In the words of Warren Buffett, health care costs are “a hungry tapeworm on the American economy.” So now the Berkshire Hathaway CEO is teaming up with the CEOs of Amazon and JPMorgan Chase to create a new company that would offer high-quality health care for their employees at a significantly lower cost.
The new company will be “free from profit-making incentives and constraints” as it explores ways to cut health costs and increase satisfaction for employees of Amazon, Berkshire Hathaway and JPMorgan Chase. The three executives unveiled their venture yesterday in press release explaining the following: “The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost,” the companies said.
The undertaking brings together three of the largest and most widely-admired companies in their respective sectors — from retail to banking, including Berkshire’s expansive portfolio of companies like Geico and Fruit of the Loom. The team also brings together veteran business leaders with a demonstrated ability to solve complex business problems.
The venture won’t be a easy one. The three CEOs admit that they face enormous challenges.
“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Bezos. “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.”
Responding to the announcement Tuesday morning, White House economic adviser Gary Cohn told CNBC “we agree in that philosophy. We think that individual workers should have to pay less for health care.”
Still, the Trump administration already “created association health-care plans, which is the exact same thing that those companies did,” Cohn said, referring to an executive order last October that sought to make it easier for employers to combine efforts in offering insurance. That order also opened the possibility some groups could get coverage across state lines — “a move that Republicans have long advocated as a way to lower costs,” NPR’s Scott Horsley explained at the time.
“Smaller businesses could pool their employees together to get more purchasing power,” Cohn added Tuesday, “so they could save money on health care.”
NPR’s Scott Hensley pointed out a precedent non-health care companies venturing into the health care business — “in fact, it has happened repeatedly.”
The example he provides is Kaiser Permanente, now a massive player in U.S. health insurance. The organization started with the Kaiser shipyards and initially provided workers comp care and, then later, more integrated health care for employees.”
The details remain obscure for now. There has not yet been any announcement of the company’s name, base of operations or long-term leadership. At the start, the new company will be led by executives from each of the troika of giant firms: Marvelle Sullivan Berchtold, a managing director of JPMorgan Chase; Todd Combs, an investment officer of Berkshire Hathaway; and Beth Galetti, a senior vice president at Amazon.
JPMorgan’s Dimon said, “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.”