The warehouse club is the latest consumer brand to offer health insurance
Costco will soon be adding Medicare Advantage plans to its offerings, which range from discounted groceries and blue jeans to electronics and tires.
Medicare Advantage may be coming to your local Costco warehouse store.
Retailer Costco Wholesale $(COST)$ and nonprofit insurer SCAN Group said they have agreed to sell jointly branded Medicare Advantage and Medicare supplement plans.
'Costco has built something exceedingly rare: trust at scale. Its members believe that if Costco puts its name on something, it has been carefully vetted for quality and value. ... That is exactly the kind of trust healthcare desperately needs.'Sachin Jain, SCAN Group
The companies will start by selling jointly branded Medicare Advantage products in two states, and a Medicare supplement plan in a third, according to the Wall Street Journal, which first reported on the partnership. Those markets have about around 5 million Medicare enrollees, the report said.
"As a longtime Costco customer, I know that if I walk into a Costco store, I'm just going to buy the item because they've done the work for me to make sure that it's a high-quality, high-value product," said Sachin Jain, SCAN's president and CEO. "I would say that that's what seniors are increasingly looking for in their Medicare experience."
A Medicare supplement plan, or Medigap, is extra insurance you can buy from a private health-insurance company to help cover out-of-pocket costs in traditional Medicare, like copayments, coinsurance and deductibles. Jain described the supplemental policies and Medicare managed products as being "designed around Costco." He also noted that older adults will be able to use their benefits at retailers where they actually shop, "as opposed to forcing people to go to work with vendors that they've never heard of."
The move comes as other Medicare Advantage providers are curtailing markets and trimming benefits to offset rising costs in the health-insurance market. Medicare Advantage, which is the private insurance alternative to traditional Medicare, controls more than half of the overall Medicare market.
The cost of prescription medications is closely watched by senior citizens, who are typically on a fixed income and may find it difficult to adjust to a price increase. Earlier this month, the Centers for Medicare and Medicaid Services said it was ending a temporary program that helped keep the price of Medicare monthly premiums in check for older adults with Part D prescription-drug plans.
"Costco has built something exceedingly rare: trust at scale. Its members believe that if Costco puts its name on something, it has been carefully vetted for quality and value. That trust was earned one decision and one member experience at a time. That is exactly the kind of trust healthcare desperately needs," Jain wrote on LinkedIn.
Other insurers have co-branded products with consumer brands. UnitedHealthcare, for example, partners with AARP to sell Medicare Advantage products with the advocacy group's trusted name. In turn, AARP gets royalties from the UnitedHealth Group $(UNH)$ business unit. A previous Medicare Advantage partnership between UnitedHealthcare and Walmart $(WMT)$ ended two years ago.
"SCAN clearly views this collaboration as a way for it to reach more consumers. And that makes sense. Costco is a household name, which SCAN isn't. Also, Costco is a brand many consumers feel good about, and SCAN is probably hoping that will rub off on them," said Matthew Fiedler, senior fellow in the Center on Health Policy at the Brookings Institution.
"Without knowing the details of the financial deal that SCAN and Costco have struck, it is hard to know exactly what Costco is getting out of this. But I suspect that Costco will get a commission (or some similar payment) for each policy that it sells," Fiedler said. "It is totally standard for MA plans to pay commissions to insurance brokers who sign Medicare beneficiaries up for their plans; this new relationship is plausibly just a variation on that broader theme."
The senior-focused insurance products may include - pending regulatory review and approval - pharmacy benefits, Medflex over-the-counter benefits, vision, audiology and more, the companies said.
The co-branded Medicare Advantage product does not include a Costco membership, according to the Journal. Costco, the No. 1 warehouse club chain, sells everything from groceries and tires to eyeglasses and electronics and offers services such as travel planning, solar panels and pet insurance.
Long Beach, Calif.-based SCAN serves customers in six states: Arizona, California, Nevada, New Mexico, Texas and Washington.
"For more than 40 years, Costco has consistently listened to our members and earned their trust delivering consistent value on essential goods and expanding our health service offerings," Ron Vachris, chief executive of Costco, said in a press statement. "Selecting SCAN as our partner to deliver a better healthcare experience for seniors, is an extension of that commitment."
-Jessica Hall -Jaimy Lee
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