Amazon, Berkshire Hathaway, and JPMorgan Chase made headlines—and sent health insurance stocks into a tailspin—when they announced in January that they had partnered to form an independent nonprofit organization dedicated to finding ways of providing health care to their employees at a lower cost. However, Kathryn Mayer at Employee Benefit News flags a new report from venture capital firm Venrock in which healthcare experts say that this partnership is unlikely to have as immediate or dramatic an impact as its founders might expect:
Of the 300 healthcare professionals, employers, investors and academics surveyed by Venrock, 73% said that the Amazon, Berkshire Hathaway and JPMorgan effort was going to take a lot longer than expected and endure many obstacles. Meanwhile, 25% said the companies “have no idea what they’re getting into.” There are a number of reasons for the industry’s skepticism, say Venrock partners Bryan Roberts and Bob Kocher.
“[One is that] many new entrants have sought to dramatically improve healthcare for many years and nearly all have failed to produce any material impact. Remember Google Health and HealthVault?,” Roberts says. “While these are all large, successful companies, they do not have any real market power in healthcare, where all leverage is locally driven.” Meanwhile, Kocher notes, the companies haven’t yet formed a leadership team.
January’s announcement reflected the pressure many US employers of all sizes are feeling as rising health care costs force many of them to shift more of these expenses onto their employees. Businesses are bracing for a further spike in costs next year, as Congress has declined to take action to stabilize the individual health insurance marketplace established by the Affordable Care Act, potentially paving the way for premium hikes of as much as 30 percent. Higher expected costs for insurers mean higher prices for group insurance customers (mainly employers) as well as individuals.
Rising health care costs have been on corporate America’s radar for a while, however. The coalition formed in January is not unlike the Health Transformation Alliance formed two years ago by a group of 20 large corporations, which is also aimed at reining in health care costs by sharing data. So far, the alliance has not announced any major breakthroughs in that effort.
Other large companies have been pursuing innovations that entail providing health care (not just health insurance) directly: Apple is establishing a network of clinics near its California headquarters to provide primary care services to its employees and to test some of the health care technologies the company is developing, while Walmart has been talking to the health insurance company Humana about some form of partnership (though Humana’s participation in the acquisition of a national hospice provider, announced this week, may put paid to rumors that Walmart is looking to buy the insurer outright). In the meantime, US companies of all shapes and sizes have been exploring alternatives to traditional group health insurance, such as self-funded health care schemes and value-based programs.