Amazon is teaming up with Berkshire Hathaway and JPMorgan Chase, the nation’s largest bank, to try to address one of the nation’s worst employer problems – soaring health care costs.

The so-far unnamed company has been created solely for the employees of the three companies, and it shows how frustrated the companies have become with the system. The statement said the new company will be “free from profit-making incentives and constraints.” Warren Buffett, the chairman of Berkshire Hathaway, said in a prepared statement, “The ballooning costs of (health care) 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.”

The announcement caused further turmoil in an industry reeling from attempts by other new players to attack a notoriously inefficient, intractable web of doctors, hospitals, insurers and pharmaceutical companies.

It was unclear how extensively the three partners would overhaul their employees’ existing health coverage — whether they would simply help workers find a local doctor, steer employees to online medical advice or use their muscle to negotiate lower prices for drugs and procedures.

While the alliance will apply only to their employees, these corporations are so closely watched that whatever successes they have could become models for other businesses.

Health care costs have risen substantially over the past few decades, though the rate has slowed in recent years.

The average annual premiums for a single worker hit nearly $6,700 in 2017, while family coverage cost nearly $18,800. Those total costs are split between the employee and the employer.

Premiums rose 3% for family coverage and 4% for individual plans in 2017, the sixth year of relatively modest increases.

Still, premiums soared for several years a decade ago, pinching workers who didn’t see their annual raises keep pace.

In 2000, the average annual premium was less than $2,500 for single coverage and $6,400 for family plans.

Companies foot most of the bill, though they have been giving more of the cost to employees in recent years. Workers paid an average of $1,200 for solo coverage last year and $5,700 in premiums to insure their families.

However, no one is really sure how the problem is going to be fixed. People briefed on the plan, said the executives decided to publicize the initiative while it was still a concept so they could start hiring staff for the new company.

However, the trio makes sense. Amazon could provide the technology and logistics, Chase could provide the financing, and Berkshire Hathaway could offer the insurance to sustain the project. And with the geniuses like Jeff Bezos and Warren Buffet at the head of the company, our health care system might just get better.

 

Image Credits: The Roosevelt Institute

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