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News of the Day ... In Perspective


Industry “land grab” sparked by Medicare drug benefit

Before Medicare Part D, the insurance industry didn’t sell a stand-alone drug benefit. But now that the government has eliminated their most of their down-side risk, insurers are scrambling to capture their “fair share” of 42 million customers.

Part D is a tremendous growth opportunity as the industry’s traditional business—administering employer health benefits—is stagnant or shrinking.

The largest player is UnitedHealth, which has 500 customer-service representatives at its call center. The top reason they give for buying their plan is that it’s the only one endorsed by AARP, “the most respected organization serving older Americans.”

UnitedHealth has a 10-year contract with AARP that started in 1998. The two co-market Medigap policies under the AARP name. In 2004, UnitedHealth collected $4.5 billion in premiums from AARP-related products. Lois Quam, head of Ovations, the UnitedHealth group that oversees products for seniors, calls the company’s tie with AARP “a relationship we treasure.”

Human hopes to snare many seniors who buy its drug plan into a comprehensive Medicare Advantage plan. Its “super low” premiums are designed to take advantage of this “one-shot opportunity” (Wall Street J 1/25/06).

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