‘Sky’s the limit’ for joint ven­ture

Ama­zon, Buf­fett and JPMor­gan to cre­ate in­de­pen­dent health care com­pany

Hawaii Tribune Herald - - NEWS - By TOM MURPHY

Three of cor­po­rate Amer­ica’s heav­i­est hit­ters — Ama­zon, War­ren Buf­fett and JPMor­gan Chase — sent a shud­der through the health care 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 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.

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. But Di­mon said: “Our goal is to cre­ate so­lu­tions that ben­e­fit our U.S. em­ploy­ees, their fam­i­lies and, po­ten­tially, all Amer­i­cans.”

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. Health care costs — branded by Buf­fett “a hun­gry tape­worm on the Amer­i­can econ­omy” — rou­tinely rise faster than in­fla­tion, and em­ploy­ers have re­acted by ask­ing their work­ers to pay more of the bill and to shop around for bet­ter deals, some­thing many peo­ple find hard to do.

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