WASHINGTON—Republicans in Congress are taking aim at AARP's financial ties to the health-insurance industry just as the advocacy group is taking a more prominent role supporting an overhaul of the nation's health-care system.
The House Republican Conference has been circulating talking points among lawmakers and staffers, saying AARP wants an overhaul because its business arm would benefit from legislation in both the House and the Senate. Friday, three Republicans on the House Ways and Means Committee sent a letter to AARP Chief Executive A. Barry Rand, saying the group's support for proposed cuts in the overhaul bills to Medicare Advantage plans would lead to benefit cuts for seniors.
"We are writing to express our deep concern that AARP is not being forthright with seniors about the consequences of health care legislation," said Reps. David Reichert of Washington, Ginny Brown-Waite of Florida and Wally Herger of California.
Of the 44 million people covered by Medicare, more than 10 million are enrolled in Medicare Advantage plans offered through insurance companies; the plans can offer extra benefits and lower premiums but often limit choices of health providers. With traditional Medicare, many beneficiaries also purchase supplemental policies known as Medigap to help pay for some health costs that Medicare doesn't cover.
AARP licenses its name to UnitedHealth Group Inc., which offers seniors AARP-branded Medicare Advantage and Medigap plans. As of Sept. 30, UnitedHealth had 2.6 million Medicare beneficiaries enrolled in AARP-branded Medigap policies and about one million more in AARP-branded Medicare Advantage plans, a spokesman for UnitedHealth said.
In the health-overhaul bills working their way through Congress, key Democrats want to cut payments to Medicare Advantage plans by more than $100 billion over 10 years because the plans cost the government an average of 14% more per beneficiary than traditional Medicare.
Mr. Reichert said in an interview that he wants to know whether AARP would be poised to pick up more revenue if seniors drop out of Medicare Advantage, switch to traditional Medicare and then buy Medigap policies. Mr. Reichert said this switch could be more lucrative for AARP because Medigap plans can have a wider profit margin than Medicare Advantage plans.
"Is AARP truly an insurance company?" Mr. Reichert said. "A lot of seniors are out there saying, 'I'm not sure AARP is representing my interest any more.'"
David Certner, AARP's legislative-policy director, said the group advocates for its 40 million members and doesn't base its policy on business calculations. "We are not an insurance company," he said. "Our policy drives our product, not the other way around."
A spokesman said 150,000 people canceled their membership from July 1 through Sept. 18 because they didn't agree with AARP's support for health-care overhaul. Over the same period, AARP signed up 740,000 new members, as more people turned 50 and many looked for discounts that merchants offer to those with AARP cards.
The GOP attacks come as Democrats increasingly lean on AARP for support in passing overhaul legislation. Friday, House Democratic leaders invited AARP Executive Vice President Nancy LeaMond for a news conference on Capitol Hill and praised the group's support for the proposed cuts in Medicare.
At the news conference, House Majority Whip James Clyburn (D., S.C.) noted how the AARP's executive vice president of policy, John Rother, wrote that gradually eliminating "excess payments" to insurers who offer Medicare Advantage plans "will permit good plans to continue and put pressure on others to offer better value to their enrollees."
AARP hasn't formally endorsed any specific bill, and Mr. Certner said it is hard to tell how the legislation would affect its AARP-branded products—and seniors—because it will depend on how insurers react to those changes.
But policy makers covet the clout AARP can bring to bear for any major initiative. Its support, for example, helped Republicans pass a 2003 law that added the drug benefit to Medicare. (Back then, Democrats accused the group of acting in its own financial interest.) It also helped torpedo former President George W. Bush's efforts to add private accounts to Social Security.
"We had faced those kinds of allegations whenever we got into these controversial fights," Mr. Certner said. "We have our policy set by our all-volunteer board."
The seniors group used to rely primarily on membership dues, but it now collects about 60% of its revenue from royalties on AARP-branded health, life and auto insurance as well as other arrangements, up from about one-third in 1999, according to the AARP. Last year, AARP collected $652.7 million in royalties, 63% from UnitedHealth Group alone, according to the group's financial statements. By comparison, it received $249.3 million in membership dues.
"They've got an interest in all the different subgames that involve Medicare," including their licensing deals with UnitedHealth offering drug benefits and supplemental insurance, said Judith Stein, executive director of Center for Medicare Advocacy, which works with Medicare beneficiaries.
Write to Jane Zhang at Jane.Zhang@wsj.com