Class Action Claims AARP, UnitedHealthcare Hide Illegal ‘Premium Commissions’ Charged to Seniors on Top of Insurance Costs

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A proposed class action has been filed against AARP, Inc., UnitedHealth Group, Inc. and three other companies on behalf of senior citizens and disabled individuals in Florida who were allegedly duped into paying artificially inflated insurance charges for Medicare supplemental health insurance policies. The inflated portions of these payments, the 26-page complaint says, were used by the defendants, which also include AARP Services Inc., AARP Insurance Plan, and UnitedHealthcare Insurance Company, to pay insurance commissions to an unlicensed entity. 

“Despite its ‘non-profit’ status … AARP reaps substantial income through business partnerships with large insurance companies like defendants UnitedHealth Group, Inc. and UnitedHealthcare Insurance Company …  in the form of commissions,” the complaint claims.

Describing the defendants’ alleged collective operations as an “elaborate scheme,” the lawsuit claims AARP helps “market, solicit and sell or renew” AARP Medigap Policies for UnitedHealth. In return, AARP receives “a 4.95% commission” from each new policy or referral, the complaint continues. According to the plaintiff, although the defendants disclose “a payment in general” changing hands from UnitedHealth to AARP—a purported “royalty” from UnitedHealth for the use of AARP’s intellectual property, the case says—the companies do not make public the fact that UnitedHealthcare’s payment to AARP is actually a percentage of a premium commission seniors and disabled individuals allegedly unknowingly pay in addition to their insurance costs.

The complaint presents a theory as to why the defendants allegedly feel it necessary to keep hidden the true nature of such a “royalty” payment between the companies (emphasis ours):

“[The defendants’] motive to term a commission payment a ‘royalty’ is two-fold: it allows AARP to avoid oversight by insurance regulators, and it allows AARP to avoid paying taxes on the income it generates through insurance sales. Calling the commission payment a ‘royalty’ is merely a fiction created by [the defendants] to further their illegal scheme.”

Because AARP is not a licensed insurance agent, the complaint points out, it is not legally permitted to collect a commission for marketing, soliciting, selling or renewing AARP Medigap policies on behalf of UnitedHealthcare. The defendants’ supposed scheme has resulted in members of the proposed class paying inflated amounts for insurance coverage, the plaintiff claims.