StashLearn
Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Money News

Can Amazon, Berkshire, and Chase Change Health Care?

January 30, 2018

  • Amazon, Berkshire Hathaway, and JPMorgan Chase will team up on a health care initiative
  • The goal is to offer their 1.2 million workers better and more affordable care
  • The news caused some health care stocks to drop
3 min read

Three of the largest and most influential companies in the U.S. are teaming up to tackle the health care crisis in the U.S.

E-commerce titan Amazon, business conglomerate Berkshire Hathaway, and mega-bank JPMorgan Chase announced on Tuesday that they will collaborate to offer their U.S.-based employees solutions for better and more affordable health care.

The leaders of the companies–Amazon’s Jeff Bezos, Berkshire Hathaway’s Warren Buffett and JPMorgan’s Jamie Dimon–are among the wealthiest and most prominent business executives in the world. And the combined weight of these companies will bring to bear resources that few other companies can match, says  health-care expert and journalist Sam Baker of Axios.

The executives offered few details about the project, which they said is in its early stages, but they said in a press release the companies would focus “on technology solutions that will provide [their] U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost,” as well as creating a solution “free from profit-making incentives”.

Hoping to cut health care costs

Health care costs in the U.S. are the most expensive in the world, and they increase every year.

Spending on health care makes up a staggering $3.3. trillion, or 18% of the economy, according to the most recent report from the Centers for Medicare & Medicaid Services, the federal agency that administers both public health care insurance programs. Spending amounted to $10,348 per person in 2016, the most recent year for which the agency had data.

“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Buffett said in a statement announcing the initiative. “Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”

The combined count of U.S. employees for Amazon, Berkshire, and Chase is 1.2 million, according to reports.

Spending on healthcare makes up a staggering $3.3. trillion, or 18% of the economy, according to the Centers for Medicare & Medicaid Services

In addition to size and scale, each company has potentially unique strengths to bring to the new endeavor, according to analysts. Amazon offers its cutting edge data analytics and logistics, whereas Berkshire is an expert in insurance, and Chase specializes in banking and finance.

Warren Buffett, Jamie Dimon, and Jeff Bezos

“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” Bezos said in the same statement. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.

The Amazon effect

Amazon has long been rumored to have an interest in disrupting the health and medical markets, for example through its involvement in medical device sales, and potentially by changing the vast pharmacy market.

And it’s not alone among large U.S. companies tackling the rising costs and increasing dysfunction of the health care market.

In December, drugstore giant CVS announced it would acquire health insurance titan Aetna in a deal worth nearly $70 billion.

Both Aetna and CVS are making a bet on the way health care will be delivered in the future, experts say, with a focus on one-stop shops in local communities offering a range of health and wellness services, including walk-in clinics and filling prescriptions.

The stocks of a wide segment of health companies fell following news of the alliance, according to reports. Aetna’s stock dropped 2.3%, while shares of Cigna declined 5.7%, and benefits manager Express Scripts fell 6% in morning trading*.

*Source: Yahoo Finance, Tuesday, January 30

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

Next for you
A Healthy Merger? Why CVS Wants to Buy Aetna for $69B

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
Retirement budgeting Careers social media politics
Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.