Chances are you’ve recently purchased something from Amazon.com.
Maybe it was books. Maybe clothes. Maybe an appliance or a tool. Maybe you streamed a movie or an Amazon series. Maybe you even bought groceries.
Sometime in the near future, though, you might have the ability to buy health insurance and pharmaceuticals.
According to the Washington Post and other sources, Amazon is teaming up with Berkshire Hathaway and JP Morgan Chase to create an independent company for their combined one million workers worldwide with the objective of containing costs internally, circumventing the establishment insurance companies serving approximately 160 million Americans.
Insurance premiums have been growing faster than their wages.
Between 2012 and 2017, workers’ earnings increased 12 percent; premiums, 19 percent.
Berkshire Hathaway chairman Warren Buffett, said in a statement:
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
About the companies’ decision, John Sculley, formerly with Apple and Pepsi-Cola, now chief marketing officer of RxAdvance, stated:
“The U.S. health-care system is unsustainable in terms of its costs, and the entire debate by political leaders — whether it is Democrats or Republicans — has focused on repairing and replacing Obamacare and the ideological differences. To have three of the most respected CEOs in the world step up and say that their companies are going to work together to focus on the real issues, of how do you make the U.S. health-care system sustainable and a better delivery of service than what we have today… it’s very positive.”
A larger risk pool helps tamp down costs.
Two years ago, 20 major companies including Verizon, American Express, IBM, and Shell Oil joined Health Transformation Alliance to improve the way they purchase health care for employees.
Human resources consulting firm Mercer operates several employer collectives unified to purchase prescription drugs.
However, it is still unclear what the Amazon, Berkshire, JP Morgan company will be, how much money each corporation will invest, or whether it will eventually serve other companies.
The company is planning on relying on “technology” to reduce costs, but what the technology will be, how much it will decrease costs, and what the costs will be are yet to be determined.
Moreover, the company is expected to be “free from profit-making incentives and constraints.”
What that means as opposed to making actual profits is not clear.
Shares for leading insurers and drug stores plummeted by 10:30 a.m. Tuesday after Amazon, JPMorgan Chase, and Berkshire announced their intentions.
UnitedHealth (fell 3%; Cigna ( ) and Anthem ( ), more than 5%; Aetna ( ) and Humana ( ), about 3%; CVS ( ) (that recently purchased Aetna) and Walgreens ( ), more than 4%; and Express Scripts ( ), almost 7%.), for example,
Chuck Self, chief investment officer with iSectors sees this as a harbinger of more insurance industry shake-ups.
“This is the start of a restructuring of the health care industry. This could be the catalyst for something bigger. It’s part of the Amazon-ization of the nation, but it’s now clearly more than just Amazon.”
According to The Atlantic:
“Across the economy, Amazon has become a kind of deflationary Death Star, so well-known for its high-volume, low-profit model that stocks plummet in every sector it threatens to enter…This suggests that investors believe the new health-care company will compete most directly with insurance firms and pharmacies rather than with hospitals and larger clinics. Even so, if the corporate trio really wants to bring down health-care costs, they might try to open a network of low-cost clinics throughout the country that compete with large hospitals for less-complicated care.”
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