Costco Just Got Into the Medicare Business — And It Could Change Everything for Seniors
For years, Costco has quietly built one of the most trusted brands in American retail by doing something deceptively simple: offering a curated, limited selection of products at prices its competitors can't match, then backing those products with a level of institutional credibility that keeps 130 million cardholders renewing year after year. Rotisserie chickens, Kirkland Signature bourbon, Michelin tires, even diamond rings — all sold under the implicit guarantee that Costco has done the vetting work so you don't have to. Now, the Issaquah, Washington-based warehouse giant is bringing that same philosophy to a category where American consumers arguably need it most: health insurance for seniors.
Costco is embarking on another venture that takes the retail giant deeper into healthcare and could eventually make a warehouse membership even more appealing to shoppers. On Tuesday, the company and SCAN Group, a not-for-profit health insurer on the West Coast, announced a partnership to launch a Costco-branded Medicare Advantage plan. The announcement landed on August 18, 2026, and immediately sent shockwaves through the insurance industry, financial media, and the massive community of Americans either already enrolled in Medicare or approaching eligibility age.
The Issaquah, Washington-based warehouse chain has agreed to work with a California-based nonprofit insurer called SCAN to offer a Medicare Advantage plan that includes a suite of senior-focused insurance products, breaking into a Medicare Advantage industry worth more than $500 billion, in which private insurers offer health plans approved by Medicare. It is, by any measure, an audacious leap — and one that the company didn't make impulsively.
The Partnership: Costco Meets SCAN Group
SCAN Group currently offers its own Medicare Advantage plan in counties across five states — California, Arizona, Nevada, Texas, New Mexico, and Washington — serving nearly 460,000 members. That's a meaningful footprint, but a relatively modest one against the giants of the Medicare Advantage world. What SCAN brings to this deal isn't raw scale; it's mission alignment. Dr. Jain said, "Being a not-for-profit provider of insurance services, our goal is to provide as much value as we can to the Medicare beneficiaries that we serve. You can understand the clear alignment between Costco and us in that regard," adding that he's a longtime Costco shopper himself. Jain also said SCAN Group believes health insurance is a "broken industry" in need of fixing, and working with Costco can help accomplish that.
Costco became a preferred pharmacy for SCAN's Medicare Advantage members last year, so Tuesday's announcement builds on that relationship. This wasn't a cold partnership hatched in a boardroom. In October 2025, the two companies formalized a broader tie-up, and on November 13, SCAN ran in-store education events at 50 Costco locations across Arizona, California, Nevada, Texas, and Washington. The groundwork had been laid carefully, and the trust between the two organizations had been tested in the real world before a single co-branded plan was ever offered.
The math behind the partnership is straightforward once you know one key data point: roughly 75% of SCAN members already shop at Costco, which is the number that explains why either side bothered. When three out of four of your existing health plan members are already walking through your partner's warehouse doors every few weeks, co-branding isn't just smart marketing — it's almost inevitable logic.
What the Plans Actually Cover
Medicare Advantage and Medigap, Combined
The two companies plan to begin with Medicare Advantage products in two states and a Medicare supplement plan in a third, pending regulatory approval from the Medicare agency. The Medicare supplement product — commonly known as Medigap — fills in the gaps that traditional Medicare leaves open, covering out-of-pocket expenses like copays, coinsurance, and deductibles that can otherwise add up to a significant financial burden for people on fixed incomes.
The three markets together include around five million Medicare enrollees. That's not a trivial test market. Five million people is roughly the population of Colorado, and reaching even a fraction of them with a new insurance product would constitute a major market entry. The companies declined to name the target states or disclose timing, citing restrictions on disclosure while the plans await agency approval. Regulatory review of Medicare Advantage plans is a formal, multi-step process, and speaking prematurely about specific markets before CMS gives the green light carries real legal risk.
