Thu, Feb 01, 2018 - Page 11 News List

Amazon, JPMorgan and Buffett rock health sector

SHOCK WAVE:Stocks in the health sector plunged on Tuesday after the corporate giants announced a plan to create a company that will give their staff affordable care


Three of corporate US’ heaviest hitters — Inc, Warren Buffett and JPMorgan Chase & Co — on Tuesday sent a shudder through the health industry when they announced plans to jointly create a company to provide their employees with high-quality, affordable care.

The announcement was short on details about precisely what the independent company would do.

However, given the three players’ outsize influence — and Amazon’s ability to transform just about everything it touches — the alliance has the potential to shake up how Americans shop for healthcare, and the stocks of insurance companies, drug distributors and others slumped in reaction.

“One of the messages they are sending is they’ve given up on traditional ways in which employers have tried to reduce costs or manage costs better,” said Paul Fronstin, an economist with the nonprofit Employee Benefits Research Institute.

Benefits experts speculated that the new company could create a virtual marketplace that makes shopping for healthcare as easy as buying a shirt on Amazon.

Or it could move directly into buying prescription drugs. Or it could be a system that bypasses insurance companies altogether and contracts directly with doctors and hospitals for better deals.

US employers are up for trying almost anything to control rising healthcare costs, which have been consuming bigger portions of their budgets for years and burdening their employees.

“The sky’s the limit on where they could possibly go with this,” said Brian Marcotte, chief executive officer of the National Business Group on Health, another nonprofit that represents large employers. “We’re always supportive of disruptive innovation and healthcare certainly is in need of it.”

The venture was announced by Amazon founder Jeff Bezos, JP Morgan Chase chief executive officer Jamie Dimon and Buffett, the investment wizard of Berkshire Hathaway. The companies have an estimated 1 million employees in the US.

The three businesses said their new venture will be independent and “free from profit-making incentives and constraints.” It will have an initial focus on technology that provides “simplified, high-quality and transparent” care.

Those involved said the idea is still in the early planning stages. It was not clear whether the ultimate intention is to move beyond the three companies.

However, “our goal is to create solutions that benefit our US employees, their families and, potentially, all Americans,” Dimon said.

Employer-sponsored health insurance covers about 157 million people in the US, constituting the biggest piece of the nation’s patchwork healthcare market, and neither companies nor their employees are happy with the system.

Healthcare costs — branded by Buffett “a hungry tapeworm on the American economy” — routinely rise faster than inflation.

Employers have been reacting by asking their workers to pay more of the bill and to shop around for better deals, something many people find hard to do.

Insurers and other companies already offer applications or programs that help people wade through the healthcare system’s often baffling mix of prices for procedures or prescriptions.

However, Amazon appears well-positioned to create a more user-friendly way to shop, Marcotte said.

“They have customer trust, they are already in people’s homes and they’re already part of many people’s routines in how they shop,” he said.

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