Costco Helps Bring Down High Cost of Healthcare

Apr 20, 2005

By George Anderson

Patrick Callins, vice president of member services for Costco, said the warehouse club leader isn’t looking “to be everything to everybody.”

What it is looking for, he told the San Diego Union-Tribune, are “programs where we can help people save some money.”

One area where Costco discovered it could help its business members save money is healthcare insurance. The company has been offering programs to business members at a savings up to 20 percent below what it would cost them to purchase on their own. It plans to begin offering plans for individuals, as well.

Martyn Hopper, the California state director of The National Federation of Independent Business, told the Union-Tribune, “It (health insurance) is the No. 1 concern of small-business owners.”

Costco’s warehouse club rival, Sam’s Club, began offering a program to members to lower the cost of healthcare services not covered under many insurance policies, such as cosmetic dentistry and vision services.

According to Sam’s, the program was a hit with members as it became one of the top five services sold by Wal-Mart’s warehouse club division.

Moderator’s Comment: Should the retail industry, led perhaps by the associations or company leaders, look to develop a cooperative approach to obtaining
healthcare insurance so that people working in the industry would have adequate medical coverage while associated costs are reduced for employers and employees? Are there models
in other areas of procurement that would be helpful in this?

George Anderson – Moderator

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5 Comments on "Costco Helps Bring Down High Cost of Healthcare"

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Ed Dennis
Ed Dennis
17 years 1 month ago
I can see great benefit from any organization negotiating rates for services. If you notice the next service confirmation you receive from almost any insurer, you will note that the insurance company does not pay the bill in full. Insurance companies negotiate rates for services that are far below “billed” rates. For instance, my daughter had some elective surgery and the doctor billed $3000 for his services as a surgeon. Insurance paid $600 and the surgeon wrote off $2400. Service discounting is standard operating procedure (no pun intended) if a physician, hospital or any service provider does business with Blue Cross/Blue Shield or any of the major insurers. Is it a benefit to a consumer if an organization is able to piggy back on “accepted negotiated rates” and is able to deliver these rates to members for an administrative fee? You’re mighty right this is beneficial! Can you get these rates as an individual? Sometimes you can, by simply asking the doctor if he will accept the negotiated rate for an uninsured service and offer… Read more »
Bernice Hurst
17 years 1 month ago

Although there obviously has to be some profit motive for Costco, if the policy being offered is genuinely less expensive than an individual policy AND offers equivalent coverage then it sounds like one of those win win situations that we all so desperately seek.

David Livingston
17 years 1 month ago

This sounds good on the surface but I doubt they will actually save anyone money. My guess is they will only be able to sell insurance to healthy people without pre-existing conditions. I’ve investigated several plans offered by groups and associations. None of them offer a plan that excludes pre-existing conditions like what you can get through employer sponsored plans or with government programs.

Insurance is like buying a car. It’s always going to cost more going through a warehouse club because they need some room to make a profit. Smart buyers will always find a lower cost method rather than using a middleman organization. I think this will be end up like the caskets Costco wanted to sell. It might be just as hard to find a doctor that accepts the insurance sold by Costco as it is to find a funeral director willing to work with someone who bought a casket at Costco.

Mark Burr
17 years 1 month ago

It is a natural fit for Costco. In particular, there’s a benefit in gaining business customers who have been traditionally a focus of Sam’s Club. That is, of course, assuming that Costco can offer a real benefit in cost savings. My assumption is that they can and this could be a great benefit, not only for Costco, but also for small to medium sized businesses that can ‘co-op’ with Costco for mutual benefit. This is innovative thinking at its best. Costco has also taken a lead as a champion of this issue in other areas. They are also a champion at providing excellent benefits to their workers at little to no cost. They are a real leader on this issue. If it doesn’t work, I am confident that they will continue to find innovative ways to address this issue, both inclusive and non-inclusive of their business customers.

Herb Sorensen, Ph.D.
17 years 1 month ago

We’ll take any relief we can get. I don’t have exact numbers, but it seems like years ago I paid about $125/month for my family of seven. Today, with 50 employees, it’s pushing $1200/month per family. We do have a “Cadillac” plan for our “Cadillac” employees, but this is ridiculous.


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