The American Association of Retired Persons has selected three insurers for negotiations on contracts to handle specific services for its members.
The contracts are worth $4.5 billion in premiums yearly and cover 5.7 million people.
The AARP is still considering proposals from insurers on its offer to make HMO endorsements in 23 markets. The association expects to announce finalists in the bidding in mid-November.
Under the proposed contracts just announced, United HealthCare Corp. would supply Medicare supplement and hospital indemnity insurance, Metropolitan Life Insurance Co. would offer long-term-care insurance, and ITT Hartford Group would provide customer service for all AARP health insurance products.
The current contract for all three lines has been held for 15 years by Prudential Insurance Co.
AARP spokeswoman Suzanne Bowman said, "We had decided to separate provision of the actual product from the way it's serviced and sold, so people will have an independent servicer and independent sales organization that will help them understand what their choices are."
Prudential now does sales, service and payment of claims. Prudential bid on the contracts but was not selected, Bowman said. The AARP isn't releasing the names of the companies that bid, but it did say that five firms bid on supplemental insurance, five firms (not necessarily the same ones) bid on long-term care, and 10 firms bid on customer service. Not all the bidders were insurance companies.
If negotiations succeed, the AARP board of directors will vote on the contracts in November. The Prudential contract expires Dec. 31, 1997.
"The appeal of both the Metropolitan and United bids was the number of product choices they were willing to make available, the flexibility of products they proposed, and the creativity with which they responded to the proposals," Bowman said. "They committed to the high quality service that Prudential historically provided."
Wayne F. Haefer, AARP's membership group director, said, "While we appreciate the past and continuing commitment of the Prudential Insurance Co., AARP has been following changes in the healthcare industry and listening to what our members have told us about their changing healthcare needs."
Covered AARP members shouldn't see a change in their current coverage. United and ITT Hartford have committed to taking on the Prudential employees whose jobs will disappear with the loss of the contract.