Millions of older Americans are being called upon to make an agonizing decision before the end of this month. That is the deadline for choosing between rival group health insurance plans offered by the Colonial Penn Franklin Insurance Co. and the Prudential Insurance Co. of America.

Specifically, the senior citizens will be asked to declare whether they wish to hold a policy through the American Association of Retired Persons after July 1, when it switches insurers from Colonial Penn to Prudential, or prefer to continue being covered by Colonial Penn outside the aegis of AARP.

A $30 million campaign, featuring television commercials, newspaper ads, mail solicitation and toll-free information lines, is being waged to sway those affected in one direction of the other. At stake is the $270 million a year that the 2.5 million members of the AARP and the National Retired Teachers Association spend on supplemental health premiums. State insurance departments and consumer organizations say they have been receiving calls from puzzled senior citizens seeking to know which insurer offers a better deal.

The present situation dates back two years when the retirees' organizations voted to sever their relationship with their insurer of 20 years, Colonial Penn, and to open bidding for the contract to many companies. That relationship had led to lawsuits alleging that the tax-exempt AARP was just a marketing agent for Colonial Penn's profitable insurance lines. Moreover, there were complaints that Colonial Penn did not return enough of its premium dollars to policyholders in the form of benefits.

Last September AARP-NRTA finally selected Prudential, which committed itself to pay claimants at least 75 cents of each premium dollar for five years, or 13 or 14 cents more than Colonial Penn had been paying. Since then the companies have been playing leapfrog, improving benefits to compete with the other and, incidentally, confusing policyholders who have no way of knowing from mailings which versions are being compared.

For Colonial Penn, the struggle could affect its very existence. Forty percent of its $665 million in premiums in 1980 came from the retirees' plan. Last year it took a $21.3 million pretax write-off on costs related to the plan, which largely accounted for its 27 percent drop in profits. Colonial Penn has budgeted about $18 million in an effort to retain some of its old customers.

As a sweetener, the company has let it be known it hopes to pay out about 80 percent of its premiums in benefits to these customers. It can do this, said spokeswoman Donna Carlyle, because Colonial Penn no longer will have to pay AARP a 5 percent administrative fee for being the plan trustee.

As of a week ago, Carlyle said, the company had received calls and letters from 180,000 policyholders, most of whom indicated that they wanted to go with Colonial Penn. However, she declined to predict how many the company thought it might sign up, except to say a "substantial number."

Prudential, which collects $8.6 billion in premiums annually, has said it will be disappointed if it does not pick up at least 50 percent of the retirees. It is spending about $13 million to that end.

Which policy offers a better deal? It is difficult to tell. Two consumer advocates specializing in insurance were asked by The Washington Post to evaluate the contracts. They disagreed in their evaluations.

The District government's insurance office does not get into detailed comparisons, an official said.

The AARP defied any expert to judge the policies by comparing them line by line without a specific case in mind. Colonial Penn says its contract was better. Prudential said it would match any Colonial Penn benefits.

Colonial Penn has run full-page advertisements that appear to show that it offers better terms than Prudential. Joe Mintz, a former insurance agent who writes the NROCA News Letter from Dallas, points to Colonial Penn's higher benefits at the upper end of the risk scale: double benefits for intensive care, and a $50,000 additional maximum payment under its Mature-Med In-Hospital Plan, or its additional $5-per-shift for nursing care. Round-the-clock special nurses for a patient can cost up to $300 a day. c

Jim Hunt, an actuary who now works for the National Consumer Insurance Organization, a Ralph Nader organization, believes that the additional benefits at the upper end of the risk scale look good but pay off infrequently. bA person would have to spend more than a year and a half in the hospital to collect the maximum payment, he says. Yet the average hospital stay for a Medicare recipient is 10 days.

Hunt prefers to consider the difference in benefits at the other end of the risk scale. For example, he notes that Colonial Penn pays only $2 more per day of hospitalization from the eighth day to the 60th day. For the average patient this would mean a net increase in benefits of $4 during a stay in the hospital.

Another actuary, who is neutral on the choice but requested anonymity because of his position, said that, on the whole, Colonial Penn's new contract appears to have a number of benefits that are better than Prudential's. AARP spokesman James Sullivan responds responds that Prudential will develop new contracts in the near future; he implied that the terms will be equal to or better than Colonial Penn's.

At the moment, the principal financial disincentive to going with Colonial Penn is the company's unwillingness to guarantee that premiums will not change. Both companies now charge the same for similar plans. But Prudential has pledged not to increase indemnity premiums for two years; it will keep them level for service benefit policies for one year.

While Colonial Penn guarantees the policyholder it will never cancel him or her, the actuary warned that raising the premiums too high could have the same effect. Prudential has a five-year contract with AARP, which means policyholders could be shifted to some other company with less favorable terms at that time.

Next Wednesday is the deadline. However, Colonial Penn has said that it will have several enrollment periods each year in which AARP members (and nonmembers) can switch to that company.

Two caveats: The terms may not be the same as now and there may be the usual benefit delays that accompany new coverage.

For those who still are undecided, D.C. Department of Insurance head James R. Montgomery III has the last word: "Regardless of which plan is chosen, the individual is still choosing from two better policies than were offered before. This is an example of what competition can do."