Costco shoppers are accustomed to filling prescriptions, buying glasses, getting hearing aids, and even receiving vaccinations during a warehouse trip, but the retailer is now preparing to move much deeper into healthcare. Costco and nonprofit insurer SCAN Health Plan announced August 18 that they are expanding their relationship to develop Medicare insurance products for older adults, marking Costco’s first comprehensive partnership with a Medicare plan. The companies intend to begin with jointly branded Medicare Advantage products in two states and a Medicare supplement plan in a third, although the locations and exact timing have not been disclosed while regulatory approvals are pending. The three initial markets contain roughly five million Medicare enrollees, making this more than a small experiment even though the rollout will initially be limited.
Costco also brings something few health insurers can replicate: 626 U.S. warehouses and an enormous base of older shoppers who already use its pharmacies, optical centers, and hearing services. Roughly one-third of Costco shoppers are baby boomers, giving SCAN access to a population already approaching or enrolled in Medicare. But what will this mean for seniors? Here’s what you need to know about the new program.
Costco Is Not Becoming a Health Insurance Company
The biggest misconception to clear up is that Costco itself is not suddenly replacing UnitedHealthcare, Humana, or other insurers as a Medicare Advantage company. SCAN Health Plan is the insurance partner and is an HMO with a Medicare contract, while Costco brings its retail network, healthcare services, consumer reach, and recognizable brand to the arrangement.
The official SCAN announcement describes the arrangement as an expanded strategic partnership designed to develop senior-focused insurance products over the coming years. “Older adults want healthcare that is easier to navigate, more responsive to their needs and rooted in organizations they trust,” SCAN Group CEO Dr. Sachin H. Jain told The Independent. “Our expanded partnership with Costco will give us a strong foundation to explore new ways to help people stay healthy and independent”
Costco CEO Ron Vachris said selecting SCAN was an extension of the retailer’s efforts to deliver value on essential goods while expanding health services. In practical terms, the Costco Medicare partnership with SCAN is better understood as a co-branded insurance initiative than Costco transforming itself into a traditional health insurer. SCAN remains the health plan behind the insurance product, while Costco provides the consumer brand and a retail healthcare ecosystem that could become part of how members use certain plan benefits.
Medicare Advantage Plans Will Come First in Two States
The initial rollout is expected to include jointly named Medicare Advantage products in two states, according to reporting on the new partnership. Medicare Advantage, also known as Medicare Part C, is offered by private insurers approved by Medicare and provides Part A and Part B coverage, frequently with prescription-drug coverage and additional benefits bundled into the plan. Costco and SCAN have not disclosed which two states will receive the first Medicare Advantage products because the offerings remain subject to regulatory review and approval.
SCAN currently serves nearly 460,000 members across 33 counties in California, Arizona, Nevada, Texas, New Mexico, and Washington, according to the health plan’s announcement. Retirees outside the eventual launch markets should therefore not assume a Costco-branded Medicare Advantage option will appear in their area during the next enrollment period.
Unlike Original Medicare, Medicare Advantage plans generally use provider networks and can have plan-specific rules governing referrals, prior authorization, prescription coverage, and out-of-pocket costs. Two Medicare Advantage plans carrying familiar brands can therefore provide very different experiences depending on where someone lives, which doctors they use, and what medications they take.
A Medicare Supplement Plan Is Also Planned
The companies are not limiting the experiment to Medicare Advantage because a jointly branded Medicare supplement product is planned for a third state. Medicare supplement insurance, commonly called Medigap, works differently from Medicare Advantage because it supplements Original Medicare rather than replacing the way beneficiaries receive their Part A and Part B benefits. Medicare explains that Medigap policies sold by private insurance companies can help pay a beneficiary’s share of certain Original Medicare costs, such as copayments, coinsurance, and deductibles.
The availability and enrollment rules surrounding Medigap can be particularly important because federal protections provide a six-month Medigap open enrollment period beginning when someone has Medicare Part B and is 65 or older, while options later can depend partly on state rules and circumstances. Anyone interested in the Costco Medicare partnership with SCAN should therefore pay close attention to whether the product offered locally is Medicare Advantage or Medigap because they are fundamentally different types of coverage.
