Costco, the Issaquah, Washington, warehouse giant, has announced that it is moving into healthcare, a product that is not neatly stacked in a warehouse aisle and will not fit in an oversized cart.
Picture a typical shopper’s reaction: “Costco is where I go when I need a few batteries or a can of peaches. I leave the store with a pallet filled with items I never thought I needed and struggle to fit into my oversized SUV. I love the experience, but why would I ever trust a warehouse store with my most important need: the health of my family and me?”
The answer is simple: Costco is a disrupter that is beloved and trusted.
Its reputation as a disrupter of retail and beyond is well earned. Just about everything in shopping in a large store has been transformed by the warehouse giant:
- Costco perfected the membership model. More than 82 million households pay between $65 and $130 a year to enter a Costco warehouse. In the U.S. renewal rates sit at a remarkable 92.3%, a level matched only by Amazon Prime, which attracts most members through “no-cost” shipping.
- Its pricing upends shopper behavior. Prices are so appealing that people buy things they did not plan on and in quantities far greater than they need.
- It makes shopping fun. Beyond core everyday items, a rotating “treasure hunt” inventory of limited-run products strikes a chord with shoppers, and every location offers unique merchandise.
- It sells what you would never expect in a warehouse: 2–3 carat diamond wedding rings (at over $10,000), Swiss watches (exceeding $20,000), and even caskets, along with expansions into travel, pharmacy, vision care and home remodeling.
Costco has built its reputation through trust and a deep understanding of its customers. It has a ridiculously generous return policy; it is not uncommon to see customers returning items bought years earlier. Regardless of inflation, Costco stands for value, maintaining loss leaders like the famous $1.50 hot dog and soda combo and the $4.99 rotisserie chickens.
More than 140 million individual cardholders rely on Costco because of an unwavering trust in the quality of its merchandise and services, paired with the conviction that the company will stand behind its products no matter what. In a world of declining customer service and “you’re on your own” attitudes, Costco sits at the top of a pyramid of trust and is beloved for it.
In the Center for the Digital Future’s COVID Reset Project in 2021, a cross section of Americans were asked “if someday in the future you were able to get health insurance from a company that has not traditionally provided health insurance, which of the following would you choose?” In a list that included Apple, Facebook, Google, Microsoft and Target, the top three choices by a wide margin were Amazon, Costco and Walmart. When asked why they chose those three companies, respondents said, “I know and trust them and they offer good value.”
Health is not new territory for Costco. Its pharmacies, optical centers and hearing-aid counters already serve millions of members, and the company provides pharmacy and hearing services to members of SCAN Health Plan, a nonprofit Medicare Advantage insurer. That track record is why Costco’s move into healthcare is logical, and likely to succeed.
The new step goes well beyond that. Costco and SCAN plan to sell co-branded Medicare Advantage plans in two states and a Medicare supplement plan in a third, pending federal approval. Scan’s CEO, Sachin H. Jain, MD, promises the move creates “a streamlined, member-first healthcare delivery model.” The plans will be sold in warehouses, through agents and online. Costco describes the effort as a pilot. But the move is unlikely to end there; Medicare may be a stepping stone to a broader disruption of medical insurance and healthcare services.
Navigating the medical ecosystem is complex and intimidating. Consumers must make decisions that profoundly affect their quality of care and finances, yet they rarely understand the full impact of those choices.
This is where trust becomes the decisive factor. Costco sells expensive engagement rings because customers, who may know little about cut, clarity and carat, or how to spot a synthetic diamond, trust that the quality has been vetted, the value is genuine and the company stands behind the product. A ring is not a Medicare plan, but the mechanism is the same: when a choice is complicated and the stakes are high, people rely on someone who has already done the vetting.
Television is flooded with endless ads for competing Medicare plans with celebrity spokespeople and sweeping promises. Costco lets the consumer cut through the clutter. When making a high-stakes, hard-to-reverse decision while overloaded with information, the most logical response is to lean on the source you trust most. On that count, Costco wins every time.
Trust alone is not a guarantee, and Walmart is a cautionary tale. Despite Walmart’s enormous scale and brand, it closed its health clinics in 2024. Running clinics, however, is a very different business from helping people choose coverage. Costco is not trying to deliver care itself. It is partnering with an established insurer and lending its credibility to the choice, which is where trust matters most.
Amazon also enjoys a strong reputation for value and scale, with even more members than Costco, and it too has made real moves into healthcare. Yet its steps have been tentative, and its results less clear. Amazon brings similar assets, but it lacks the personal, tangible relationship Costco has built, a bond reinforced through physical store visits and face-to-face interactions with store teams.
The disruption may not stop at healthcare. Financial services are equally confusing and vital to consumer needs. Through hidden fees and poor service, traditional banks have alienated many customers, while online banking and ATMs have eradicated differences between banks. Costco already has a foothold through its co-branded credit card and its insurance offerings. Expect Costco, Amazon and Walmart to make bolder moves into financial services.
A few years ago, Big Tech giants like Google, Meta and Microsoft might have seemed natural contenders for healthcare and finance. But the reputations of tech companies and their leaders have suffered, creating a barrier to the deep trust required for these essential sectors.
Disruption starts with dissatisfaction. Legacy leaders fail their customers, and a vacuum opens. We saw this when Uber disrupted a taxi industry marred by poor service, and when music fans grew tired of paying $17 for a 12-track CD when they only wanted one song. In high-stakes categories like healthcare and finance, dissatisfaction opens the door. Trust decides who walks through it.
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This story was originally featured on Fortune.com
