California Broker June 2018

Page 8



Healthcare Players Must Adapt to Price Transparency orFace Extinction By MARK GALVIN

Editor’s note: Views expressed in our guest editorial are those of the author, not Cal Broker magazine. We welcome your opinions on any subject. Tell us at


hen Berkshire Hathaway purchased National Indemnity in 1967 for $8.6 million, putting them into the insurance business, and when Amazon announced their acquisition of Junglee and PlanetAll in 1998 as part of their move beyond book and music sales directly to consumers over the Internet, probably no one imagined that Berkshire and Amazon would team up with JP Morgan Chase decades later to fix healthcare for the American people. With their recent announcement and the help of a bit of insider market knowledge, it starts to become exceedingly obvious how and why these three companies are uniquely situated to actually pull it off. Looking at these three giants of industry today, you’d find that Berkshire Hathaway’s portfolio companies are collecting over $61 billion in insurance premiums, including a substantial business in stop-loss underwriting and over $30 billion in direct-to-consumer insurance through Geico. JP Morgan Chase, a political machine potentially stronger than America’s Health Insurance Plans (AHIP— the health insurance lobby) and all its members combined, is a depository for Medicare and Medicaid funds and acts as a clearinghouse for authorized reimbursement payments under those government programs among other health and medical programs.


Lastly, and perhaps most important in this particular trifecta, Amazon has the largest direct-to-consumer marketplace for buyers and sellers to meet on the Internet. They support everybody who wants to sell items to anybody who wants to buy items, and they also do this for a wide variety of service categories beyond the traditional physical products. So how will these three successful enterprises collaborate to fix healthcare? When we consider each of these companies’ unique strengths, the resulting solution is actually pretty straightforward. Amazon will create “AmazonHealth,” a relatively simple extension of their world-class, Internet-based shopping platform. The same way they already leverage location information for the services and shopper to deliver a variety of perishable goods and home services, they’ll match medical providers with patients. Healthcare facilities and medical practitioners, as “vendors,” will submit their available tests and procedures, along with their locations and their prices for services. The end result will be something that might look much like Screenshot 1. Geico will get licensed to provide catastrophic health insurance across all 50 states in the form of HSA-compliant high-deductible health plans (HDHPs) with the highest-level deductible and max out-of-pocket amounts allowed by the IRS for a given year - -

(currently $13,300). Because Geico will pay nothing until Geico is responsible for paying everything for the rest

Screenshot 1

of the plan year (that’s how HDHPs work when there’s no copay element confusing the issue), the plan will effectively allow the consumer/patient to choose as if all providers are “inJUNE 2018