Tires, toilet paper, health insurance? Costco Wholesale Corp. is starting a pilot program in California to offer individual health insurance policies to members who pay $100 a year for the store chain's "executive" membership.The program will begin next month at 34 stores in Los Angeles and Orange counties, although it could expand statewide by year's end, said Dellanie Fragnoli, Costco's assistant vice president for insurance services.
Costco has 3.4 million executive members, with about 1.5 million in California. The pilot program is geared to people who cannot get group insurance, such as the jobless and the owners of mom-and-pop businesses.
There are no plans to offer the insurance to all 18 million Costco members, and it may prove unfeasible to offer it nationwide, Fragnoli said.
"It's a challenge because of all the regulations surrounding insurance and because they differ by state," she said. "Everything we do has to be a state-by-state initiative," and some states may lack the customer base to be worth the hassle, she said.
Costco's move to sell health plans through its membership stores probably won't have much effect on the nation's estimated 45 million uninsured. But if other big-box discounters jump in, it could do to brokers what Wal-Mart did to small retailers, analysts said Friday.
Costco will offer two types of policies from PacifiCare Health Systems Inc. of Cypress, Calif., through which Costco already sells group health plans to small businesses.
Costco, based in Issaquah, Wash., declined to disclose its premiums, which would vary depending on the participant's age, medical condition, number of dependents and other factors routinely taken into account when buying health coverage.
But she estimated customers could save as much as 20 percent on coverage. The discounting is due, in part, to Costco's lower commission and to lower administrative costs.
"We only have to manage two plans. We don't have to manage 20 plans, like some other agencies," Fragnoli said.
PacifiCare benefits from working with a chain that, through its members, has a proven marketing base.
Read the full article: CBS News | Costco to Sell Health Insurance in Calif.
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