Krukas v. AARP, Inc.

MEMORANDUM OPINION

BERYL A. HOWELL, CHIEF JUDGE

Plaintiffs Helen Krukas and Andrea Kushim have brought this putative class action against defendants AARP Inc., AARP Services Inc. (“ASI”), and AARP Insurance Plan (“AARP Trust”) (collectively referred to as “AARP”), alleging a violation of the Washington D.C. Consumer Protection Procedures Act (“CPPA”), D.C. Code § 28-3901 et seq., as well as common law claims of conversion, unjust enrichment, and fraudulent concealment, based on their purchase of a Medicare supplemental health insurance policy, also known as a “Medigap” policy, offered by UnitedHealthcare Insurance Company (“United”) and administered by AARP. See First Am. Class Compl. (“FAC”) ¶¶ 1-5, 120, 124, 128, 135, ECF No. 40. These claims are predicated on plaintiffs' allegation that AARP wrongly retained a 4.95% “commission” on the sale of the insurance that AARP was not entitled to receive, id. ¶ 1, and that AARP misled plaintiffs into buying their insurance policies by failing to disclose the nature and extent of its financial interest in the sale of AARP Medigap policies, id. ¶ 5.

Following more than a year of discovery, defendants have now moved for summary judgment. See Defs.' Mot. Summ. J. (“Defs.' Mot.”), ECF No. 95; Defs.' Mem. Supp. Mot.

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Summ. J. (“Defs.' Mem.”), ECF No. 96. Defendants' first Motion to Dismiss (“Defs.' First MTD”), ECF No. 8, was denied because plaintiff Krukas adequately alleged financial harm constituting injury in fact and alleged facts sufficient to plead each count. Krukas v. AARP, Inc. (“Krukas I”), 376 F.Supp.3d 1, 34, 36-37 (D.D.C. 2019).^[1] Now, with a more fully developed record and the heightened burden at summary judgment, plaintiffs have failed to establish any concrete injury stemming from defendants' conduct. They do not argue that their AARP Medigap insurance would have been less expensive were AARP to retain a lower payment or adopt a more limited role in the sale of AARP Medigap insurance, nor do they present any evidence of a lower-priced comparable Medigap insurance policy that they could have purchased had the payment been disclosed and prompted them to look elsewhere for comparable coverage.

Accordingly, this Court now joins numerous others that have rejected similar claims brought by AARP Medigap policyholders against AARP. See Dane v. UnitedHealthcare Ins. Co., 974 F.3d 183, 192 (2d Cir. 2020), aff'g, 401 F.Supp.3d 231 (D. Conn. 2019); Friedman v. AARP, Inc., No. 14-34-DDP, 2019 WL 5683465, at *6 (C.D. Cal. Nov. 1, 2019), appeal dismissed, No. 19-56386, 2020 WL 2732230 (9th Cir. Mar. 26, 2020); Nichols v. AARP, Inc., No. 20-cv-6616-JSC (N.D. Cal Feb. 19, 2021), appeal dismissed, No. 21-15364 (9th Cir. Aug. 23, 2021). Defendants' motion is granted, and the case is dismissed for lack of standing.^[2]

I. BACKGROUND

The factual allegations underlying plaintiffs' claims are described in detail in two prior decisions, see generally Krukas I, 376 F.Supp.3d 1; Krukas v. AARP, Inc. (“Krukas II”), 458 F.Supp.3d 1 (D.D.C. 2020),

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and thus are reviewed below only as relevant to resolution of the pending motion, followed by this case's procedural history.

A. Factual Background

Despite vigorous disagreements between the parties about how to characterize certain facts, the details of the AARP Medigap program and key features of its administration, as well as plaintiffs' experience with the program, are not materially disputed by the parties, as explained next.

1) The AARP Medigap Program

Defendant AARP, Inc. is a nonprofit membership organization for Americans over the age of 50. See Defs.' Statement of Undisputed Material Facts Supp. Mot. Summ. J. (“Defs.' SMF”) ¶ 1, ECF No. 97 (public); Pls.' Corrected Statement of Add. Material Facts (“Pls.' SAMF”) and Pls.' Counter-Statement of Genuine Issues (“Pls.' SMF”) ¶ 1, ECF No. 113-1 (public).^[3] Medigap insurance is a form of supplemental coverage for healthcare costs not covered by Medicare. Defs.' SMF ¶ 4 (citing 42 U.S.C. § 1395ss(g)(1)). Since 1998, United has “offered Medigap coverage to AARP members under a group policy issued to [defendant AARP Trust], a grantor trust that serves as the group policyholder.” Defs.' SMF ¶ 5; see also Pls.' SMF ¶ 5. In collaboration with AARP, United “offers Medigap coverage to AARP members across the nation in all 50 states, four territories, and the District of Columbia.” Defs.' SMF ¶ 7; Pls.' SMF ¶ 7.

