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