Costco Wholesale Corporation (NASDAQ:COST) is preparing to enter the Medicare insurance market through a partnership with nonprofit insurer SCAN Group.
The warehouse retailer plans a limited rollout of jointly branded Medicare Advantage plans in two states and a Medicare supplement plan in a third, The Wall Street Journal reported Tuesday.
The three markets together have about 5 million Medicare enrollees, while the companies have not disclosed the locations or timing, citing regulatory limits pending approval from the Medicare agency.
Costco Expands Into Medicare
Costco plans to initially offer Medicare Advantage plans in two states and a Medicare supplement plan in a third state through its partnership with SCAN Group. The three target markets include around 5 million Medicare enrollees, although the companies declined to disclose the exact locations or timing, citing regulatory limits pending approval by the Medicare agency.
SCAN, which is based in Long Beach, California, has about 560,000 members and offers Medicare Advantage plans in Arizona, Nevada, New Mexico, Texas and Washington state.
SCAN CEO Sachin Jain said the new Medicare Advantage plans will integrate with Costco offerings including 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," Jain told the Journal.
The new plans will not include a Costco membership, which is prohibited under federal rules. The products will instead be sold through Costco stores and regular channels including insurance agents and websites, according to the report.
Costco did not immediately respond to Benzinga’s request for comment.
Medicare Market Faces Pressure
The Costco move comes as Medicare Advantage insurers navigate rising costs and changing billing rules. Humana Inc. (NYSE:HUM) said in July that it planned to exit additional Medicare Advantage plans in 2027, a move expected to affect about 600,000 members. The insurer said the changes were aimed at improving profitability while reshaping its Medicare Advantage portfolio.
Humana’s individual Medicare Advantage membership had increased 23% year over year to 6.45 million, while the company continued to target about 25% membership growth for 2026. The company also said it was prioritizing higher-performing plans as insurers face rising medical costs and regulatory scrutiny.
Medicare Advantage has also faced scrutiny over coverage decisions. Federal investigators found that many denials for post-hospital recovery care were later overturned on appeal. One review found that about 13% of requests for skilled nursing facility care were denied, while nearly all appealed denials were later approved.
UnitedHealth Group Inc. (NYSE:UNH), Humana and CVS Health Corporation (NYSE:CVS) were among the insurers examined in the reviews.
Medicare Costs and Coverage Shift
The Medicare market is also facing changes to prescription-drug coverage. The Centers for Medicare & Medicaid Services said in July that it would end the Medicare Part D Premium Stabilization Demonstration after the 2026 plan year, potentially affecting premiums for some beneficiaries in 2027.
Administration officials said about 25% of Medicare Part D enrollees could see premiums remain flat or decline in 2027, while about 30% could face monthly increases of less than $10.
Meanwhile, Medicare Advantage payment rates for 2027 were finalized at a 2.48% increase, adding more than $13 billion in payments to participating insurers.
Costco Sees Medicare as Pilot
Costco has been expanding services beyond its warehouse business, including gasoline and vacation packages, as it looks for ways to increase sales and make membership more valuable.
Richard Stephens, Costco’s senior vice president for pharmacy, said the retailer has seen older customers struggle with insurance coverage at its pharmacy counters.
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," Stephens told the Journal. "That’s really what we’re trying to do with this particular product."
Stephens described the Medicare initiative as a pilot, saying, "We plan to learn a lot from it, and we plan to make sure that we have the right product for our members."
Image via Shutterstock/ Fox_Ana
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