Costco Medicare Advantage Plans Launch in California and Nevada

A warehouse club enters the Medicare market

Costco is getting into health insurance, though only partway. On October 1, SCAN Health Plan, a nonprofit Medicare Advantage insurer, and Costco Wholesale announced SCAN Costco Medicare Advantage (HMO). It is the first Medicare Advantage product to carry Costco's name.1 Starting January 1, 2027, the plans will be offered to eligible beneficiaries in 17 California counties and two Nevada counties.1 Seniors can sign up during the annual enrollment period, which runs October 15 to December 7.4

Costco is not the insurer. SCAN holds the Medicare contract and carries the risk. Costco provides its brand, its pharmacy, and its in-store optical and hearing services.2 Even before the October launch, coverage was pointing out that Costco would not be selling a Medicare plan of its own. The deal is a co-branding arrangement with a licensed carrier.9 Richard Stephens, Costco's senior vice president of pharmacy, said entering Medicare Advantage was a natural extension of the retailer's focus on quality and value.7

What the plan includes

The benefits are typical of a $0-premium Medicare Advantage plan, with Costco tie-ins added. Depending on the county, members get a $0 monthly premium, $0 copays for most primary care visits, and $0 copays for Tier 1 and Tier 2 generic drugs. San Francisco is the exception on premiums, at $2 a month.1 The plan also offers:

• A quarterly "FlexEssentials" allowance of $115 to $125 for over-the-counter items. Members with qualifying chronic conditions can also use it for healthy food.1
• A $300 vision allowance and a $400 allowance toward hearing aids.4
• $0 preventive dental care everywhere, plus a $1,000 to $2,500 dental allowance in some markets.1

Pharmacy is the main Costco feature. Costco Pharmacy is a preferred pharmacy in the plan's network, and members can pick up prescriptions at the warehouse, get them by mail, or have them delivered free through Instacart.1 In most counties, the plan's transportation benefit also covers rides to Costco locations for pharmacy, hearing, and vision visits. A few California counties, including Fresno, Alameda, and San Diego, are excluded.7 SCAN's Health Action Rewards program lets members earn up to $130 for things like annual wellness visits. The rewards can be spent at Costco or at other participating retailers.10

The plan does not include a Costco membership. Non-members can use their eyewear, hearing aid, and over-the-counter benefits at other stores.1 Earlier reporting explained why: federal rules bar tying a Medicare Advantage plan to a paid retail membership, so anyone eligible can enroll.9 That earlier coverage also made a practical point that still holds. Members who already shop at Costco will probably get more out of the plan, because non-members can't buy most non-pharmacy items or get member pricing.9 SCAN's plan page goes a step further. It says rewards money can be put toward a basic Costco membership, which partly closes the gap in a way that complies with the rules.2

How the plan changed between announcement and launch

The product that launched is narrower than early reports suggested. SCAN first announced a broader partnership with Costco in August without giving a timeline.6 In September, some outlets said the companies planned Medicare Advantage plans in two states and a Medigap supplement plan in a third, with no states named and federal approval still pending.9 Another report described a rollout in three unnamed states, possibly before the end of 2026.8

At launch, only the Medicare Advantage HMO in California and Nevada was announced, and coverage starts in January rather than late 2026.1 The companies did not announce a Medigap product, though Fierce Healthcare reports they plan to add products over time.6 The co-branded Medigap plan described in late-summer reporting may still be coming. For now, it hasn't been launched.

The states chosen fit SCAN's existing business. SCAN covers nearly 460,000 members in 33 counties across California, Arizona, Nevada, Texas, New Mexico, and Washington.7 Starting in Southern California and the Las Vegas area keeps the risk inside markets where SCAN already has provider networks.

A retail strategy while big insurers pull back

The launch stands out because much of the Medicare Advantage market is shrinking. A Healthcare Dive analysis of CMS's 2027 landscape data found that every major insurer cut its number of plans. Humana is dropping about 2,400 plans, UnitedHealthcare about 690, and Centene about 3,000.12 According to KFF figures reported by Quartz, the average beneficiary will have 28 Medicare Advantage drug plans to choose from in 2027, down from 32 this year.11 Humana and UnitedHealth together are discontinuing plans that cover more than a million people.11

The benefits are getting thinner too. J.P. Morgan analysts found fewer $0-premium plans for 2027. In a HealthScape Advisors survey, nearly 70% of health plan executives said they expect their Medicare Advantage benefits to be less generous, with higher specialist copays and less dental coverage.12 Politico reported that the industry is warning enrollees to expect higher out-of-pocket costs.16

Not all of the data points the same way. CMS projects that the weighted average Medicare Advantage premium will fall from $14.37 to $12.0011, and it expects dental, vision, and hearing benefits to stay broadly stable.13 Healthcare Dive notes that the CMS premium figure includes special needs plans, so it likely understates premium increases for most enrollees.12 The overall picture is fewer plans, leaner benefits, and a projected drop in enrollment to about 34 million in 2027.12

In that market, a $0-premium plan with dental, vision, and hearing allowances and a well-known brand should attract seniors whose current plans are being cut. SCAN is not following the large for-profit insurers in retreating. Its approach is to use retail partners to reach people in places they already shop. Since the Costco launch, SCAN has also announced co-branded plans with Walmart and with The Springs Living, a senior-living operator.5 SCAN Group CEO Sachin Jain has said older adults want simpler healthcare that fits into their daily lives.6 The Costco plan is a test of whether a familiar store can help an insurer keep members when they shop around.

Concerns from critics

Financial commentator Clark Howard has criticized the partnership directly. His objection is less about Costco and more about Medicare Advantage itself: narrow networks, prior authorization requirements, and the chance of denied claims when someone gets seriously ill.3 He also worries that Costco's reputation could make shoppers less careful, assuming a Costco-branded health plan carries as little risk as a bulk purchase.3 He recommends that seniors compare Original Medicare plus Medigap and a Part D drug plan before choosing Medicare Advantage.3

The broader market gives some support to these concerns. At least 33 health systems have ended or are ending in-network contracts with one or more Medicare Advantage insurers this year, often citing prior authorization denials and slow payment.17 This is one of the main drawbacks of Medicare Advantage plans, including SCAN's. As an HMO, the Costco plan relies on a defined network, and a familiar brand doesn't change that.

What seniors should check

The Costco name doesn't remove the usual homework. A health policy analyst at medicareresources.org said buyers should still confirm that their doctors and hospitals are in network, that their prescriptions are covered, and what their total costs would be.8 SCAN tells prospective members to check the formulary and pharmacy directory before enrolling.2 Some rule changes for 2027 also matter:

• Enrollment caps. For the first time, CMS is letting insurers set hard enrollment limits in their bids. Fifteen insurers have set caps on 65 plans, and a plan that reaches its cap closes partway through the enrollment period.20 There is no reporting that the SCAN Costco plan has a cap.
• Network changes. If even one doctor leaves a plan's network, that can now qualify a member for a Special Enrollment Period.18
• More marketing. Marketing restrictions loosened October 1, so seniors should expect more calls and mail.18

The Costco plan is a real new choice for seniors in about 19 counties. It is also a co-branded HMO with the usual trade-offs, so seniors should compare it against their other options rather than choose it for the name.