AARP to Offer
Health Coverage
To Wider Group

By VANESSA FUHRMANS

Wall Street Journal
April 17, 2007; Page D2

The powerful senior lobby AARP announced an ambitious expansion in the health-care products it markets to older Americans, targeting in particular the roughly 7 million who are still under the age of 65 and have no coverage.

As part of the expansion, the 38 million-member organization renewed and expanded a longstanding contract with UnitedHealth Group Inc. to continue to sell AARP-branded indemnity health plans, Medicare supplement policies and drug benefit plans. It will also market private, comprehensive Medicare plans, known as Medicare Advantage, under the AARP name. The group also struck a new partnership with Aetna Inc. to design, underwrite and administer a range of health plans for the under-65 set.

AARP says its move is an effort to improve the health and to bring more affordable and stable health care coverage to a population that increasingly finds it out of reach. Unless they're covered by an employer, many Americans between the ages of 50 and 64 find individual insurance either too expensive or simply unavailable from health insurers eager to avoid customers in declining health.

The deals also illustrate how providing health care for older Americans has become a big business, even as AARP tries to remain a consumer health advocate for its members.

The deals are a coup for both insurers, though Medicare still represents the much larger share of the business. UnitedHealth's existing partnership with AARP has already helped make it the largest seller of Medicare products, and generates roughly $5 billion in annual revenue just from selling Medicare supplement plans. For the first time, though, the insurers' income will also be tied to whether they improve the health care of plan members, provide easy-to-read policy materials and reach certain benchmarks in corporate governance, responsibility and diversity, AARP said.

AARP executives say the deals will help them reach their target of providing health insurance products to roughly 14 million people by 2014, up from 7 million today. Through its new and expanded partnerships with Aetna and UnitedHealth, AARP expects to generate some $4.4 billion in health care-related royalties over the next seven years, $1.5 billion more than its previous projections. AARP's CEO, Bill Novelli, said much of the money would be ploughed back into other health care access and affordability initiatives.

AARP's scale would help keep a lid on the new plans' costs, executives said.

Although Aetna would still underwrite, or price premiums individually based on a customer's health and demographics, it would be required to take a more flexible approach than many commercial insurers currently do. Members who bought the plans also would have access to disease management programs and other tools designed to monitor and improve chronic conditions such as diabetes—and which are typically only available through an employer group plan.

Likewise in the Medicare realm, UnitedHealth will be required to commit to providing AARP-branded Medicare Advantage plans in a given market for at least two years. Federal law requires insurers to stick to providing the plans a minimum one year.

AARP said the plans would become available at the beginning of 2008.

Write to Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com