AARP’s Non-Profit Status Under Fire Over Insurance Income

Three Republican lawmakers are calling on the IRS to investigate the non-profit status of AARP, the nation’s leading organization for senior citizens, over the hundreds of millions of dollars the group makes from marketing health insurance.

"During this investigation, it became very clear that despite its privileged tax-exempt status, in many cases, AARP represents a for-profit entity," Rep. Charles Boustany, R-La., said at a committee hearing on a probe into the group’s finances.

The subcommittee of House Ways and Means led by Boustany found that AARP's haul from sponsoring insurance plans have nearly tripled in recent years to $657 million a year.

What does it do with all that money? AARP has charitable foundations, but the report says the contributions to them have barely moved, increasing by only $3.5 million over the same period.

"So where does that money going to? We want to know," said Rep. Dave Reichert, R-Wash.

Some goes toward hefty paychecks. Former CEO Bill Novelli got a raise of more than 80 percent from 2007 to 2009 even as the recession was taking hold. Novelli’s pay went from a little over $900,000 a year to more than $1.6 million.

Some of the money also goes to lobbying -- AARP is the fourth highest-spending lobbying group in Washington.

And one of the things it lobbied for was the new health care law, an effort which brought the group praise from President Obama.

"They're endorsing this bill because they know it will strengthen Medicare, not jeopardize it; they know it will protect the benefits our seniors receive, not cut them," Obama said in a November 2009 press briefing on his controversial law.

But the law does cut $500 billion from Medicare spending, leading critics to ask if AARP had a conflict of interest. Government experts predicted the cuts in Medicare would push seniors into Medigap insurance -- the product from which AARP makes the most money.

"AARP gets a percentage from each senior that signs up for Medigap insurance,” Reichert said.

Boustany estimated that the organization could get an additional $1 billion over the next decade as a result of the president’s law.

But AARP says it disagrees with the conclusions of the report.

"We flatly reject any implication that AARP is driven by anything other than our mission to improve the lives for all Americans as they age," the group said in a statement.

The organization said in another statement that it wants “people to be able to judge for themselves whether the report’s inferences are accurate, since AARP disagrees with the conclusions."

So the group posted its annual reports and other information on its website:

And this Friday, AARP executives will testify at a hearing where they'll get a chance to defend themselves.