Health Insurance? Turn Left At Aisle 6

Price-savvy shoppers look to big-box stores for bargains on everything from T-bones to tires. Will health insurance be next? Since 2003, Sam’s Club has offered a free brokerage service to consumers in 48 states who are shopping for a health-insurance plan. Now Costco Wholesale Corp. is joining the market with a pilot program to sell medical coverage directly to consumers. In 34 Southern California stores this month, Costco will begin selling individual and family health insurance to its executive members–those who pay a $100 annual fee. The policies, in partnership with PacifiCare Health Systems, a California-based insurer, aren’t cheap: $1,500 to $3,000 a year for a single person or $3,000 to $6,000 for a family. Premiums will vary according to the individual (and coverage can be denied those with certain pre-existing conditions), but the giant retailer says its plans will cost from 5% to 20% less than comparable policies now on the market. “If we can save people a little money,” says Costco’s vice president of member services, Patrick Callans, “then we’re doing something O.K.”

The initiative builds on a health-insurance program Costco offers its small-business members. As 45 million Americans are unable to afford or obtain health insurance, retailers envision a vast market for individual policies. But experts are skeptical that even a giant chain like Costco can provide comprehensive, reasonably priced coverage to people who can’t afford it now. Given that health-care costs are rising faster than working families’ income, Costco’s plan “may be a helpful Band-Aid,” says E. Richard Brown, director of UCLA’s Center for Health Policy Research. “But it won’t stop the hemorrhaging.” What’s needed, he says, is not a fragmented free market but “a publicly accountable and organized system of health insurance.” –By Margot Roosevelt, with reporting by Logan Orlando