Amazon’s Health Care Disruption Continues With Insurance Play
Home care companies have been keeping a watchful eye on Amazon (NYSE: AMZN), looking for how the company might disrupt the health care system as a whole and their business models in particular. On Tuesday, the internet retail giant took another step into the health care space, in partnership with two other corporate titans.
Amazon announced it is forming a new, independent company with Berkshire Hathaway (NYSE: BRK.A, BRK.B) and JPMorgan Chase & Co. (NYSE: JPM).
The announcement comes as rumors have swirled about how Amazon could enter the health care market. Industry experts have speculated that the Seattle-based retail giant could become a pharmaceutical distributor or even a full-blown provider in the space. But this latest move is focused not on prescription drugs but insurance.
The new company will aim to tackle the heath care insurance options for the employees of the three companies. Amazon topped 541,000 employees as of the third quarter of 2017, according to the company’s records; JP Morgan Chase & Co., the largest U.S. bank, has more than 240,000 employees; and Berkshire Hathaway, a holding company, has more than 367,000 employees.
It is not exactly clear how the three businesses will work together under the new company, which is still in its early planning stages, according to the announcement Tuesday. But while few details have emerged, it’s plausible that home care options could be favored by these companies, as a way to keep people out of the hospital and cut costs.
With the new company, the three conglomerates will focus on technology solutions to provide their U.S. employees and their families with “simplified, high-quality and transparent health care at a reasonable cost,” according to a press release. Amazon’s voice-technology products already have been harnessed to aid in home caregiving services.
“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Berkshire Hathaway Chairman and CEO Warren Buffet said in a statement. “Our group does not come to this problem with answer. But we also do not accept it as inevitable. Rather, we share the belief that putting our collecting resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
The deal also comes at a time when the health care industry is going through consolidation, with health care insurers specifically gaining larger control over different parts of the care continuum. Insurance giant Aetna (NYSE: AET) recently announced its acquisition of CVS Health (NYSE: CVS), and another example is Humana’s (NYSE: HUM) planned acquisition of Kindred Healthcare’s (NYSE: KND) home health and home care operations.
“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” Jeff Bezos, Amazon founder and CEO, said in a statement. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind and a long-term orientation.”
In the aftermath of the announcement, the share prices of major U.S. insurance companies took a hit Tuesday, with pharmacy benefits manager Express Scripts (NYSE: ESRX) sliding more than 11%.
“Our people want transparency, knowledge and control when it comes to managing their health care,” Jamie Dimom, chairman and CEO of JP Morgan Chase, said in a statement. “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.”
Written by Amy Baxter
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