Arthur J. Villasanta – Fourth Estate Contributor
New York, NY, United States (4E) – Corporate behemoths Amazon.com, JP Morgan Chase & Co and Berkshire Hathaway, Inc. — the three biggest private employers in the United States — have teamed-up to offer their employees subsidized healthcare, and will organize a health care company aimed at cutting health insurance costs for their U.S. employees.
News of this stunning development triggered a plunge in U.S. stock markets, with shares in the three largest U.S. health insurers (UnitedHealth, Anthem and Cigna Corporation) all falling over 5% in early trading following the announcement.
UnitedHealth Group and Pfizer were the two biggest losers on the Dow, while Anthem saw the largest losses on the S&P 500. Investors fear the trio will massively disrupt the health insurance sector (leading to lower profitability) in the same way Amazon has the retail sector.
The U.S. Congressional Budget Office has forecast the cost of a medical insurance policy will increase by 25% in 2018 and double by 2026.
Losses among health insurers, however, spread rapidly and hit almost every sector in the stock market. The blue chip Dow Jones Industrial Average dropped nearly 1.4%, marking its biggest one-day decline in months as investors dumped health care companies.
The fall followed news that Amazon, JPMorgan Chase and Berkshire Hathaway, which together employ more than 1.15 million persons, will establish a new healthcare company as yet unnamed. Amazon employs 542,000 persons; Berkshire, 368,000 and JP Morgan, 243,400.
The three companies said their new and independent firm will be “free from profit-making incentives and constraints. Their health insurance firm will provide care to their employees at a “reasonable cost.”
They said they’d focus on technology to provide “simplified, high-quality and transparent healthcare.”
“Our people want transparency, knowledge and control when it comes to managing their healthcare,” said Jamie Dimon, chairman and chief executive of JPMorgan Chase.
“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.”
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Amazon founder and CEO Jeff Bezos.
“Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort.
“Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
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