Big-box retail stores add health insurance to wares
By Barbara Marquand
Sacramento Business Journal
September 30, 2005
Shoppers look for deals on everything from paper towels to computers at big-box warehouse stores. Now they can get health insurance too.
Costco Wholesale Corp. and the Sam’s Club unit of Wal-Mart have been offering small-business health insurance policies to customers for the last two years. Two months ago Costco expanded its line with a pilot program in Southern California to sell individual health insurance policies.
Costco decided to offer individual health insurance policies as one more way to offer value to customers… The coverage is available only to executive members, who pay $100 a year to shop at the warehouse, versus the $45-per-year standard membership fee.
PacifiCare has about 6,000 people enrolled in its Costco small-business plan and about 800 enrolled in its individual Costco PPOs. The Costco plans have higher deductibles and slightly different benefits from other PacifiCare products, which help achieve the premium savings.
Rita Gibson doesn’t think the big-box phenomenon will have a big impact for most traditional brokers. The big-box stores are selling insurance as a commodity, she said, and the benefits for those policies are not as strong as they are for other policies sold through brokers.
“In the short run it brings more competition to the market, and as an economist I think that’s good,” said Glenn Melnick, director of the University of Southern California Center for Health Policy and Management. “It makes it easier to have access to a lower-cost market.”
But he doesn’t expect a big impact in the long term unless insurers get more innovative…
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Comment: So now the big-box discount stores are entering the competitive market for health insurance. And how do they compete? By reducing benefits and require greater cost sharing than the competing products that have already reduced benefits and required greater cost sharing. It’s a race to the bottom!
How long has it been since you’ve seen a new insurance product that offers greater benefits and lower out-of-pocket costs? Well, you won’t see any because the competition is with premiums charged rather than with the quality of the insurance product. By far the largest sector of the market is composed of healthy individuals who have only relatively negligible current needs for health care. That sector finds it very difficult to devote a large portion of income to a “commodity” that they aren’t using.
Deterioration in the value of insurance products has already created financial hardships for those who do develop significant acute and chronic problems. As these innovative trends expand, more and more middle income individuals will be impacted. But for the affluent, who have a political voice, health care will never become unaffordable, so there will be little pressure for change.
Besides, look at the potential for new revenue opportunities. Right next to the insurance desk, the big-box stores can set up Chapter 13 agents. And that is destined to be a very high volume business!