Benefits Built Around What Costco Already Does
What separates this announcement from a generic health insurance rebrand is the specificity of the product integration. Under the arrangement, Costco would market branded health insurance products for older adults; the companies said covered services could encompass prescription drug access, Medflex over-the-counter benefits, vision care, and audiology, among other offerings. Each of those categories already exists inside a Costco warehouse. The retailer operates one of the largest optical chains in the country, a full-service pharmacy, a hearing aid center, and sells a broad catalog of over-the-counter health and wellness products at its characteristically low margins.
SCAN Group CEO Dr. Sachin H. Jain described the supplemental policies and Medicare managed products as being "designed around Costco," noting 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." That framing cuts to the heart of what makes this pitch compelling: the Medicare Advantage market has long been cluttered with benefit allowances redeemable only at obscure catalog retailers or narrow networks that don't include the stores seniors actually frequent.
Dr. Jain has been blunt about why that matters, telling Fierce Healthcare that over-the-counter benefits rank among the most used perks in Medicare Advantage, and that plans sometimes mark up catalog items so the allowance drains faster. That practice — quietly inflating prices on approved OTC goods so that a monthly allowance evaporates before a beneficiary gets full value — is exactly the kind of thing Costco's pricing model is structurally designed to prevent. Costco's long-stated internal ceiling is a 14% markup on branded goods and 15% on Kirkland Signature. In an industry where insurance-adjacent retail often operates at dramatically higher margins, that cap is a genuine consumer protection.
The OTC Benefit Rail: How Costco Already Had a Head Start
On January 1, 2026, SCAN members in Washington state gained the ability to spend their over-the-counter and flexible benefit allowances at Costco. That wasn't just a perk — it was an infrastructure test. The two companies were running a live experiment to see how smoothly Medicare benefit dollars could flow through Costco's point-of-sale systems, and the results were apparently promising enough to justify scaling the entire relationship into a co-branded insurance product.
Costco already accepts Medicare Advantage prepaid benefits cards at its registers. The retailer says those cards can generally be used for eligible over-the-counter products and other health and wellness purchases, depending on the member's individual plan. The new partnership would take that relationship a step further by putting Costco's name directly on Medicare products.
The Market Context: A $600 Billion Business in Turbulent Waters
Medicare Advantage Is Massive — and Struggling
Nationally, Medicare is a more than $600 billion business for insurers. The scale is difficult to fully absorb. Medicare Advantage — the private insurance alternative to traditional Medicare — has grown relentlessly over the past two decades, and its footprint now dwarfs what most Americans probably realize. Medicare Advantage, which is the private insurance alternative to traditional Medicare, controls more than half of the overall Medicare market. Just over 35 million people were enrolled in Medicare Advantage as of February 2026, an increase of 1.1 million from February 2025, or 3 percent year over year.
But the growth story has gotten more complicated. Medicare Advantage is going through a brutal stretch. Insurers are trimming perks, raising out-of-pocket limits, and dumping plans they don't consider profitable enough to keep. The players pulling back aren't bit players. Humana said in July that it planned to exit additional Medicare Advantage plans in 2027, a move expected to affect about 600,000 members, saying the changes were aimed at improving profitability while reshaping its Medicare Advantage portfolio. Roughly 2.9 million people were forced out of Advantage plans heading into 2026, according to Johns Hopkins researchers.
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. The political and regulatory environment around the program has grown more adversarial, with CMS tightening rules around how plans can deny care and what disclosures they must make to enrollees.
Payment Rate Changes and the Regulatory Landscape
Medicare Advantage payment rates for 2027 were finalized at a 2.48% increase, adding more than $13 billion in payments to participating insurers. For a new entrant like Costco and SCAN, that increase represents a meaningful tailwind — more government dollars flowing into the system means a slightly larger pool of revenue from which to fund benefits. However, the regulatory uncertainty cuts both ways. The Centers for Medicare and 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.
