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Amazon, Buffett and JPMorgan join forces on health care

  • This combination of photos from left shows Warren Buffett on Sept. 19, 2017, in New York, Jeff Bezos, CEO of Amazon.com, on Sept. 24, 2013, in Seattle and JP Morgan Chase Chairman and CEO Jamie Dimon on July 12, 2013, in New York. ap photos



Associated Press
Tuesday, January 30, 2018

Three of corporate America’s heaviest hitters — Amazon, Warren Buffett and JPMorgan Chase — sent a shudder through the health industry Tuesday 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 will do. But 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 health care, 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 this new company could create a virtual marketplace that makes shopping for health care 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.

Employers are up for trying almost anything to control rising health care 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, CEO of the National Business Group on Health, another nonprofit that represents large employers. “We’re always supportive of disruptive innovation, and health care certainly is in need of it.”

The venture was announced by Amazon founder Jeff Bezos; JP Morgan Chase CEO Jamie Dimon; and Buffett, the investment wizard of Berkshire Hathaway. The three companies have an estimated 1 million employees in the U.S.

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.

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

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

The potential disruption from three renowned innovators in technology and finance sent a shock wave through the health care sector on Wall Street, erasing billions in value in seconds.