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Judge tosses lawsuit against AARP over 'Medigap' insurance plans

3 minute read

REUTERS/Kevin Lamarque

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  • Plaintiffs claimed "royalty" paid by UnitedHealth to AARP was unlawful commission
  • Judge finds lawsuit failed to allege actual injury

(Reuters) - A federal judge has dismissed a proposed class action accusing elder advocacy group AARP of duping Medicare patients into paying an undisclosed commission when they enrolled in AARP-branded supplemental health insurance plans.

U.S. District Judge Beryl Howell in Washington ruled Tuesday that the plaintiffs, two purchasers of the so-called Medigap plans, had failed to claim any actual injury, since they did not argue that their plans would have been cheaper without the commissions.

Daniel Gustafson of Gustafson Gluek, a lawyer for plaintiffs Helen Krukas and Andrea Kushim, did not immediately respond to a request for comment. Nor did AARP or its attorney Jeffrey Russell of Bryan Cave Leighton Paisner.

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Medigap policies are supplemental plans offered by private insurers that are intended to offer coverage to patients enrolled in Medicare beyond what the government program for the elderly offers.

About one-third of all Medigap policyholders are enrolled in AARP's supplemental insurance plan. The nonprofit does not itself provide insurance but instead is the group policyholder for insurance underwritten by UnitedHealth Group Inc, which is not named as a defendant in the lawsuit.

According to the plaintiffs' 2018 lawsuit, for each policy sold, AARP received 4.95% of what the buyers' paid, a payment that its contract with UnitedHealth describes as a "royalty" for use of its intellectual property, like its name and logo.

Krukas and Kushim said that payment was actually an unlawful insurance commission paid to AARP, which is not licensed as an insurance agent. According to their complaint, in 2016, AARP generated $880 million in "royalty" income from UnitedHealth insurance products, amounting to 54% of the group's total operating revenue.

AARP countered that the plaintiffs had failed to support any claim that their costs would be lower if not for its agreement with UnitedHealth, meaning they had not alleged injury.

Howell agreed. In her decision dismissing the case, she also noted that, according to the record, Kushim remained enrolled in the policy.

"She may continue paying her premiums, which will go in part to AARP, but if she does so with full knowledge of the fee structure and is happy with her policy, she plainly is not being injured by that voluntary and knowing transaction, or by the absence of the disclosures plaintiffs claim were material to the purchase decision," the judge wrote.

The case is Krukas v. AARP Inc, U.S. District Court, District of Columbia, No. 18-cv-01124.

For the plaintiff: Daniel Gustafson of Gustafson Gluek

For AARP: Jeffrey Russell of Bryan Cave Leighton Paisner

Read more:

AARP must face lawsuit over 'Medigap' insurance commissions - judge

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Our Standards: The Thomson Reuters Trust Principles.

Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.

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