The fact that the average U.S. employer committed to spend nearly $27,000 a year for a PPO to cover a family of 4 in America in 2017 is the most important rationale underlying the announcement that Amazon, Berkshire-Hathaway, and JP Morgan made on 30th January 2017.

That news immediately shook Wall Street trading, sending downward shocks down the proverbial spines of healthcare insurance plans and suppliers to the industry — legacy healthcare companies that scale patient-members and healthcare supplies, like pills and surgical implants.

The “new competition” chart published in the Wall Street Journal in the morning illustrates those shock waves…the word “disruption” comes to mind, although we won’t know how long-lived this kind of statistic will be. The companies illustrated are Express Scripts, the pharmacy benefit manager; CVS, the pharmacy which recently announced intentions to acquire Aetna, the health plan (also hit hard by the A-BH-JPM news), along with United HealthGroup, Cigna, and Anthem, the other major U.S. health insurers.

What has been long-lived, for the better part of two decades, is the upward climb of healthcare costs facing employers, who pay for 50% of healthcare in America. And, increasingly, employee-patients, who have become important payors in the process, as well, shouldering many thousands of dollars of that PPO cost in the form of shared premium, copayments, and coinsurance, according to Milliman, the actuaries, who calculated that $26,944 PPO cost figure.

The A-BH-JPM alliance isn’t about creating a new health plan, I’m sure. If you read this CNBC interview with Gary Cohn who closely works with President Trump, you would see he believes it’s akin to this White House’s push for association health plans as a Holy Grail to reduce healthcare costs. (Hint from this health economist — they won’t do that).

What the promise of the triple threat could bring would leverage the team’s data chops, enchanting consumer-centered design (#UX for you design wonks), trust (which bolsters consumer health engagement), and a collective passion for innovation.

Remember: when Aflac asked health consumers what they’d expect their health insurance shopping experience to be like, 50% of folks said, “like Amazon.”

Health Populi’s Hot Points: I’ve analyzed the Milliman Medical Index for many years here on Health Populi, and use it in my advisory work. For each version, I identify stuff you could spend the PPO money on if not the health plan — usually I pick a car that’s priced at that PPO cost, and a second item such as a year at a university for a college student.

Ironically, last May, I picked 28 shares of Amazon stock, which at the time was worth roughly $27K.

Today, those 28 shares of Amazon stock would be valued at around $40,000. Amazon stock traded up over $8 today. Just think – one and one-half PPO plans…!

I will have more to say, over time, about this venture. For now, know that Warren Buffett has bitten that tapeworm that he’s long complained about, and based on my Twitter feed today, many of us are paying very close attention to the venture.

That includes many stock market investors whose holdings today got bit, hard.

6 Comments on Warren Buffett’s Healthcare Cost Tapeworm & His Alliance with Amazon and JPMorgan said : Guest Report 4 years ago

[…] Warren Buffett could divest companies in his investment portfolio that represent industries in processed foods, sugar, tobacco, guns, and other products that diminish public and individual health. We’ve seen Danone (Dannon) and CVS/health moving in this direction. […]

John Chamberlain said : Guest Report 5 years ago

While Association Health Plans will not, in and of themselves, provide the panacea to decreasing healthcare costs, they do indeed provide more latitude in how employers and individuals address the cost issue. With more options available to them like Direct Primary Care, independent third party price transparency and non-hospital-owned outpatient imaging and labs, cash pricing for Rx, there are significant savings to be had. Not to mention improved access and quality of service.

Virginia Balogh- Rosenthal said : Guest Report 5 years ago

Worker-centered plans do nothing for those who are in part-time or contract positions - an increasing sector of the economy said : Guest Report 5 years ago

[…] Omron’s consumer health products have had a strong market following by older patients, who have traditionally purchased these devices at the retail pharmacy. Being a trusted brand of wearable health tech for older people is a major differentiator for Omron, most importantly because heart disease risks can grow as we age. Increasingly, Omron like other digital health device players, channel products through Amazon, which has a huge connected health store among its growing roster of health-related things (and, potentially, services). [This week, Amazon co-announced a program bringing them together with Warren Buffet’s Berkshire-Hathaway and JP Morgan, to address the high costs of healthcare at the workplace – more on that here in Health Populi]. […]

Pearly Dhingra said : Guest Report 5 years ago

Jane, this reminds me of being on s train and the passengers are leaning and moving to one side to change the direction of the train. Sure, the trifecta will create a successful company and probably gain market share by subsidizing healthcare (remember Amazon retail, Uber, etc.) and offer an amazing experience and even win loyal customers (advocates). This is not likely to bend the healthcare cost curve. You want to change the direction of where the train is headed you’ll have to get out of the train and lay new tracks. It’s basic economics, a question of supply and demand. Increase supply (thru disruptive low cost automation and algorithms, e.g. Dr. Watson, Digital Therapeutics, etc.) or reduce demand (self care, better health promotion and disease prevention). I’d like to see a study assessing Amazon’s contribution to the quality of life. Enabling more, better and cheaper home delivery of sugar, nicotine and alcohol is not going to improve the long term health and well-being of the consumer. Ebooks are disruptive and eliminate wastage (paper, ink, delivery cost, etc.) I don’t think they’ve contributed to literacy. So....the trifecta may succeed at the expense of other health care suppliers (insurance, PBMs, etc.). Consumers may pay less, have more convenience (Amazon books and Uber rides) but it won’t change the health care addiction or the health of the population. That’s too big a task, even for this deep pocket trifecta. What will do that, is a topic for another discussion. Look at distribution of healthcare costs: highly skewed during the first and last year of life; managing chronic conditions e.g. hypertension, diabetes. Wall Street, Big Business, Health Insurance, Care Provider Industry, Lobbyists and Government have no incentive to dismantle the house they’ve built and enjoy living in. Anyone who makes money off the existing system is not likely to contribute to or advocate for a system of self care.

John shain said : Guest Report 5 years ago

Great work. Will be fascinating to see how their relationships drive this

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