Costco Enters Medicare Market
Costco Partners with SCAN Health to Launch Branded Medicare Plans, Deepening Healthcare Footprint
Key Points
SCAN Health Plan currently serves nearly 460,000 members across 33 counties in six states (Arizona, California, Nevada, New Mexico, Texas and Washington), providing Costco with an established Medicare network as a partner.
Costco’s paid memberships stood at 82.9 million as of the quarter ended May 10, with membership growth of 4.1% year over year.
The initial offerings under the partnership may include a pharmacy experience and Medflex OTC benefits, in addition to vision and audiology services.
Costco is the largest hearing aid retailer in North America and accounted for about 16% of the US retail hearing aid market in 2025.
Federal marketing rules constrain Medicare plans from bundling a warehouse membership (Costco’s core profit engine) and cap value at about $75/year, pushing the model to monetize the OTC benefit card rather than membership fees.
Costco is moving into Medicare for the first time, partnering with nonprofit insurer SCAN Health Plan to offer Costco-branded Medicare Advantage plans in two states and a Medicare supplement plan in a third, PYMNTS reported. Regulatory approval is still pending, but the companies are targeting a market they say could reach roughly five million potential enrollees in the initial states alone.
Shares of Costco rose 1.9% as investors digested the news, according to TS2 Tech. The deal marks a major step in Costco's push to deepen its relationship with seniors — a fast-growing slice of its 82.9 million paid members.
What the Costco-SCAN Medicare Plans Actually Include
The partnership pairs Costco's retail reach with SCAN Health Plan's existing Medicare network. SCAN currently serves nearly 460,000 members across 33 counties in six states: Arizona, California, Nevada, New Mexico, Texas, and Washington, according to MyNorthwest. That gives Costco a ready-made infrastructure instead of building one from scratch.
The plans are expected to include a pharmacy experience, vision services, audiology, and a Medflex OTC benefit card — a prepaid card members use to buy over-the-counter health products, PYMNTS reported. Costco is already the largest hearing aid retailer in North America, holding about 16% of the U.S. retail hearing aid market in 2025. Those existing services give the partnership a natural fit.
Federal Rules Block the One Benefit Costco Wants to Offer
There is a catch. Federal marketing rules ban Medicare plans from bundling a warehouse club membership as a benefit, according to Business Model Analyst. The cap on extras sits at about $75 per year — far less than Costco's $65 basic membership fee. That means Costco cannot use Medicare as a direct pipeline to new warehouse members.
Instead, the model leans on the OTC benefit card as its main revenue tool. Costco is not underwriting the insurance and is not collecting premiums. SCAN carries the insurance risk. Costco's role is to be the retail destination where members spend their benefits, Business Model Analyst explained.
A Strategic Play, Not a Profit Windfall
Analysts are tempering expectations on earnings impact. Costco runs on razor-thin merchandise margins and makes most of its profit from membership fees. Adding Medicare plans does not change that math much, according to The Sun. Observers view this as a strategic move to lock in senior loyalty — not a near-term earnings driver.
Still, the long-term logic is clear. Costco's membership grew 4.1% year over year to 82.9 million paid members as of May 10. Seniors are among the most loyal retail shoppers. Giving them a reason to use Costco for Medicare benefits, prescriptions, hearing aids, and vision care builds what analysts call a moat — a reason competitors cannot easily pull those customers away.
Timeline and Expansion Remain Uncertain Pending Approval
Costco and SCAN have not disclosed which states will get the Medicare Advantage plans first or exactly when enrollment will open. Everything hinges on regulatory approval, PYMNTS noted. The companies describe this as a multi-year rollout, suggesting a slow and deliberate expansion rather than a nationwide launch.
If approved, the pilot will serve as a proof of concept. A five-million-person addressable market across the target states gives the partners room to grow. But for now, seniors and investors alike are waiting on regulators to greenlight the next chapter in Costco's healthcare ambitions.
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