-- AARP, the advocacy group for older Americans, said Friday it would voluntarily suspend sales of a type of health insurance plan critics say leaves policyholders vulnerable to tens of thousands of dollars in costs.
Suspension of sales will occur "as soon as possible" and last until AARP completes an independent review of the plans their marketing efforts, the group said.
The AARP plans came under scrutiny this week when Sen. Chuck Grassley, R-Iowa, sent a detailed letter to AARP CEO Bill Novelli demanding answers to dozens of questions about the plans, which cover up to 1 million policyholders nationwide.
"Insurance is supposed to limit your exposure to the potentially high cost of a serious illness and these plans do the opposite," Grassley told USA TODAY on Monday. The sales suspension and review comes in response to Grassley's concerns, AARP said Friday.
"We have extremely high standards for the provider products that carry the AARP name," Novelli said in a written statement.
Grassley called AARP's action a "step in the right direction." But he is still concerned that people who bought the plans may not fully understand their coverage.
"The AARP needs to do right by the more than 1 million people who may have bought this AARP product because of the misleading marketing," Grassley said in a written statement.
AARP sells the plans, which are backed by UnitedHealth Group, mainly among people ages 50 to 64. Such plans are dubbed "limited benefit" policies because they set specific limits on how much the plan will pay per day, year or procedure rather than paying a percentage of total costs, as more traditional coverage provides.
Such policies are a small but growing segment of the market and are sold by many insurers. They appeal to people on tight budgets because their premiums are generally lower than more traditional insurance. But the plans cap what insurers pay toward medical care and have no cap on how much policyholders may owe.
AARP offers several types of limited benefit insurance, but Grassley's concern initially focused on two: Essential Plus Health Insurance and Medical Advantage Plan. AARP says about 44,000 people are enrolled in those two plans — out of 1 million in all AARP limited benefit plans.
The plans pay a few hundred dollars to $10,000 toward surgery costs, depending on the type of surgery.
None of the plans cover the first day of hospital care. They pay $50 to $75 toward a doctor office visits.
Policyholders pay the difference between what the plan pays and what the doctor or hospital fees total.
AARP also sells other insurance products, including a major medical plan similar to those offered by employers, supplemental Medicare insurance and Medicare drug benefit plans. None of those are part of Grassley's inquiry.