Costco partners with SCAN Group to launch limited Medicare plans

Plans will integrate with pharmacy, vision, hearing and food offerings

Costco and nonprofit insurer SCAN Group said Tuesday that they plan a limited rollout of Costco-branded Medicare plans, beginning with Medicare Advantage products in two states and a Medicare supplement in a third. The three target markets include around five million Medicare enrollees, the companies said.

SCAN and Costco executives declined to disclose exact locations or timing, citing regulatory limits on disclosure pending approval by the Medicare agency.

SCAN is based in Long Beach, Calif., and Southern California is a core market for the nonprofit, which focuses on Medicare and has about 560,000 members. SCAN also offers Medicare Advantage plans in Arizona, Nevada, New Mexico, Texas and Washington state.

Sachin Jain, chief executive of SCAN, said the new Medicare Advantage plans will integrate closely with Costco’s offerings across prescription drugs, vision, over-the-counter medications, food and hearing products. “We are trying to create something that’s incredibly simple for people to use that will enable them to seamlessly access their benefits,” he said.

The new Medicare products won’t come with a Costco membership thrown in — that isn’t allowed under federal rules. The plans will be sold in Costco stores, as well as through normal channels such as insurance agents and websites.

Medicare is a more than $600 billion business nationally for insurers. Advantage plans offer seniors a private version of the federal program’s benefits, and supplemental products provide richer coverage on top of traditional Medicare. In recent years, rising costs and changing billing rules have squeezed Medicare Advantage, which has long been a growth engine for health insurers.

Costco has been working to find new ways to increase sales and make its membership more valuable to shoppers, including through a growing foray into stand-alone gas stations. Costco has long had tie-ins with an array of services, including its vacation packages.

Richard Stephens, senior vice president for pharmacy at Costco, said the retailer has seen older people struggle with their coverage at the pharmacy counter. Costco members “know that if they buy something from Costco, it has been vetted, and we feel it’s the best thing in the category,” he said. “That’s really what we’re trying to do with this particular product.”

The retailer sees the new Medicare effort as a pilot. “We plan to learn a lot from it, and we plan to make sure that we have the right product for our members,” Stephens said.

The two companies declined to disclose the financial details of their partnership.