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Class Says AARP Sold ‘Junk’ Health Insurance

(CN) - A federal class action claims AARP used a misleading marketing campaign to sell fixed-benefit insurance disguised as primary health coverage. The named plaintiffs, a Texas couple, say AARP's "deceptive marketing" of its "Medical Advantage Plan" left them facing "a devastating illness and financial ruin."

James and Allison Halpern of Austin say they did not find out AARP's Medical Advantage Plan left huge gaps in their coverage until Allison was diagnosed with breast cancer.

They say the insurance, for which the Halperns paid $400 per month, covered "only a fraction" of the cost of Allison's mastectomy, leaving them with more than $75,000 in health-care bills and another $55,000 per month in chemotherapy costs.

AARP - the American Association of Retired People - is a political heavyweight in Washington, where the class action was filed. The Halperns claim AARP intentionally misled consumers to profit from what Consumer Reports calls "junk insurance."

"AARP has preyed upon [the plaintiffs] and thousands of Americans over age 50 by luring unsuspecting consumers in need of affordable health care to enroll in AARP's health insurance plan," the complaint states. "Consumers are not informed that, if they suffer any type of serious illness, they will be responsible for tens of thousands of dollars of health care costs."

The class claims that fixed indemnity plans, including those marketed by AARP, have drawn the ire of consumer groups and Congress because of their "huge coverage gaps" and often deceptive marketing strategies. AARP has "voluntarily suspended" the health plan at issue as a result of the public outcry, the Halperns say.

But the Halperns call it too little, too late. They say they canceled their previous insurance and signed up with AARP because of the unsolicited marketing materials that AARP sent them.

They claim that AARP presented the Medical Advantage Plan as a "primary health insurance" plan for Americans older than 50 who were not yet eligible for Medicare, were in between jobs or wanted to retire early.

"None of the marketing materials provided by AARP stated that AARP's Medical Advantage Plans were fixed benefit indemnity plans or that they offered anything other than primary health coverage," the complaint states. "Indeed, had AARP disclosed that fixed benefit plans would financially devastate a family facing serious illness, it is unlikely that consumers over age 50 would purchase such a plan."

The class accuses AARP of violating state consumer protection laws and of unjust enrichment. The Halperns want a jury trial, unspecified damages, and reimbursement of their premium payments.

AARP swings a powerful stick in Washington, based on its claimed membership of 40 million members and the propensity of older people to vote more regularly than younger ones.

The Halperns are represented by David Wachen with Shulman Rogers.

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