The Amazon-JPMorgan Chase-Berkshire Hathaway plan has created a stir in the healthcare world but also in the broader business community.
Three financial giants—Amazon, JPMorgan Chase, and Berkshire Hathaway—are embarking on a partnership to improve employee healthcare options while lowering costs, the firms announced Tuesday.
The partnership aims to form a new company that will provide employees with technological healthcare solutions that are “free from profit-making incentives and constraints,” according to a joint news release.
The move intrigued market watchers, who see the plan in long-term context for growth opportunities and consumer benefits.
“Competition coming to the bloated health insurance industry courtesy of Amazon, Berkshire Hathaway, and JPMorgan Chase. Looks like good news for consumers: ‘The announcement slammed the shares of multiple companies in the health-care sector,’” tweeted Erik Brynjolfsson, director of the MIT Initiative on the Digital Economy.
Neil Irwin, a senior economic correspondent for The New York Times, tweeted the proposal is “a classic concept from the Bezos playbook.” This focuses on creating an internal product which can be developed into a product for an external audience, Irwin said.
“So if this new initiative can actually deliver quality health care for AMZN, BRK, and JPM employees at lower cost than legacy insurers, Aetna et al. should be nervous,” Irwin said. “That, of course, is a huge ‘if.’”
The announcement elicited a response from the Trump administration ahead of Tuesday night’s State of the Union address.
Gary Cohn, National Economic Council director, told CNBC the new company would not be doing anything the White House hasn’t already done. Cohn cited the introduction of association health plans as an affordable healthcare solution for consumers.
“‘Smaller businesses could pool their employees together to get more purchasing power, so they could save money on health care,” Cohn said.
Stocks tumble on announcement
Market reactions to the announcement, made early Tuesday morning, were profound for both the healthcare industry and the larger financial sector.
The Dow Jones Industrial Average fell 240 points at the opening bell, posting a 250-point loss by late morning. Major health insurance companies also saw significant slides on stock prices after the announcement.
Shares for Cigna Corp. fell by nearly 6%; Anthem Inc. was down 6%; UnitedHealth Group Inc. slid by 3.3%; and Aetna Inc. was down 2.5 %
Meanwhile, the three companies venturing into the massive project held steady. JPMorgan shares were down less than 1%, while Amazon and Berkshire were each up by less than 1%.
Details of a new management structure, specific business strategy, and location of the headquarters have not been released. The planning process for the new company will be headed by one executive from each company: Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a managing director of JPMorgan Chase; and Beth Galetti, a senior vice president at Amazon.
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” said Berkshire Hathaway Chairman and CEO, Warren Buffett. “Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, 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.”
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.