How health insurers can prepare for Amazon, Chase and Berkshire Hathaway
The insurance and business worlds were rocked by a sudden announcement from Amazon, Berkshire Hathaway, and J.P. Morgan Chase that the three titans are collaborating on a “healthcare company” for their employees, with the goal of revolutionizing the sector. The companies said their initial focus would be on “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”
Health insurers and other players in the healthcare ecosystem saw their stock valuations take a hit on the news. Ultimately, this development presents a big test for insurers, who need to take it in stride as they continue down the road of digital transformation. Health insurance specifically has been battered by distractions over the past year, from the healthcare reform debacle to M&A drama to the ultimate repeal of the individual mandate as part of tax reform.
While all that was going on, though, health insurers have continued to invest in new technology platforms and use digital means to address the industry silos that are a drag on care. That’s what carriers need to continue to do over the next several months as more about this venture is revealed. Forrester analyst Kate McCarthy says that “an Amazon/Buffet/JPMorgan play makes almost anything possible: insurance products, consumer products, robust analytics and customer insights, pharmacy and PBM, retail healthcare…” With so few specifics, it can be tempting to brush off the news.
However, insurers can’t really afford to ignore this announcement. It indicates that companies are running out of patience with the escalating costs of healthcare and are willing to take potentially drastic steps to defray them. And of course, Amazon’s reputation for disrupting legacy businesses is well-cataloged.
At the same time, healthcare delivery is a complex beast, with many players and variables and no shortage of ideas of how to do it better. Having the data and customer experience that have powered Amazon’s retail domination is one thing, but effectively pricing risk and keeping costs under control is another. Or as Spencer Perlman, director of health-care research at Veda Partners told Marketwatch, “Just because somebody’s been a disrupter in other areas of the economy, to say they can then be a disrupter in health care is a leap.”
Insurers can continue to leverage their strengths in the latter to inform their initiatives on the former to ensure that they have a seat at the table in the ever-evolving healthcare ecosystem.