of affordable health care to enroll in AARPs health insurance program.

Plan canceled

The Halperins' allegations are only the latest in a series of claims that AARP misled consumers as to the extent of the plan's coverage. Last year, Sen. Chuck Grassley of Iowa sent a letter to AARP's then-CEO Bill Novelli voicing concerns that consumers who purchased the plan might not realize that it only provides limited coverage. Grassley also sounded the alarm about Essential Plus Health Insurance, a second AARP policy with similar terms as the Medical Advantage Plan.

Insurance is supposed to limit your exposure to the potentially high cost of a serious illness, Grassley told USA Today. These plans do the opposite.

The ensuing firestorm led AARP to stop offering the plans, technically known as "fixed-cash benefit indemnity plans."

Unkind year

All in all, 2009 has not been kind to AARP.

Approximately 60,000 seniors have canceled their memberships since July, apparently in protest of the group's support for health insurance reform. A competing, conservative-backed group creatively named the American Seniors Association has been trying to woo AARP members over to its side. While AARP originally refused to back a specific bill, the group last week endorsed the Affordable Health Care for America Act, the bill currently snaking its way through Congress.