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Amazon Health

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Re: Amazon Health

#21

Post by padobson »

Thriptic wrote: post #17
thinkingkong wrote: post #4

I read the original announcement and also this analysis. Is it decided that Amazon will “own” the healthcare provider? As far as I can tell this is still a joint effort by several companies with the same philosophy on how to solve the problem. Presumably if other large companies were aligned they could create their own joint partnerships or discuss the possibility of joining this one.

One avenue this entity could take is to offer itself as a non-profit third party administrator of a self-funded plan for other companies. Large companies typically put up the money for health insurance anyway combined with employee premiums and then pay a TPA company or health insurer to create the benefit plan and administer it for them. They don't actually buy insurance as a product from a health insurer for their…

you need to strike business agreements with literally countless small practices, hospital systems, lab service providers, drug companies, outpatient clinics, etc.

This is why the aggregator model described in the article is relevant - the small practices will come to Amazon to plug into their aggregator and access their customers.

In that scenario, Amazon opens up shop in a state, provides cookie cutter TOS agreements to providers that mesh with the state's regulations, and providers on-board themselves in order to access the customer base.

Re: Amazon Health

#22

Post by aaavl2821 »

adrianmonk wrote: post #16
aaavl2821 wrote: post #5

The article makes the point that the companies have complementary business competencies that could help them deliver a better healthcare experience (tech, logistics and customer service at amazon; reinsurance at berkshire; capital at JPM), but there is another advantage to these three companies working together: scale. amazon and berkshire are in the top 10 employers, and JPM is in the top 25. while most of the talk…

The article actually touched on scale when it talked about risk pooling. Its argument was that the three together are not big enough to have the same kinds of economies of scale as big health insurers, but I'm not sure I think it'll be a problem like they suggest. If the 3 are going to do their own insurance, all that has to happen is that the gains of cutting out a for-profit middleman need to exceed the losses of r…

That is true, but I was referring more to scale as relates to negotiating leverage around PBMs or negotiating with payers

The negotiating leverage piece is a more acheivable near term benefit. Creating their own insurance company would be complicated and actually maybe not the best idea. There are tons of regulations that would hinder this, but also the local nature of healthcare markets dilutes the power of their scale if the try to start an insurance company

Amazon, Berkshire and JPM have employees scattered all across the country. However, they'd likely not have greater leverage than a given payer or provider in any specific locality as they wouldn't be a major employer in most areas. If they want to own physicians, in order to attract more physicians than the most locally powerful provider, they'd have to pay above market rates and would not have a large enough patient pool in most areas to justify this. In order to create a network as a payer, they'd need to spend a lot of money getting providers onboard but won't have a local network as large as that of leading payers, so they won't be able to reimburse at competitive rates.

So arguably the biggest challenge to the uber aggregator model laid out in the article is that they have lots of national power but dilute local power in most markets, and since healthcare delivery is local, they can't win

Edit: conciseness

Re: Amazon Health

#23

Post by dv_dt »

adrianmonk wrote: post #16
aaavl2821 wrote: post #5

The article makes the point that the companies have complementary business competencies that could help them deliver a better healthcare experience (tech, logistics and customer service at amazon; reinsurance at berkshire; capital at JPM), but there is another advantage to these three companies working together: scale. amazon and berkshire are in the top 10 employers, and JPM is in the top 25. while most of the talk…

The article actually touched on scale when it talked about risk pooling. Its argument was that the three together are not big enough to have the same kinds of economies of scale as big health insurers, but I'm not sure I think it'll be a problem like they suggest. If the 3 are going to do their own insurance, all that has to happen is that the gains of cutting out a for-profit middleman need to exceed the losses of r…

The odd disconnect with the pooling notes in the article is that it seems like all the other insurers seem to delight in creating mini single business pools even though the mega insurers themselves have plenty of customers to create single large pools (and win a nice administrative simplification). None of the large insurers also seem effective in price controlling via pooling drug purchases of their customers either - so it seems curious if this combination of businesses will be able to succeed. Good luck to Amazon and co, I hope they succeed at this venture.

Re: Amazon Health

#24

Post by cosmie »

aaavl2821 wrote: post #12
rezashirazian wrote: post #7

Earlier quoted context omitted.

If these companies get together and create a not for profit, how can for-profit providers even begin to negotiate with them. Also given the scale of these companies, wouldn't this raise healthcare costs for all others who don't work for one of them?

