Costco Wholesale Corporation (NASDAQ: COST) is preparing to enter the Medicare insurance market through a strategic 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 state. The three target markets collectively include approximately 5 million Medicare enrollees. Both companies declined to disclose the exact locations or timing of the launch, citing regulatory limits pending approval from the Medicare agency.
Partnership Structure And Integration
SCAN Group, based in Long Beach, California, currently serves about 560,000 members and offers Medicare Advantage plans in Arizona, Nevada, New Mexico, Texas, and Washington state. SCAN CEO Sachin Jain stated that the new Medicare Advantage plans will integrate with existing Costco offerings, including prescription drugs, vision care, over-the-counter medications, food, and hearing products. Jain emphasized the goal of creating a simple user experience that enables seamless access to benefits.
Federal rules prohibit the inclusion of a Costco membership requirement for these insurance plans. Consequently, the products will be sold through Costco stores as well as regular distribution channels, including insurance agents and websites. Costco did not immediately respond to requests for comment regarding the initiative.
Market Context And Regulatory Pressure
The entry into the Medicare market occurs as insurers navigate rising costs and evolving billing regulations. Humana Inc. (NYSE: HUM) announced in July that it planned to exit additional Medicare Advantage plans in 2027, a move expected to affect approximately 600,000 members. Humana cited profitability improvements and portfolio reshaping as drivers for the change. Despite the exits, Humana’s individual Medicare Advantage membership increased 23% year over year to 6.45 million, with the company targeting about 25% membership growth for 2026.
Regulatory scrutiny has also intensified around coverage decisions. Federal investigators found that many denials for post-hospital recovery care were later overturned on appeal. One review indicated that about 13% of requests for skilled nursing facility care were denied, while nearly all appealed denials were subsequently approved. UnitedHealth Group Inc. (NYSE: UNH), Humana, and CVS Health Corporation (NYSE: CVS) were among the insurers examined in these reviews.
Policy Changes And Pilot Strategy
Changes to prescription-drug coverage are also reshaping the landscape. The Centers for Medicare & Medicaid Services announced in July that it would end the Medicare Part D Premium Stabilization Demonstration after the 2026 plan year. Administration officials noted that 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 has been expanding services beyond its core warehouse business, including gasoline and vacation packages, to enhance membership value. Richard Stephens, Costco’s senior vice president for pharmacy, noted that older customers have struggled with insurance coverage at pharmacy counters. Stephens described the Medicare initiative as a pilot program aimed at learning and ensuring product fit for members. He stated that members trust Costco’s vetting process, a standard the company aims to apply to this new product category.
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