Apr 17, 2007 1:13 pm US/Central
UnitedHealth, AARP Renew Insurance Agreement
Minnetonka, Minn. (AP) ―
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AARP has 38 million members. A spokeswoman says seven million AARP members now buy the organization's branded products from UnitedHealth.
UnitedHealth Group Inc. won a new, expanded contract with AARP although it lost one piece of business to competitor Aetna Inc.
Some had worried that UnitedHealth's stock options scandal would prompt AARP to shift its Medicare prescription drug program to another insurer. Instead, the deal announced Tuesday locks UnitedHealth in as the exclusive provider for AARP's prescription drug program through 2014. The deal also covers AARP's Medicare Advantage, and Medicare Supplement products across all markets.
However, AARP-branded insurance for those ages 50 to 64 -- before Medicare kicks in -- will shift from UnitedHealth to Aetna next year. UnitedHealth will continue to offer a less comprehensive program for people in that age range. AARP is a nonprofit organization for people older than 50.
Aetna spokeswoman Cynthia Michener said UnitedHealth had signed up about 30,000 people in that plan, but said AARP has about 18 million members in that age range. She said new enrollees in AARP's program will go to Aetna beginning in 2008, and people already in UnitedHealth's plan can stay in it or switch to Aetna.
UnitedHealth has become the largest provider in the Medicare prescription drug program in part because it made a deal to be the only provider of the AARP-branded drug plan. That deal was set to expire at the end of 2007 but now will run through 2014.
In February UnitedHealth reduced its 2007 revenue forecast because of lower-than-expected enrollment in programs for older people. The company projected revenue in its Ovations division for older people would be $28 billion, down from $29 million it had projected earlier.
UnitedHealth is set to report earnings on Thursday.
Bank of America analyst Joseph France wrote in a research note that for UnitedHealth, "While the branding is not insignificant, we expect it will have a minimal impact on earnings since UNH is already the country's largest Medicare insurer, with 1.4 million Medicare Advantage lives."
The good news for Aetna, he wrote, "is that it gets its foot in the door with AARP, an association with 38 million members over the age of 50, but the near-term impact seems likely to be limited. AET has not lately been effective in the individual market, despite several years of effort with consumer driven health plans, although it will now enjoy the AARP branding, and could do better. We'll see."
None of the parties disclosed how much money changed hands in the deals. But AARP said it would dedicate $500 million in royalty payments from the UnitedHealth and Aetna agreements over 10 years to a new program aimed at helping people find health information and assistance.
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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