Amazon PillPack

Last week Amazon, JP Morgan Chase, and Berkshire Hathaway announced a partnership to bring healthcare to its over one million employees and their families.

Among those three businesses, Amazon is the largest employer. But Berkshire Hathaway, the conglomerate that owes its growth to its longtime Chairman and CEO Warren Buffett’s prowess in picking the right stocks, operates over 60 whole owned subsidiaries of well-known companies.

The three bring different expertise and knowledge to this endeavor. The trio plan to start an independent company that is free from profit-making incentives and constraints.

And Amazon may have a very significant role in this collaboration as they plan to utilize technology solutions to offer simplified, high-quality, and transparent healthcare at a reasonable cost.

“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. 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. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

Jeff Bezos, Amazon founder, and CEO

There are great synergies here to have a chance to make this work. Maybe more so than any other group that one could assemble today.

  • Amazon has the technology chops and infrastructure (Amazon AWS) needed to overhaul health care.
  • Berkshire Hathaway owns several insurance and indemnity companies that bring regulatory and risk management expertise.
  • JP Morgan Chase brings financial resources and is not afraid of financing disruptive industries.

All three businesses are run by widely respected CEOs and management teams. And may just be the type of alliance needed to overhaul the healthcare industry in the U.S.

Beyond Employees?

While the announcement made no mention on how or if this may go beyond employees, last year reports indicated Amazon was obtaining pharma licenses in several U.S. states and exploring talks with generic drug makers.

Was this all part of this deal or is there more to it?

First, it is important to remember that many supermarket chains in the U.S. have pharmacies in their stores. Amazon-owned Whole Foods Market could become the “retail/consumer” distribution point for their pharma business.

The grocer already sells a lot of nutritional and health-related over-the-counter products and natural remedies, so it this would make a lot of sense.

Secondly, other large tech companies such as Apple, Alphabet, Microsoft have been buying up medical startups, hiring healthcare industry talent, and all are reportedly running healthcare skunkworks programs.

This interest in healthcare is well beyond building new features into existing or future wearables. It appears to be about changing the industry.

Apple just announced a new feature called “Health Records” that will find its way into IOS devices soon. But it has the look and feel of a beginning strategy into healthcare.

Source: Apple

The desire by the tech industry to come up with a solution to the nation’s healthcare debacle has the health industry scrambling. CVS, the U.S. largest pharmacy chain, purchased Aetna, one of the largest health insurers last year.

In a bid widely seen to defend CVS’s market share in prescription drugs, it will now be able to tie its retail pharma business directly into one of the largest insurers.

If “Big Pharma” is worried, then there must be something disruptive to this tech business jumping into healthcare thing! And with an industry that is 10 percent of the U.S. GDP, there is a large pie to carve up.

May Amazon Marketplace Sellers Become the First Group of non-Employees?

The three companies in their announcement made it clear this is a long-term process, and they are committed to seeing it through. But enlarging the pool of insured reduces costs and spreads risk among a broader group of insured. Amazon could be the big winner in an expansion strategy.

Much of Amazon’s success relies on third-party marketplace sellers, and many of them are micro and small businesses with less than 50 employees.

It would not be unprecedented for Amazon to bring marketplace sellers into the program they are building with JP Morgan Chase and Berkshire Hathaway.

In 2003, eBay launched a program in collaboration with Marsh Advantage America and later with Mercer to offer health insurance to eligible PowerSellers. The last reference to this program appears to be from 2014 and none of the outside links work anymore.

From a purely risk management and business interest point of view, it would seem to be highly beneficial for Amazon to expand the healthcare program to marketplace sellers.

Obamacare is Dead!

Blame Democrats for passing a law (Patient Protection and Affordable Care Act – or commonly known as Obamacare) on a purely partisan vote that included so many open and unresolved issues that typically require ongoing legislative fixes.

The backlash from voters was more significant than Democrats probably imagined, a miscalculation that doomed the new law. At no time in the run-up to the law was there a poll that showed that ACA was popular among the general population.

Even Social Security and Medicare had bipartisan support, because there was broader support among voters. This fundamental difference allowed for fixes to be implemented after the big bill passed.

But due to the public disapproval of the Obamacare, Democrats lost their power in Congress, and President Obama was forced to use Executive Orders to move the law along. The downside, what can be implemented by one administration can be axed by the next, a significant flaw in the process.

Or blame Republicans to continuously undermine Obamacare by taking away funding and putting the public/private healthcare marketplaces into a near “death spiral” as more insurers were fleeing the system due to fiscal uncertainty.

With public approval ratings of Obamacare showing little improvement, and generally staying below the 50 percent mark, there was little political will among Republicans, who now control both the Senate and House, to fix the law.

So the strategy was “repeal and replace,” but they only effectively repealed the law by not funding significant portions of it and removing the individual mandate, and offered now replacement.

No matter who you blame or what side of the divide you are on, the fact is Obamacare as envisioned is dead. The effective final nail in the coffin was the tax reform bill passed in December 2017 that removed the mandate for individuals to purchase insurance or pay a fine to the IRS.

Without healthier people being enticed to buy insurance vis-a-vis a penalty on their taxes, the 2018 insurance premiums of Obamacare Marketplace insurance plans are likely going to see even larger increases during the next enrollment period.


“Prime Healthcare” to The Rescue?

With Washington D.C. not having a workable answer for making healthcare in the U.S. affordable, the tech industry may be the next best hope. And it might be the company from the state of Washington that leads the way!

Over 90 million people in the U.S. already trust Amazon by paying for the Amazon Prime Membership plan. Therefore, there is a large group of “Amazon Converts” that would likely trust the company to offer health insurance or other healthcare services.

“Bezoscare” may start out with being a pharmacy or some urgent care centers, but with time it could go much further.

Without speculating too much further on what could be, the alliance of Amazon, JP Morgan Chase, and Berkshire Hathaway must first prove that they are able to build a working healthcare program for their employees. This will take a little time.

The tech industry moves notoriously fast. If they can find a way to navigate this highly regulated field in short time, it could be the next disrupting force.

Odds are these three companies, along other tech giants like Apple, Alphabet, and Microsoft can find fixes to a dysfunctional healthcare system over the career politicians in Washington D.C. that worry more about being re-elected.

The healthcare industry has too many layers of brokers, distributors, and other intermediaries adding no value to the actual care patients receive. It will take outsiders and a little out-of-the-box thinking to break up those alliances.

Analytics-driven, machine-learning enabled, distribution efficient, and always in touch technology to provide better, faster, and more affordable healthcare may be on the horizon.

Nobody thinks wearables are going to replace MRIs or other laboratory tests. And we are far away from seeing an DIY Alexa Powered Medical Tricorder.

But a comprehensive overhaul of how healthcare is administered in the U.S. could actually reduce the cost of care. And that will benefit consumers, small businesses, and large enterprises alike.

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