Walmart, the largest retailer in the world, with more than 265 million weekly shoppers and a workforce of 2.2 million is launching Walmart Insurance Services - a licensed insurance brokerage. The Bentonville, Arkansas based international retailer will begin selling Medicare Insurance plans beginning October 15th during the annual enrollment period (which ends December 7th). It will offer plans by a number of Medicare Advantage Insurers including Humana, UnitedHealthcare, Anthem, and Clover Health. Licensed in all 50 states and Washington D.C--this will be a national rollout!
“Health care can be complicated. But we think quality health care should be within reach of everyone, and pricing should be transparent and affordable. Our money-saving $4 generic prescription program and, more recently,Walmart Health locations are helping customers save money and live healthier. Similarly, our Healthcare Begins Here program has helped customers navigate the very complex health insurance system for years.” Lori Flees, SVP and COO, Walmart U.S. Health & Wellness.
According to Walmart, only 1 in 10 seniors take advantage of cost savings, so there is a market for improving the matching process. If you’d like a sneak peek at what a Walmart health partner would look like if it was rolled out as a bundled insurance, benefit plan, and health services platform similar to Cigna’s Evernorth, just take a look at the platform they offer their employees known as One Walmart.
Why this matters?
This is a brilliant move by the retail giant. It’s not reinventing the wheel, nor seriously innovating in the space, as insurance brokerage is still a largely labor intensive process. However, there are more than 3,148 Medicare Advantage plans offered in this country and Walmart has hired insurance agents to support seniors looking for a plan that fits their budget and health needs. There is a lot of potential cost savings for new members and this value add creates a diversified revenue stream by leveraging its significantly large captive audience. This will also be a learning opportunity to offer a best in class health plan of their own based on millions of direct user feedback through its network of professional brokers.
How much revenue are we talking about?
One thing insurance companies don’t have is a good enough marketing or sales team to be able to reach new customers. Outside of their existing members, they do not have another channel with a captive audience. That is why they contract with Medicare to provide health coverage and while they may have a few salespeople here and there, they use agents or brokers to sell their Medicare plans to Medicare beneficiaries.
The way it works is the agent or broker receives an initial payment in the first year of the policy and half that in year 2 and so on on a decreasing scale. This incentives getting customers who are less likely to switch but still maintains the higher incentive to bring in new customers. The agent or broker needs to be licensed in the state they are selling plans and there are protective rules around how they are allowed to market to consumers. Most insurers offer about $500-600 per enrolled member for the first year and $250-300 for the second year of enrollment if they renew. The data on how much Insurers pay brokers is publicly available on the CMS website. With about 24 million or ⅓ of Medicare members enrolled in Medicare Advantage in 2020 and a sobering statistic of 10,000 new members aging-in each day or about 3.6 million every year, the potential revenue is significant.
Even more attractive is the expectation that Medicare Advantage enrollees will grow from a third of total Medicare members to closer to 50% within the next 10 years! Revenue for Walmart will be in the hundreds of millions initially--not a big contributor to its existing $500 billion+ annual revenue which explains why its stock price didn’t budge with the announcement. However, it will be a high margin business that can evolve into something quite interesting as Walmart continues to build its $36 billion healthcare brand.