The headline that shook the health insurance sector this morning: “Amazon, Berkshire Hathaway, and JPMorgan Chase to partner on US employee health care.”
While details are few, this is the largest new initiative in U.S. health care in several years. The three employers have 1 million employees, so the new company could, at launch, control 1 percent of the U.S. health care market. The paperwork burden will be the initial focus:
"The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty," said Amazon CEO Jeff Bezos. "Hard as it might be, reducing healthcare's burden on the economy while improving outcomes for employees and their families would be worth the effort."
"Our people want transparency, knowledge and control when it comes to managing their healthcare," said JPMorgan Chase CEO Jamie Dimon. "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."
The new company's goal at first will be to target technology solutions to simplify the health-care system.
Any technology-focused effort could surely find a way to streamline the administrative burden of health care. In its current form, health care data flow is a hodgepodge of papers, fax machines, web portals, spreadsheets, data warehouses, and password-protected files attached to email messages. The office buildings where health coverage decisions are made are larger than hospitals. Data leaks are so common that most Americans have had parts of their health history exposed. Insurers so routinely decline coverage for needed medical treatments that health care costs are the leading cause of bankruptcy among those with or without health coverage, and the potential inability to get medical treatment is one of the all-pervasive anxieties in American life. The bar is set so low, any company determined to take a fresh look at the problem could easily do better.
Though the initial focus on paperwork points to the greatest potential for efficiencies that could put new pressure on health care companies, the sector is equally worried about another detail: the new joint venture will not be expected to make a profit. This is why CVS and several other health care stocks are down 6 percent this morning. It is hard for a profit-making company to compete with one that is just trying to solve a problem.