Many not for profit providers in the US are actually quite profitable, and insurance companies, even for profit ones, have regulations regarding their profit taking (they must pay out like 85% of premiums they receive to cover medical expenses). So while not having a profit mandate can certainly help Amazon / brk/ JPM, scale and negotiating leverage are probably bigger drivers Interesting point re increasing costs fo…

The cycle you mentioned is certainly a vicious one.

But you missed another: their cap on profit is percentage based. This disincentivizes the insurer from truly attempting to contain costs, because while the percentage of income they can take as profit is capped, the absolute value is not. This leads to underinvestment in attempting to contain costs except to the level that they can retain as overhead and a cycle of ever increasing premiums ensue.

It's also a reason for insurers to vertically integrate and getting their hands in the PBM business and offering telemedicine services and whatnot. Doing so allows the insurance arm to "pay out" to non-insurance subsidiaries, where they can both count that as a medical cost from the insurance arm yet still capturing profit from the non-insurance arm. In which case, it's beneficial to have inefficient contracts that give the non-insurance subsidiary a lot of leeway to run efficiently and generate solid profits.

Re: Amazon Health

#25

Post by kgwgk »

adrianmonk wrote: post #16
aaavl2821 wrote: post #5

The article makes the point that the companies have complementary business competencies that could help them deliver a better healthcare experience (tech, logistics and customer service at amazon; reinsurance at berkshire; capital at JPM), but there is another advantage to these three companies working together: scale. amazon and berkshire are in the top 10 employers, and JPM is in the top 25. while most of the talk…

The article actually touched on scale when it talked about risk pooling. Its argument was that the three together are not big enough to have the same kinds of economies of scale as big health insurers, but I'm not sure I think it'll be a problem like they suggest. If the 3 are going to do their own insurance, all that has to happen is that the gains of cutting out a for-profit middleman need to exceed the losses of r…

Many companies “do their own insurance”, outsourcing the administrative part (sometimes to insurance companies under a “administrative services only” contract): https://en.m.wikipedia.org/wiki/Self-funded_health_care

Re: Amazon Health

#26

Post by watertom »

I think these 3 will no longer provide health insurance for their employees, they are going to create a new more affordable framework and they will allow any other large company to participate.

The goal will be keep the cost of insurance the same for the employees, while eliminating the cost for the companies entirely, which is why this will take off.

It’s crazy to have employers paying for healthcare, this I believe will be the beginning of the end of employer paid healthcare. It won’t happen overnight but it will go fast because every employer wants to drop that overhead cost.

Re: Amazon Health

#27

Post by perseusprime11 »

watertom wrote: post #26

I think these 3 will no longer provide health insurance for their employees, they are going to create a new more affordable framework and they will allow any other large company to participate. The goal will be keep the cost of insurance the same for the employees, while eliminating the cost for the companies entirely, which is why this will take off. It’s crazy to have employers paying for healthcare, this I believe…

Interesting idea. Do you know what is the current overhead for Amazon in terms of $$$?

Re: Amazon Health

#28

Post by Thriptic »

mastax wrote: post #20
Thriptic wrote: post #17

Earlier quoted context omitted.

One avenue this entity could take is to offer itself as a non-profit third party administrator of a self-funded plan for other companies. Large companies typically put up the money for health insurance anyway combined with employee premiums and then pay a TPA company or health insurer to create the benefit plan and administer it for them. They don't actually buy insurance as a product from a health insurer for their…

> The trouble with Amazon trying to become THE payer or TPA is that insurance is highly variable across the country. There are many different laws governing insurance in each state, and you need to strike business agreements with literally countless small practices, hospital systems, lab service providers, drug companies, outpatient clinics, etc. It would actually be a massive administrative feat for Amazon to provid…

Absolutely it is possible, and I imagine that is exactly what they will do.

Re: Amazon Health

#29

Post by ihsw2 »

perseusprime11 wrote: post #27
watertom wrote: post #26

I think these 3 will no longer provide health insurance for their employees, they are going to create a new more affordable framework and they will allow any other large company to participate. The goal will be keep the cost of insurance the same for the employees, while eliminating the cost for the companies entirely, which is why this will take off. It’s crazy to have employers paying for healthcare, this I believe…

Interesting idea. Do you know what is the current overhead for Amazon in terms of $$$?

It's about $19K for employer-provided family-coverage.

Considering the three companies have about 1M stuff in total, that represents ~$20B in annual recurring costs.

This effort combined with accelerating automation will lead to a much better capital:labor cost ratio (and, depending on who you ask, reduction in labor costs is massively bad for wealth equality).

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