Costco Selling Health Insurance in Pilot Program

RENEE MONTAGNE, host:

On Wednesday's business news, we talk about the workplace.

Costco, the members-only retailer that sells everything from $5 cooked chickens to $5,000 plasma TVs, is now offering individual health insurance policies. The pilot program was launched last month here in California. It's aimed at mom-and-pop business owners, those without a job or without job-provided health insurance. NPR's Wendy Kaufman reports.

WENDY KAUFMAN reporting:

Costco's approach to selling insurance is a bit like its approach to selling a TV or even a bottle of ketchup. Costco vice president, Pat Callins, describes it as preselecting one or two high-quality products, negotiating a fixed and favorable price and passing the savings on to consumers. In this case, he says, Costco is offering individual health insurance policies through PacifiCare Health Systems.

Mr. PAT CALLINS (Vice President, Costco): There is pricing that is negotiated between Costco and PacifiCare. There's a choice of a couple of different plans. You sign up and you have coverage just like you would have coverage through an employer or through another group.

KAUFMAN: The plan is only available to what Costco calls its executive members. There are about 1.5 million of them in California. So for now, at least, the insurance is only being offered in Southern California. Costco's been offering health insurance for small businesses for some time, and views this move as a logical extension. Competitor Sam's Club, a division of Wal-Mart and the nation's largest members-only warehouse, also sells insurance to its members, but Sam's Club operates more like a traditional insurance broker. Costco won't disclose the premiums it's negotiated with PacifiCare, but Callins said customers could save between 5 and 20 percent.

Mr. CALLINS: Now that's not to say that we are changing the world in terms of making health care available to the millions and millions of people that are uninsured. But we do think that if we can save people some money, then, you know, we're doing what we're supposed to be doing.

KAUFMAN: The director of the University of Southern California's Center for Health Financing Policy and Management is skeptical about a 20 percent savings for consumers. Still, Glenn Melnick says Costco's should benefit them.

Mr. GLENN MELNICK (Director of the University of Southern California's Center for Health Financing Policy and Management): Any time you have new entry into the marketplace, as an economist, you like that. To the extent that Costco, who is known as a low-cost provider of everything, can get into this market and try to control costs and make it more accessible, I think that's good news for consumers.

KAUFMAN: But, he continues, whether Costco's insurance offerings will have a major impact on the market remains to be seen.

Wendy Kaufman, NPR News. Transcript provided by NPR, Copyright NPR.