(AP) – Amazon, Warren Buffett and JPMorgan are forming a new company to address the health care costs of their employees, sending shares of health care companies down sharply across the entire sector despite the vague nature of the announcement.
On Tuesday Amazon’s Jeff Bezos said that he, along with Buffet and JPMorgan, would attempt to make health care better for hundreds of thousands of their employees, and perhaps, eventually, the country.
There were few details and those involved said the project is in the early planning stage.
“The ballooning costs of (health care) act as a hungry tapeworm on the American economy,” said Buffett, the head of Berkshire Hathaway, in a prepared statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
The new company will be independent and “free from profit-making incentives and constraints.” The businesses said the new venture’s initial focus would be on technology that provides “simplified, high-quality and transparent” care.
It was not clear if the ultimate goal is to eventually move beyond Amazon, Buffett’s Berkshire Hathaway and JPMorgan. However, JPMorgan Chairman and CEO Jaimie Dimon said, “our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”
The potential disruption from three renowned innovators in technology and finance sent a shock wave through the health care sector, erasing billions in market capitalization in seconds.
Six of the top ten companies with significant share declines on the Standard & Poor’s 500 index were health care companies. Almost all companies in the health field were in retreat Tuesday.
The need for a solution to the health care crises in the U.S. is intense. With about 151 million non-elderly people, employer-sponsored coverage is the largest part of the U.S. health insurance market.
Health care costs for companies routinely rise faster than inflation and eat up bigger portions of their budgets. Americans are mired in a confusing system that creates a mix of prices in the same market for the same procedure or drug and offers no easy path for finding the best deal.
The rising costs of health care have dragged on U.S. companies, big and small, and employees are increasingly feeling that pain. Employers have hiked deductibles and other expenses for employees, meaning less spending power for almost all Americans.
Only 50 percent of companies with three to 49 employees offered coverage last year, according to the nonprofit Kaiser Family Foundation. That’s down from 66 percent more than a decade ago. The federal Affordable Care Act requires all companies with 50 or more full-time employees to offer it.
Amazon, Berkshire and JP Morgan say they can bring their scale and “complementary expertise” to what they describe as a long-term campaign.
Amazon’s entry into the health market has been perceived as imminent, even though the company had announced nothing publicly.
It has been watched very closely on Wall Street, which has seen Amazon disrupt numerous industries ranging from book stores to clothing chains.
Amazon, which mostly sold books when it was founded more than 20 years ago, has radically altered the way in which people buy diapers, toys or paper towels. Most recently it has upended the grocery sector, spending $14 billion last year for Whole Foods Market Inc.