AARP Class Action: Medigap Charges Are Hiked to Cover Kickbacks

A class action lawsuit claims that charges for Medigap, a Medicare supplemental heath insurance policy, are artificially hiked to cover a kickback illegally paid to AARP, who advertises the product.

Plaintiffs Stephen Christoph and Glen Hill say they purchased an AARP Medigap insurance policy through UnitedHealth.

They claim that AARP helps market, solicit, sell, and renew AARP Medigap policies in exchange for an illegal 4.95 percent commission from each new policy or renewal of an AARP Medigap program.

Christoph and Hill allege that they would have been charged 4.95 percent less had AARP not been collecting a commission.

Additionally, they claim that had they known that AARP was being paid an illegal commission, or kickback, they would have purchased a Medigap policy from a different insurer.

The Medigap kickback class action lawsuit notes that Medigap, also known as Medicare supplement insurance or Medicare supplemental insurance, refers to a number of private health insurance plans that are designed to provide coverage for many co-pays and co-insurance not covered by Medicare, but related to services and procedures covered by Medicare, including hospital stays, home care, ambulance usage, medical equipment, and other costs.

The Medigap AARP kickback class action lawsuit also notes that AARP is a non-profit organization that is designed to protect the interests of the country’s seniors.

The AARP insurance commission class action lawsuit notes that though AARP is a nonprofit, a substantial amount of its income comes from partnerships with insurance companies like UnitedHealth, paid in the form of commission.

Christoph and Hill claim that AARP is acting illegally in receiving these commissions because as not a licensed insurer, AARP may not profit from the sale of insurance.

The AARP class action lawsuit notes that Pennsylvania insurance law requires “a person doing business as an agent in this Commonwealth shall obtain a certificate according to this chapter.”

The plaintiffs claim that because AARP markets UnitedHealth products like Medigap, AARP is acting as a de facto agent of UnitedHealth, though they do not have a certificate, or license, to do so.

For this service, AARP allegedly receives a 4.95 percent kickback from each new policy or renewal, a cost which is effectively borne by consumers in the price they pay for the insurance policy.

Christoph and Hill claim that AARP attempts to mask the true nature of the payment by calling it a “royalty,” which AARP says is charged to UnitedHealth for the use of AARP’s intellectual property.

Allegedly, incorrectly categorizing this cost as a “royalty” allows AARP to avoid scrutiny by insurance regulators, and to not pay income taxes on revenue generated from the “royalties” which is really revenue generated from insurance sales.

The AARP Medigap class action lawsuit claims that to continue to recuperate these funds, AARP would need to be licensed to act as an insurance agent, which would in turn, subject them to regulatory oversight, and would require them to pay taxes.

Christoph and Hill are represented by Brian Penny of Goldman Scarlato & Penny PC and by Joshua D. Arishon of Bursor & Fisher PA.

The AARP Medigap Health Insurance Class Action Lawsuit is Stephen Christoph and Glen Hill v. AARP Inc., et al., Case No. 2:18-cv-03453-NIQA, in the U.S. District Court for the Eastern District of Pennsylvania.

Join an AARP Medigap Class Action Lawsuit Investigation

If you purchased Medigap insurance through AARP, you may be eligible to join this AARP Medigap insurance overcharge class action lawsuit investigation.

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