KFF found that 66% of Medicare Advantage plans offered an over-the-counter allowance in 2026, down from 73% in 2025, with the standalone limit falling about 13% to roughly $23 a month. That contraction in benefits is a headwind for incumbents trying to retain members who enrolled specifically for those perks — and it's a potential opening for a new entrant willing to engineer their product from the ground up around maximizing the value of whatever allowance it does provide. Costco's warehouse pricing model is arguably the most efficient OTC benefit delivery mechanism that exists.
The Costco Brand as a Healthcare Credential
The strategic genius of this partnership — and the reason it deserves to be taken seriously rather than dismissed as a novelty — lies in what the Costco name actually means to the Americans who use it. Richard Stephens, Costco's senior vice president for pharmacy, said the retailer has seen older customers struggle with insurance coverage at its pharmacy counters. That's not an abstract statistic. That's a front-line observation from someone watching seniors stand at the register, confused by what their plan does and doesn't cover, every single day.
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 Wall Street Journal. That brand promise — radical simplicity backed by institutional due diligence — is almost perfectly suited to a Medicare market that has become bewilderingly complex. Costco has built its brand around curated products, bulk savings, and member loyalty. If the retailer applies that model to Medicare, the pitch would likely be that beneficiaries can shop for coverage through a familiar brand rather than navigating dozens of insurer websites or broker options.
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. Medicare insurance fits naturally into that strategic arc. The company has already demonstrated that it can move seamlessly from selling tires to offering auto insurance, from hawking travel accessories to booking full vacation packages. Health insurance for seniors is a logical next frontier for an organization whose core members are aging into Medicare eligibility every year.
The Distribution Model: Not Just In-Store
How These Plans Will Reach Consumers
The plans will be sold in Costco stores as well as through insurance agents and other standard channels. That multi-channel approach is important. A pure in-store rollout would limit the addressable market to people who are physically close to a Costco location and already hold a membership. By routing plans through traditional insurance brokers and online channels, the partnership can reach Medicare-eligible adults regardless of their proximity to a warehouse — and regardless of whether they're already members.
There is one thing Costco cannot do, however, and it's worth understanding why. There's one important detail Costco members shouldn't assume: the new Medicare plans won't come with a Costco membership. That's because federal rules prevent the retailer from bundling a Costco membership with the Medicare plans. The anti-kickback provisions embedded in Medicare law are designed to prevent insurers from using non-insurance inducements — like a retail membership worth $65 or more per year — to steer beneficiaries toward particular health plans. Costco and SCAN will have to sell the insurance on its own merits.
The plans also won't necessarily be limited to Costco members. That's another significant detail. The co-branding gives Costco name recognition a prominent role in marketing, but it doesn't wall off the product to existing cardholders. Any Medicare-eligible American in the approved markets could theoretically enroll, which dramatically expands the potential pool of beneficiaries.
The Existing Medicare Marketplace: Already More Than People Realize
Costco already has a Medicare-related marketplace through Custom Benefit Consultants, which allows Costco members to shop and compare available Medicare plans, including Medicare Advantage, Medicare Supplement plans, and Medicare Part D plans. That marketplace lists availability in Arizona, California, Florida, Georgia, Illinois, Michigan, Minnesota, Montana, Nevada, Oregon, Texas, Washington, and Ohio. However, that existing marketplace will not necessarily be the same as the new Costco-branded SCAN plans. The new product is fundamentally different — it's not a comparison-shopping tool for third-party plans, it's a plan with Costco's name on the card itself.
What This Means for the Broader Healthcare Retail Race
Costco is far from the first major retailer to attempt a push into healthcare, but its approach is considerably more coherent than most. Amazon's acquisition of One Medical gave the e-commerce giant a network of primary care clinics; CVS absorbed Aetna in a $69 billion deal that turned pharmacies into quasi-insurance companies; Walmart launched and then quietly shuttered its in-store health clinics after struggling with unit economics. The healthcare retail space is littered with ambitious pivots that didn't survive contact with the complexity of the American health system.
