Three major employers, Amazon, Berkshire Hathaway and JP Morgan Chase, announced Tuesday they were partnering to create an independent company aimed at reining in health-care costs.
There were almost no details available about how the company would function — whether it would seek to integrate into existing markets or try to disrupt the complicated fabric of American health care.
But major health company stock prices tumbled on the news, and the announcement stirred excitement and concern among industry leaders that the three companies could bring their clout to containing costs in the massive employer-sponsored health insurance market, which provides care to approximately 160 million Americans.
"The U.S. health care system is unsustainable in terms of its costs, and the entire debate by political leaders — whether it is Democrats or Republicans — has focused on repairing and replacing Obamacare and the ideological differences," said John Sculley, who formerly led Apple and Pepsi-Cola. "To have three of the most respected CEOs in the world step up and say that their companies are going to work together to focus on the real issues, of how do you make the U.S. health care system sustainable and a better delivery of service than what we have today... it's very positive."
The announcement comes amid rampant rumors and anticipation that Amazon could disrupt health care as it has in other industries, particularly in the business of selling prescription drugs. A person at one of the companies who is familiar with the matter said that this is day one of the joint venture and that specific plans will take shape over time.
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The person said that the joint venture is not currently expected to be a simple replacement for existing health care companies. It would not be a new health insurance company or a hospital or a pharmaceutical company, but a company that can bring the power and scale of the three organizations to bear on making health care more transparent, affordable and simple. The person warned that could change.
"The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable," Warren Buffett, Berkshire Hathaway chairman said in a statement.
Amazon reported in October that it had 541,900 worldwide employees globally. Berkshire Hathaway employed about 367,000 people worldwide at the end of 2016. JP Morgan Chase said in a news release last week that it last year spent $1.25 billion on medical benefits for 300,000 U.S. employees and family members.
The independent company would be jointly led by executives from all three companies, although a chief executive has not yet been announced. It will be free from the need to deliver a profit.