The nation's two largest organizations for the elderly took steps this week to sever their exclusive group health insurance ties to the Colonial Penn Group of Philadelphia.
Meeting in Miami, the board of directors of the National Retired Teachers Association (NRTA) yesterday ratified the actions taken Wednesday by the American Association of Retired person (AARP) board.
In recent years, lawsuits have been filed and federal agencies have investigated allegations that the organizations, whose combined membership is 12.3 million, are "just a marketing agent" for the insurance company, which sells group health coverage only to AARP-NRTA members.
The charges were based partly on the fact that the associations make their membership lists available only to Colonial Penn and grant advertising rights in their publications only to that firm.
"The actions we've taken don't admit the charges are true," said Lloyd Wright, public relations director for the associations. "Unfortunately, however, people don't act on reality, they act on their perceptions of reality."
In steps taken this week, the associations agreed:
To discontinue their endorsement and recommendation of Colonial Penn products and services "within a reasonable period of time."
To reappraise the status of their group health insurance program, currently underwritten by Colonial Penn Franklin Inc., a CPG subsidiary, and consider phasing it out after current contracts with the firm expire in 1981.
To accept general advertising in their bimonthly publications and "increase the product and service information distributed to members."
To assume, no later than June 30, 1981, "full responsibility for all data processing, membership promotion and list management functions now being provided by a Colonial Penn subsidiary," the Colonial Penn Data Corp.
Wright said an independent consulting firm is studying the availability of supplemental health insurance to older Americans in the general marketplace. He noted that other firms sell individual health insurance plans and that Colonial Penn has announced it will start doing the same.
Some 2.7 million association members carry group health insurance with Colonial Penn, and their contracts expire in 1981. "It's very likely that we'll be getting out of the group insurance business altogether, but the study is not finished yet," Wright said.
Donna Brennan Carlyle, public relations director of Colonial Penn, said the firm expects to offer individual health policies "that will remain competitive in benefits and price."
Commenting on the associations' actions, she said they "open up the market to us. Our market now is 12 million, but there are 50 million Americans who are age 50 and older. We hope to provide individual policies to association members and to expand our market to older people generally."
Colonial Penn also offers other kinds of insurance -- life, auto, home-owners -- to the general elderly population, and it operates a retirement community in Leesburg, Fla., as well as travel and temporary employment services.
Up to 45 percent of its revenues come from the group health insurance program alone, Carlyle said, but all programs for association members accounted for most of CPG's 1977 revenues of $566.9 million and for aftertax income of $59.8 million. Carlyle said 1978 figures are not available.
Charges that the associations are merely a front to sell CPG insurance were made by Arthur S. Cahn, former assistant general counsel of the U.S. Postal Service, which is considering a recommendation that the elderly groups be denied their nonprofit mailing status. Last year the Internal Revenue Service concluded that the associations "are not controlled" by CPG.