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AARP is not a licensed insurance broker or agent, but instead helps administer and promote the AARP-branded Medigap program through its subsidiary ASI and serves as the group policyholder through AARP Trust. See Defs.' Sealed SMF ¶¶ 14, 18; Pls.' Sealed SMF ¶ 14. An agreement between AARP and United governs the administration of their Medigap program. Pls.' SAMF ¶ 4. Under the agreement, AARP grants United a license to use its intellectual property in connection with the program, and in exchange AARP receives 4.95% of the total premium revenues, which AARP characterizes as a royalty for use of its intellectual property. Defs.' Sealed SMF ¶¶ 8, 26; Pls.' SMF ¶ 8.^[4] AARP, through ASI, also plays a role in reviewing and approving marketing materials and plays a role in developing brand strategy, Pls.' Sealed SMF ¶ 14, and owns all Medigap marketing materials. Pls.' Sealed SAMF ¶ 42. Additionally, the agreement requires that the “AARP marks” be “dominant.” Id.; see also Pls.' Sealed SMF ¶ 16. AARP member data is used to “identify AARP members for direct mail and other advertising efforts, ” Defs.' SMF ¶ 17, and ASI informs AARP of the existence of the AARP Medigap program, Defs.' Sealed SMF ¶ 24. AARP uses its position as a trusted advocate for its members to distinguish the AARP Medigap policy from other Medigap programs. Pls.' SAMF ¶¶ 37-38.^[5]

AARP Trust serves as the group policyholder, collects premiums from policyholders, and distributes the premiums between AARP and United. Defs.' Sealed SMF ¶ 18; Pls.' Sealed SMF

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¶ 18. The Trust transfers the 4.95% royalty to AARP, Inc. pursuant to the terms of the agreement before transferring the remainder to United. Defs.' Sealed SMF ¶ 18; Pls.' Sealed SMF ¶ 18; Pls.' Sealed SAMF ¶¶ 8-9.^[6] The portion transmitted to United is used to cover claims and expenses and pays United's “risk and profit” charge, which is United's profit on the premiums. Defs.' Sealed SMF ¶ 11; Pls.' Sealed SAMF ¶¶ 8-9. Any remaining funds go into a Rate Stabilization Fund (“RSF”), which is used at least in part to stabilize rates. Defs.' Sealed SMF ¶ 11; Pls.' Sealed SMF ¶ 11.

The rates for the AARP Medigap program are ultimately determined by state regulators, Defs.' SMF ¶ 39, which annually evaluate and approve the rates proposed by United in consultation with AARP, Defs.' Sealed SMF ¶ 41; Pls.' Sealed SMF ¶ 41. State regulators, including those in the states where plaintiffs purchased their insurance, review each rate to ensure it is reasonable and meets applicable loss-ratio standards, Defs.' SMF ¶ 44, which generally require insurers to spend at least 75% of premium revenue on benefits, id. ¶ 45. Medigap plans may charge only the approved rate. Id. ¶ 46.

Medigap plans traditionally compete on price, Pls.' Sealed SAMF ¶ 38, because federal law specifies the benefits that insurers must offer in their Medigap plans, Defs.' SMF ¶ 36 (citing 42 U.S.C. § 1395ss(p)). Defendants contend that AARP Medigap insurance is frequently among the lowest in plaintiffs' home states. Defs.' SMF ¶ 106. Plaintiffs counter that a majority of AARP members over the age of 65 would find lower rates from other Medigap insurers, but do

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not indicate how the premiums would have compared in plaintiffs' home states during the relevant time period. Pls.' Sealed SMF ¶ 10.

AARP's marketing materials disclose the royalty to prospective insureds, stating that “UnitedHealthcare Insurance Company pays royalty fees to AARP for the use of its intellectual property. These fees are used for the general purposes of AARP. AARP and its affiliates are not insurers.” Defs.' SMF ¶ 66; Pls.' SAMF ¶ 67. The marketing materials do not indicate the royalty rate. Defs.' Sealed SMF at ¶ 67.^[7] Plaintiffs assert that this disclosure (1) mischaracterizes what is effectively a commission as a royalty, Pls.' SMF ¶ 35; (2) misstates the purpose of the royalty, which they allege is to compensate AARP for soliciting its members, id. ¶ 66; and (3) misstates AARP's role in the program, id. See also Pls.' SAMF ¶¶ 69-70.

2) Plaintiffs' Experience with AARP Medigap

The two named plaintiffs used AARP Medigap policies for over four years, with one plaintiff still enrolled in this program. Plaintiff Helen Krukas enrolled in a Louisiana AARP Medigap Policy in 2011, Defs.' SMF ¶ 82, and remained enrolled in this plan through March 2016, id. ¶ 87. She then enrolled in a Florida AARP Medigap plan when she moved to Florida, id. ¶ 89, and kept that plan until she switched to a different high-deductible Medigap plan offered by another insurer, id. ¶ 90. Plaintiff Krukas did not compare Medigap premium rates or comparison shop until she switched providers in 2016. Id. ¶ 91. She explains that she “always thought of AARP as a club that negotiates on the behalf of [] retired people, of its members” and “it didn't even occur to [her] to look anyplace else. And had [she] known that they were receiving money for it, [she] would have gone and shopped around with other brokers.” Pls.' SMF ¶¶ 91, 94.

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Plaintiff Andrea Kushim enrolled in a Michigan AARP Medigap plan in 2017 and is still enrolled in AARP Medigap today. Defs.' SMF ¶¶ 92, 94; Pls.' SMF ¶ 94. She concedes that she did not comparison shop when purchasing the insurance and has not done so in the intervening years. De...