Costco Wholesale Corporation and nonprofit insurer SCAN Group announced a partnership on Tuesday to launch Costco-branded Medicare Advantage plans in two states and a Medicare supplement (Medigap) plan in a third, pending regulatory approval from the Centers for Medicare & Medicaid Services (CMS).
The companies did not disclose the target states or timing, citing CMS restrictions during the approval process. The three markets combined include approximately 5 million Medicare enrollees, according to reporting from The Wall Street Journal. Federal rules prohibit bundling Costco membership with the health plans, meaning the insurance products will be sold separately through Costco stores, insurance agents, and digital channels.
How the plans will work
The Costco-branded Medicare Advantage plans will integrate with SCAN Group’s existing offerings, covering services such as prescription drugs, vision care, audiology, and over-the-counter benefits. SCAN Group currently serves nearly 560,000 members across five states—California, Arizona, Nevada, New Mexico, and Washington—with its own Medicare Advantage plans. Costco has previously partnered with SCAN Group as a preferred pharmacy for its Medicare Advantage members.
SCAN Group CEO Dr. Sachin Jain stated the partnership aims to simplify access to benefits for seniors. “We are trying to create something that’s incredibly simple for people to use that will enable them to seamlessly access their benefits,” Jain said. Costco CEO Ron Vachris emphasized the retailer’s commitment to delivering value to its members. “We have developed a shared understanding of what matters most to the seniors we serve,” Vachris said.
Market context and potential impact
The move marks Costco’s first entry into the Medicare insurance market, expanding its healthcare-related offerings beyond its existing pharmacy and optical services. Analysts note that the partnership leverages Costco’s loyal customer base and reputation for value, particularly among older consumers who may prioritize affordability and convenience in healthcare decisions.
The pilot nature of the rollout suggests Costco and SCAN Group will evaluate the program’s performance before considering broader expansion. Richard Stephens, senior vice president for pharmacy at Costco, described the initiative as a learning opportunity. “We plan to learn a lot from it,” Stephens said.
Regulatory and operational details
The plans must receive CMS approval before launch, a process that typically involves review of benefits, provider networks, and compliance with Medicare regulations. Medicare Advantage plans are privately administered alternatives to Original Medicare, often including additional benefits like dental or fitness programs. Medigap plans, by contrast, supplement Original Medicare by covering out-of-pocket costs such as copays and coinsurance.
As of April 2024, 70.3 million people were enrolled in Medicare, with 51.2% enrolled in Medicare Advantage or other private plans and 81.2% having Part D prescription drug coverage, according to CMS data. The Costco-SCAN partnership targets a segment of this market by offering integrated benefits and potential cost savings through Costco’s purchasing power.