Costco’s Pharmacy and Health Businesses Are Central to the Idea
This partnership makes more sense when you consider how much healthcare business Costco already conducts inside its warehouses. SCAN says future offerings may include a redesigned pharmacy experience, Medflex over-the-counter benefits, vision services, audiology, and additional features, although those offerings remain subject to regulatory approval. SCAN CEO Dr. Sachin Jain said the companies want to make healthcare easier for older adults to navigate and more seamlessly integrated into everyday life.
Costco’s Richard Stephens also told The Wall Street Journal that the retailer has watched older customers struggle with insurance coverage at pharmacy counters, which helped shape the new initiative. The Costco Medicare partnership with SCAN could therefore attempt to connect insurance benefits more directly with places where beneficiaries already fill prescriptions, purchase glasses, shop for OTC products, and obtain hearing-related services.
Exactly how those benefits will work, what spending allowances might be available, and which Costco products or services would qualify have not yet been announced.
You Will Not Get a Free Costco Membership With the Plan
One detail likely to disappoint some shoppers is that enrolling in one of the new Medicare products will not automatically include a Costco membership. Federal Medicare rules prevent the companies from simply bundling a warehouse membership into the insurance plan, according to executives discussing the rollout. The plans are expected to be available through Costco locations as well as traditional channels such as insurance agents and websites, meaning consumers will not necessarily need to treat the warehouse as their only place to shop for coverage. More importantly, the Costco name should not substitute for comparing premiums, provider networks, drug formularies, out-of-pocket limits, copayments, prior-authorization requirements, and other plan details.
What to Compare Before Choosing a Costco-SCAN Plan
When details eventually become available, beneficiaries should compare:
- monthly premium
- doctor and hospital network
- prescription-drug formulary
- drug copays
- annual out-of-pocket maximum
- specialist copays
- prior-authorization requirements
- pharmacy network
- supplemental benefits
- coverage when traveling
A Costco logo may get someone’s attention, but it can’t tell them whether their cardiologist is in-network or whether a $600 monthly medication is covered.
5 Questions We Still Don’t Know About Costco’s Medicare Plans
Because the announcement was just made today, there are still some questions that haven’t yet been answered. Here are five things that haven’t yet been announced.
- Which states get the plans first? Two states will receive Medicare Advantage products and a third will receive Medigap, but those states haven’t been disclosed.
- When will enrollment begin? No exact rollout date has been publicly announced.
- How much will the plans cost? Premiums, deductibles, copays, and out-of-pocket maximums aren’t available yet.
- Which doctors and hospitals will participate? Provider-network information hasn’t been released.
- What Costco benefits will actually be included? The companies have discussed pharmacy, vision, hearing, OTC, and other opportunities, but detailed benefit structures remain subject to regulatory approval.
Costco is also entering Medicare Advantage at an interesting moment. The market is enormous, but established insurers have been reassessing plans in some areas amid rising medical costs and regulatory pressures, meaning the Costco-SCAN partnership is moving into a competitive business that isn’t necessarily easy simply because the Costco brand is popular.
Don’t Change Your Medicare Coverage Based on the Announcement Yet
Nothing announced August 18 requires Medicare beneficiaries to change coverage, and there is currently no nationwide Costco Medicare plan available to enroll in. The products remain subject to regulatory review and approval; the initial three states have not been publicly identified, and detailed premiums, provider networks, formularies, copays, and other coverage information are not yet available. When plans eventually become available, Medicare beneficiaries can compare approved options using the government’s Medicare Plan Compare tool rather than evaluating a plan solely on the Costco name. Costco and SCAN describe the initiative as a longer-term effort, so what begins in a handful of markets could potentially evolve based on regulatory approval and how the initial products perform.
People approaching Medicare eligibility should continue making enrollment decisions based on the options and deadlines that apply to them now rather than delaying coverage in anticipation of a Costco product that may not initially be offered where they live.
Would you consider choosing a Medicare plan associated with Costco, or would the retailer’s name make little difference when comparing your healthcare coverage? Share your thoughts in the comments.
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