“We’re out of paper towels, so I guess it’s time for a Costco run. And while I’m there, maybe I’ll schedule a doctor’s appointment.”
That sounds ridiculous today. Maybe not for long.
Costco recently expanded its push into healthcare by partnering with SCAN Health Plan to offer a Medicare Advantage program. It’s a move that fits perfectly with Costco’s business model. They aren’t just selling products. They’re continuously looking for ways to make that annual membership feel more valuable.
And that’s important because the membership is the business.
Costco’s fiscal year ended August 31, and the numbers tell an interesting story. The company generated roughly $12 billion in operating income. Membership fees contributed about $6 billion. When you work through the economics of the merchandise business, you arrive at a surprising conclusion:
The membership fees account for essentially half of Costco’s operating profit. In other words, those membership cards aren’t just a customer loyalty tool. They’re one of the most valuable assets on Costco’s balance sheet.
So what do you do when you’ve built a massive base of loyal members? You find more ways to serve them.
Costco already has a strong presence in pharmacy and vision care. Adding healthcare services isn’t a dramatic departure from what they’re doing today. It’s a logical extension of a business that has spent decades earning consumer trust.
Whether this specific healthcare initiative succeeds remains to be seen. But the larger lesson is worth paying attention to.
Costco is leveraging an existing relationship to deliver a service in a completely different category. They’re meeting people where they already are rather than asking them to change behavior.
That’s innovation.
And it’s the same type of thinking employers should bring to their group health plans.
Too often, benefits strategies consist of renewing the same plan, with the same carrier, through the same broker, while absorbing another round of premium increases. The process changes very little. The cost changes quite a bit.
The organizations making real progress are taking a different approach. They’re exploring alternative plan designs, evaluating new delivery models, and looking for ways to create better outcomes for everyone involved: the employer, the employee, the provider, and the facility.
No, that doesn’t necessarily mean sending employees to a warehouse for medical care.
But it does mean being willing to question assumptions.
Costco is doing it in healthcare.
The question is whether your organization is doing it with its benefits strategy.
