Dr. Ethel Percy Andrus founded AARP in 1958. AARP evolved from the National Retired Teachers Association (NRTA), which Andrus had established in 1947 to promote her philosophy of productive aging, and in response to the need of health insurance for retired teachers. After ten years, Andrus opened the organization to all Americans over 50, creating AARP. Today, NRTA is a division within AARP. Dr. Andrus founded AARP while living in Ojai, California, where she had established an innovative new retirement home named Grey Gables. Ojai served as national headquarters for AARP from 1958 until the mid-1960s.
Honors to Dr. Andrus include National Teacher of the Year in 1954, induction into the Women's Hall of Fame and, more recently, a medallion placed on the Points of Light Institute's "Extra Mile Pathway" in downtown Washington, D.C. According to Andy Rooney, AARP was established by Leonard Davis, founder of the Colonial Penn Group insurance companies, after he met Ethel Percy Andrus.
According to critics, until the 1980s AARP was controlled by Mr. Davis, who promoted its image as a non-profit advocate of retirees in order to sell insurance to members. After a lengthy competitive bidding process, AARP shifted the insurance contracts made available to members to Prudential in 1980. In the 1990s, the United States Senate investigated AARP's non-profit status, with Republican Senator Alan Simpson, then chairman of the United States Senate Finance Subcommittee on Social Security, Pensions, and Family Policy, questioning the organization's tax-exempt status in congressional hearings.
According to Charles Blahous, the investigations did not reveal sufficient evidence to change the organization's status, though in an interview years later by the Des Moines Register, Senator Simpson remained "troubled by AARP's practices", calling AARP "the biggest marketing operation in America and money-maker" and an organization whose practices are "the greatest abuse of American generosity I witnessed in my time in the U.S. Senate."
The organization was originally named the American Association of Retired Persons, but in 1999 it officially changed its name to "AARP" (pronounced one letter at a time, "ay ay ar pee") to reflect that its focus was no longer American retirees. AARP no longer requires that members be retired, but be at least age 50; it does not extend full membership privileges to applicants who are retired but not yet 50.
AARP has been active in health care policy debates since c. 1960 and its recent engagement is a reflection of this long-standing involvement.
AARP's public stances influenced the United States Congress' passage of the Medicare Prescription Drug, Improvement, and Modernization Act, which authorized the creation of Medicare Part D, in 2003, and also influenced the Congress by resisting radical changes to Social Security in 2005. AARP also addressed health care issues in their campaign targeting the 2008 elections with Divided We Fail.
Approximately seven million people have AARP branded health insurance, including drug coverage and Medigap, as of April 2007 and AARP earns more income from selling insurance to members than it does from membership dues. In 2008, AARP plans to begin offering several new health insurance products: an HMO for Medicare recipients, in partnership with UnitedHealth Group; and a PPO and "a high-deductible insurance policy that could be used with a health savings account" to people aged 50–64, in partnership with Aetna. AARP will likely become the largest source of health insurance for Medicare recipients, and AARP estimates the new products will increase its health insurance customers to 14 million by 2014.
AARP is not an insurer and does not pay insurance claims. Instead, AARP allows its name to be used by insurance companies in the sale of insurance products, for which it is paid a commission like an insurance agent.
Senator Charles E. Grassley (R-Iowa), senior Republican on the Senate Finance Committee, said in 2008 that the "limited benefit" insurance plans offered by AARP through UnitedHealth provided inadequate coverage and were marketed deceptively. One plan offered $5,000 for surgery that may cost two or three times that amount.