Three corporate giants on Tuesday announced they were banding together to provide healthcare for their 1.1 million employees.
The companies — Amazon, Berkshire Hathaway and JP Morgan Chase — plan to form a company “free from profit-making incentives and constraints” in order to improve employee satisfaction with their healthcare coverage as well as reduce costs.
The company initially will focus on technology solutions that provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway CEO Warren Buffett.
“Our group does not come to this problem with answers,” he continued, “but we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
Ready for Challenge
The companies are keenly aware of the difficulties in front of them, said Amazon CEO Jeff Bezos.
“Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort,” he maintained. “Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
The trio’s healthcare initiative could reach beyond their employees, suggested JP Morgan Chairman Jamie Dimon.
“The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he said.
Still in the formative stages, the healthcare initiative will be led by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a managing director of JPMorgan Chase; and Beth Galetti, a senior vice president at Amazon.
Hurting Margins
Although the details haven’t been hammered out yet, the initiative has the potential to disrupt the healthcare industry.
“Since the three together have over 1 million employees, potential solutions could range from simply leveraging those numbers to gain favorable rates from HMOs to more aggressive moves, like creating their own network of caregivers,” said Charles King, principal analyst at Pund-IT.
“Right now, everything is on the table,” he told TechNewsWorld.
If the new entity does throw the weight of its employee base around, it could hurt the balance sheets of others in the market, noted Paddy Padmanabhan, CEO of Damo Consulting.
“The new company will likely be a big buyer of healthcare products and services with pricing leverage that can hurt the profit margins of existing healthcare players,” he told TechNewsWorld.
Healthcare Disrupter
Amazon’s technology prowess also could change the market for existing players.
“It’s clear that healthcare consumerism is on the rise, and there is a need for better user experiences,” observed Padmanabhan.
“Amazon is well known for its intuitive customer interfaces, use of advanced analytics, and its negotiating power with suppliers in the e-commerce space,” he explained. “They will likely use these skills to disrupt the markets for healthcare products and services.”
One motive driving these companies is the desire to make employees healthier, said Jack E. Gold, principal analyst at J.Gold Associates.
“What they’re trying to do here is establish a program that lowers cost by making people healthier and using technology to do that,” he told TechNewsWorld. “If we can make people healthier, insurance costs should go down because they won’t be in doctors’ offices so often.”
Reform Needed
While the Amazon and friends venture could disrupt the healthcare market and increase competition, it still won’t address the fundamental problems with the industry, maintained Michael Cannon, director of health policy studies at the Cato Institute.
“Healthcare needs more than competition. It needs reform,” he told TechNewsWorld.
“It’s going to be hard for Amazon and the others to have a transformative impact on healthcare because they’re fighting perverse incentives baked into federal law. Without reforming those perverse incentives, there’s very little good that entrepreneurs can do,” Cannon argued.
“Those perverse incentives are due to the fact that everyone is spending someone else’s money, so there’s no incentive to control costs,” he explained.
If Amazon, Berkshire Hathaway and JP Morgan were to succeed despite the challenging circumstances, their 1.1 million employees could benefit, Cannon acknowledged, “but I do not think it can benefit other consumers in the healthcare system without fundamental reform.”
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