This week, Costco and SCAN Group announced their intention to offer Costco-branded Medicare Advantage (MA) products in two states and a Medicare supplement product in a third. The three initial markets contain roughly 5 million Medicare beneficiaries, although Costco and SCAN have not disclosed the states, counties, or launch timing while the products await regulatory approval. This partnership sets up an interesting question: Can Costco and SCAN change how an MA plan competes? 

At first glance, the announcement is another welcome addition to a market built around consumer choice and value, that has also seen some conspicuous exits by insurers over the past few years. But MA is hardly starving for plan options. The average beneficiary can choose among 39 individual MA plans in 2026, and 28 percent of beneficiaries live in counties offering more than 50 plans.

Costco has built one of the most recognizable consumer brands in America around a simple proposition: Pay for membership, and the company will try to make that membership worth more than it costs. This has – by and large – been successful. For Costco, health care is less of a departure than the word “insurance” suggests. Its businesses already include pharmacy, optical services, and hearing aids, and Costco says those businesses are located around its warehouses in part to encourage more frequent shopping. The company ended fiscal year 2025 with 81 million paid memberships and a 92.3 percent renewal rate in the United States and Canada. A Medicare plan gives Costco another way to make membership more useful while directing customers toward services it already provides.

SCAN Group, meanwhile, has spent nearly five decades focused on a similarly straightforward proposition in health care: keeping older adults healthy and independent. SCAN currently has about 560,000 members –offering MA products in California, Arizona, Nevada, New Mexico, Texas, and Washington – and brings some infrastructure Costco lacks. The companies have already been testing their compatibility. Last year, a partnership made Costco a preferred pharmacy for SCAN members, allowing members to use eyewear allowances there and providing certain rewards that can be spent on healthy groceries, personal care items, or fitness equipment. SCAN has said roughly three-quarters of its members already shop there.

The newly announced plan to launch jointly branded MA products may therefore be less surprising than it first appears. MA insurers spend considerable effort acquiring members, explaining benefits, and encouraging people to use them. Costco already has a trusted physical location that beneficiaries routinely visit. Integrating pharmacy, vision, hearing, over-the-counter (OTC) products, and other benefits into that environment could disencumber some benefits from specialized channels, making them feel detached from normal consumer activity. The supplemental benefit becomes less abstract and potentially more valuable.

Costco may also alter the value proposition of those benefits. MA plans frequently compete by offering allowances for dental, vision, hearing, OTC products, and other services. Yet the dollar amount on the brochure does not necessarily tell beneficiaries how much value they can obtain. A $50 OTC allowance that purchases more goods at a lower-cost retailer is effectively more valuable than the same nominal benefit in a higher-cost channel.

None of this, however, changes the fundamentals of operating an MA plan. Costco cannot manufacture an adequate physician network, erase prior authorization, or make unfavorable local medical costs disappear. That is why the most important unanswered question is not simply when the plans will launch, but where.

Medicare Advantage is a national program with decidedly local economics. Payment rates are set by the Centers for Medicare and Medicaid Services and incorporate county-specific information, while provider networks, medical utilization, market penetration, and incumbent competition can vary considerably across geographies. Recent insurer behavior underscores the point: Major insurers have been leaving many more counties than they enter, with local market conditions, cost pressures, firm strategy, and expected profitability helping explain those decisions. The empirical test of Costco-SCAN will therefore occur county by county, not across the national market.

A launch centered on SCAN’s southern California base would be a relatively controlled test: a familiar insurer adding a powerful distribution and benefit partner in a mature market. Expansion into newer SCAN territories such as Washington or Texas would signal something more ambitious: an effort to use Costco’s brand and physical footprint as an enrollment engine. The right analysis will compare Costco storefront density, SCAN’s existing enrollment, local MA penetration, incumbent concentration, county benchmarks, and provider-market dynamics, whenever location data becomes available.

The eventual launch market should be a key metric policymakers and competitors observe in this experiment. More choice is welcome, but simply adding plans is not the real promise here. MA is often evaluated through premiums, benefit counts, benchmarks, and plan availability, all of which matter. The Costco-SCAN partnership could provide a test of whether greater integration between an insurance product and the places beneficiaries already obtain health-related goods and services can improve the value of those benefits without simply spending more. If the model works, that would argue for preserving room for plans to experiment with benefit delivery and distribution. Other MA insurers may have to think less about the nominal generosity of supplemental benefits and more about whether beneficiaries can easily understand, access, and extract value from them.

Costco is not becoming a health insurer so much as a potential Medicare storefront. If that storefront succeeds, the important lesson may extend well beyond Costco and SCAN: In a mature MA market, the next frontier of competition may be less about adding benefits and more about making existing benefits work better for the people who are supposed to use them.