By Nitya Pandit
Amazon, Berkshire Hathaway and JPMorgan Chase are joining forces to make some radical changes in the healthcare provided to their employees. The announcement, made by the three business tycoons, has sent shockwaves throughout America and its stock market, with numerous pharmaceutical and health insurance stocks witnessing steep declines.
While this healthcare initiative lacks specific details, it can be estimated that this venture will improve healthcare based on a well-defined digital infrastructure and apps. For a short run, the companies will focus on implementing this change mainly for their own workers.
Known facts
The partnering firms are planning to form an independent company, which will put technology solutions at the centre of everything it does and will be free from profit-making incentives and constraints. The primary aim of this initiative is to improve the US employee satisfaction and reduce costs related to healthcare. These three massive firms can collectively use their resources, technical abilities and expertise to ensure that their employees and their families benefit from cheap yet high-quality healthcare. Further details and plans are yet to be furnished.
Assumptions being made
Many expert assumptions about the next step ahead have been making the rounds. Many companies nowadays fund their own health insurance which is known as being ‘self-insured.’ Taking a step forward from that, Amazon, JPMorgan Chase and Berkshire might take up all the administrative responsibility of the health plan instead of contracting it out to a third party. What this will mean for the employees is that through apps supported by a good digital infrastructure, they will be able to explore their insurance benefits and anything related to their healthcare with ease.
Experts in the healthcare sector are also wondering if the companies will, apart from paying for healthcare, also own hospitals and other healthcare facilities. Craig Garthwaite of the Northwestern University, however, does not see this happening. He thinks that the Amazon population, for example, is not big enough to support its own healthcare system, as the scale is not big enough and hence, having an entire hospital for the employees is not enough to disrupt the entire healthcare system.
Hence, it will be interesting to see how many services will the companies build instead of simply buying them. The key to disruption is to be able to negate third-party administrators and introduce features and aspects that can replace those of the traditional system. Since only five percent of the population consumes half of the total healthcare, experts are hoping that the joint venture will serve the remaining 95 percent population.
Companies in fear of losing business
UnitedHealth Group, one of the top healthcare facilities provider in the country, has fallen by three percent causing a drop north of 300 points on the Dow itself. In addition, other big insurance firms like Cigna and Anthem have also seen a five percent drop along with a three percent dip of Aetna and Humana. Even CVS and Walgreens have fallen by more than four percent.
This shows the many possibilities of change which might take place in the insurance market, due to this new and unexpected alliance. However, it is too soon to make anything of these reactions.
Conclusion
Jeff Bezos recognises the level of difficulty attached with what the venture is set out to do. Regardless of this, JPMorgan Chase CEO Jamie Dimon believes that the alliance can possibly have benefits for all Americans. Over the years, healthcare in America has been one of the most expensive globally, despite hefty government funding. Hence, Berkshire Hathaway and its partners need to ensure that they succeed in places where others have failed in the past.
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