Costco is getting into the Medicare insurance market
In addition to everything Costco already wants to sell to you, it now wants to help insure your healthcare, too. The warehouse giant is teaming up with SCAN Group, a nonprofit health insurer, to launch a Costco-branded Medicare Advantage plan. The plan is still going through the regulatory process, but the companies expect it to launch initially in two states.
Let’s go over how your Costco membership could eventually come with yet another reason to keep renewing it.
Costco is taking its healthcare game to the next level
Costco isn't exactly a newcomer to healthcare. Its warehouses already offer pharmacies, vision care and hearing aids, meaning members can do considerably more than buy a 48-pack of protein bars while they are there.
But selling or sponsoring a health insurance plan is a different beast entirely. The new partnership puts Costco's brand behind a Medicare Advantage offering, with SCAN Group handling the insurance side of the operation.
SCAN already operates Medicare Advantage plans across parts of California, Arizona, Nevada, Texas, New Mexico and Washington, serving nearly 460,000 members. The two companies have a relationship, too. Costco became a preferred pharmacy for SCAN's Medicare Advantage members last year. Now they are taking that relationship considerably further.
Why Costco thinks it can make Medicare better
The pitch is basically Costco's membership philosophy, but applied to healthcare. SCAN CEO Dr. Sachin Jain says the insurer sees the healthcare industry as "broken" and believes Costco's obsession with member value could help redesign the Medicare Advantage experience.
In Jain’s words: “Part of the work that we’re trying to do is really redesign the Medicare Advantage experience, and do it in the same way that Costco knows how to do it, which is an exquisite focus on member value.”
Medicare Advantage is a big, complicated market
Medicare Advantage is the privately administered alternative to traditional Medicare. Plans generally combine hospital, medical, and prescription drug coverage while potentially offering additional benefits. It's also a huge business. For years, major insurers such as UnitedHealth and Humana aggressively expanded their Medicare Advantage operations. But the market has become more difficult as insurers deal with rising medical costs, increased healthcare utilization and tighter government reimbursement.
Some companies have consequently started pulling back. Cigna, for example, sold its Medicare business last year. That makes Costco's decision to step into the market particularly interesting.
Your Costco card won’t become a health insurance card tomorrow
There is still plenty we don't know. The Costco-branded Medicare Advantage plans haven't received all the necessary regulatory approvals, and the initial rollout will be limited.
The companies also haven't revealed enough details to know exactly what the plans will cost, what benefits they'll include or how widely they'll eventually be available. So this isn't Costco suddenly becoming America's health insurer overnight. For now, it's a relatively small experiment. But Costco has a habit of turning small experiments into things that become surprisingly important to its membership strategy.
The company has already expanded beyond its warehouses with businesses such as pharmacies, optical services, hearing aids and gas stations. Healthcare insurance could be another way to make the membership feel harder to give up. After all, membership fees are a major part of the chain’s profits.
Source: CNBC
