As health care costs continue to rise, families of all ages and sizes continue to feel the pinch. But when seniors get squeezed, one organization in particular benefits, and it’s not one you might think.
While it claims to run a seniors’ advocacy organization, AARP, formerly the American Association of Retired Persons, actually profits from its own members’ economic misery. As premiums rise for its members, so too does AARP’s financial windfall — a perverse set of circumstances for a purported consumer group.
Medigap Premiums Spike
A recent Kaiser Health News story highlighted an underreported trend within insurance markets. In recent years, rates for Medicare supplemental insurance plans, which offset the cost of copayments and coinsurance that traditional Medicare does not cover, have risen rapidly. One analysis of first-quarter filings for these Medigap plans shows most insurers increasing rates by upwards of 10 percent and in several cases by more than 20 percent.
These premium increases leave seniors in a pinch for several reasons. First, traditional Medicare does not include a cap on out-of-pocket spending by beneficiaries. That absence makes a Medigap policy a virtual necessity, unless enrollees in traditional Medicare want to risk exposing themselves to tens or even hundreds of thousands of dollars in expenses should they develop a catastrophic medical condition.
While all Medicare Advantage plans offer catastrophic coverage, they also impose restrictions on seniors’ choice of doctors and hospitals. And if senior citizens dislikes their Medicare Advantage plan, they may not have a chance to return to Medigap coverage.
Contrary to Democrat claims that Obamacare “ended discrimination against people with preexisting conditions,” Medigap plans can — and do — impose waiting periods and other restrictions related to health status. While all seniors can buy a Medigap plan when they turn 65, beyond then, “[s]trict rules then kick in around when beneficiaries can enroll in or switch Medigap coverage and options become much more limited.”
Those rules mean many seniors facing surging Medigap premiums consider themselves stuck without other realistic options. The leftist Center for American Progress went so far as to call this dynamic the “Medigap trap,” which leads enrollees to remain in their Medicare supplemental plans.
AARP Wins When Seniors Lose
But even as some seniors feel trapped in a vise of rising premiums, one organization clearly benefits: AARP. As I have noted in prior work for American Commitment, the group receives a “royalty fee” that equals a percentage of premiums paid.
AARP’s own members have previously derided this arrangement as a “kickback.” But more than that, the arrangement means AARP’s financial interests are diametrically opposed to its members’. AARP makes more money the more seniors get charged in Medigap premiums, meaning the spike in Medigap premiums will give the organization a financial windfall.
Yet while AARP advocates in favor of transparency for drug companies and other entities, it does not practice what it preaches. When members apply for AARP-branded Medigap plans, AARP does not clearly disclose the financial conflict of interest it has with those members. For that matter, neither does AARP disclose the sizable percentage of revenue it receives from UnitedHealth Group, the nation’s largest insurer, when communicating with Congress or its own members about policy issues.
Profitable Insurer
For its part, UnitedHealth pledged to rebate 2026 profits related to its Obamacare Exchange offerings ahead of a congressional hearing this past January — a time when insurers were still hoping Congress would extend enhanced Covid-era subsidies that expired at the end of last year. UnitedHealth has only about 1 million members on the Exchanges, a fraction of the more than 4 million enrollees in its AARP-branded Medigap plan.
In conjunction with the January hearing, Rep. Diana Harshbarger, R-Tenn., took me up on my suggestion to ask UnitedHealth CEO Stephen Hemsley whether UnitedHealth would also forgo profits on its Medigap coverage. In a list of responses to written questions for the hearing record, Hemsley recently answered:
Will you pledge to return any profits your company makes in the Medigap (Medicare supplemental) marketplace to America’s seniors — similar to what you have pledged for consumers in the [Obamacare] marketplace?
Our commitment for 2026 to return profits applies to what we have pledged for consumers in the [Obamacare] marketplace.
Translation: Fat chance.
Putting the Squeeze on Seniors
The Medigap premium increases have rational explanations. Health care utilization rose after the pandemic due to pent-up demand, the senior population continues to age, and labor and other input costs have risen.
But senior citizens don’t deserve to get kicked in the teeth by a percentage-based “royalty fee” that quite literally adds insult to injury. And they shouldn’t have an organization like AARP that claims to advocate for seniors but profits off of their misery — and fails to come clean with their own members about it.