What makes the Costco-SCAN model potentially more durable is the specificity of the target population and the coherence of the benefit design. Rather than trying to reinvent primary care or disrupt hospital systems, Costco and SCAN are doing something narrower and arguably smarter: building a Medicare product that maps directly onto what a Costco member already does when they shop. The new plans are built to plug into what Costco already sells: pharmacy, vision, hearing aids, and over-the-counter items. There is no gap between the insurer's benefit catalog and the retailer's product floor. That alignment could prove to be the decisive advantage that previous retail healthcare ventures lacked.
The update builds upon Costco and SCAN's existing rewards program, offering incentives for members partaking in healthy habits. That behavioral health component suggests the partnership is thinking beyond basic coverage mechanics and into the longer-term goal of keeping beneficiaries healthier — which, under the Medicare Advantage model, directly benefits the insurer's bottom line by reducing medical costs.
What Buyers Should Know Before Signing Anything
For the millions of Americans either currently enrolled in Medicare Advantage or approaching age 65, the Costco-SCAN announcement raises a reasonable question: should I wait for this plan before making my coverage decision? The honest answer is that it's too early to know whether these plans will outperform the competition in any given market. Medicare Advantage plans live and die by their networks. The specialist you've seen for years might not be covered where you live. Costs, drug lists, and coverage rules vary from plan to plan and county to county. The Costco name on a plan card is a signal worth paying attention to, but it doesn't automatically resolve those fundamental questions.
Exactly what Costco's plans will cost, what benefits they will offer, and where they will initially be available remain unknown. Those details are critical. A plan with a strong OTC benefit and a generous pharmacy network might be a compelling value in one ZIP code and a poor fit in another, depending on where enrollees live and which doctors and specialists they rely on. The right approach — once these plans become available — is the same disciplined comparison shopping that Costco applies to every category it enters.
The partnership reflects "a shared understanding of what matters most to the seniors we serve," Costco CEO Ron Vachris said. That's a statement of values, not a promise about price or network breadth. But in an industry where consumers often feel abandoned by complexity and baffled by jargon, a retailer with Costco's track record of institutional honesty is at least starting from a better place than most.
The Long Game: A Multiyear Rollout, Not a Single Product Launch
Costco plans to start offering a Medicare plan and other senior-focused insurance products over the coming years. The retailer partnered with SCAN Health Plan, a nonprofit organization focused on healthcare for older adults, to launch offerings that may include a pharmacy experience, Medflex over-the-counter benefits, vision, audiology, and more. The launch of these offerings is subject to regulatory review and approval. This is explicitly framed as a multiyear project, not a one-time product drop. That phased approach is consistent with how Costco has entered every non-traditional category — carefully, methodically, and with an eye toward sustainable quality rather than rapid expansion.
The initial three-market test covering roughly five million Medicare enrollees is better understood as a proof of concept than a finished product. If the regulatory approvals come through and the early enrollment numbers show consumer demand, the logical next step is geographic expansion into additional states — likely prioritizing the markets where SCAN already has operational infrastructure and where Costco's warehouse density is highest. SCAN begins the trial with around 560,000 members and currently provides Medicare Advantage plans in Arizona, Nevada, New Mexico, Texas, and Washington, in addition to its main market in Southern California. That existing footprint suggests the West Coast and Sun Belt will be the most likely expansion zones once the pilot proves itself.
For older Americans tired of being shuffled between confusing insurance products they don't trust, sold by companies they've never heard of, the prospect of buying coverage from the same place they buy their vitamins, eyeglasses, and hearing aids is more than a marketing novelty — it's a genuine quality-of-life offer. Whether Costco can deliver on that promise at scale is the question the next several years will answer. But the fact that the company entered this market at all, with the partner it chose and the benefit structure it's building, suggests that for once, somebody in the healthcare industry has actually done the math from the consumer's point of view first.
