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updated on Feb. 2, 2018
Corporate giants Amazon, Berkshire Hathaway and JPMorgan Chase & Co. said on Jan. 30 they will collaborate to offer health care services to their U.S. employees more transparently and at a lower cost. The companies plan to set up a new independent insurer "that is free from profit-making incentives and constraints," according to a news statement.
If the venture succeeds, what begins as a self-funded "captive" insurer for the three companies' employees could expand and challenge today's major health care providers.
"New entrants with fresh approaches like these may be just the prescription our ailing health care system needs," Brian Marcotte, CEO of the National Business Group on Health in Washington, D.C., told
SHRM Online. The health care industry "is ripe for disruption, and the collective resources of these three companies, emerging technologies and Amazon's customer obsession and supply chain savvy gives me optimism that they will pursue a consumer-focused model that will transcend the fragmented, provider-centric delivery system that we have today."
Here's a roundup of insights from the media's coverage.
A New Venture
"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," said Berkshire Hathaway chairman and CEO Warren Buffett.
Added Jamie Dimon, chairman and CEO of JPMorgan Chase, "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," suggesting that the initiative could expand beyond the three partners.
"The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty," said Jeff Bezos, Amazon founder and CEO. "Hard as it might be, reducing health care's burden on the economy while improving outcomes for employees and their families would be worth the effort."
A Transformative Approach
The initial focus of the new insurer will be on using health-provider reimbursement models to promote technology that delivers simplified, high-quality and transparent health care at a reasonable cost. Health care spending was estimated to account for about 18 percent of the U.S. economy last year, far more than in other developed nations. Despite efforts to curb costs, studies suggest that U.S. doctors and hospitals continue to provide too much unnecessary health care. (Bloomberg)
[SHRM members-only toolkit:
Managing Health Care Costs]
Shaking Up the Health Care Market
The move speaks to the desire to rip apart the traditional health care system from distinctive silos. Experts have anticipated more deals and vertical integration in wake of
CVS announcing its intention to buy Aetna.
Adam Fein, president of Pembroke Consulting, said it's "long past time" for employers like these three to force innovation into the health care system. "For better or worse, there are warped incentives baked into every aspect of the U.S. health care system, from medical innovation to care delivery to insurance and benefit management," Fein told CNBC.
Amazon in particular can play a strong role if it promotes a greater presence for technological advances including artificial intelligence and information sharing platforms into health care, said Idris Adjerid, management information technology professor at the University of Notre Dame's Mendoza College of Business, (CNBC)
"Some experts view the employer health system, despite its flaws, as a force for innovation and reform." https://t.co/9i888hrdUa— Stephen Miller, CEBS (@SHRMsmiller) February 2, 2018
"Some experts view the employer health system, despite its flaws, as a force for innovation and reform." https://t.co/9i888hrdUa
A Whiff of Market-Based Health Care Change
Those who buy health care for employers and unions probably quietly rejoiced at the announcement. For them, the prospect of a group that might actually transform health care would be a breath of fresh air. The CFOs and benefits managers at employers and unions are acutely aware that they’re being taken advantage of by every health care industry sector. They’re genuinely weary from it, and they’d welcome a solid alternative.
'Captive' Insurance Can Drive Cost Control Measures
To take self-insurance to the next level, large corporations are using their own "captive" insurance companies to provide employee benefits. A captive is a wholly owned subsidiary created to provide insurance to the employees of the parent company (or companies in a collaborative venture). Captive insurance companies can rein in benefit cost increases by identifying and addressing key cost drivers.
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