
Amazon Health - joeyespo
https://stratechery.com/2018/amazon-health/
======
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.

~~~
sjg007
What is the mechanism? I don't think it is realistic to assume that health
care can run on employee premiums alone. In fact we know it can't b/c
individual premiums are outrageous.

So I don't think your premise is realistic. These billion dollar companies
self insure and Buffet's companies offer reinsurance for the most costly
million dollar claims. Even though they self insure, they will pay a company
like Cigna a percentage to manage the claims and get access to their
negotiated prices. All I can think of is that this is a play to get Cigna and
other insurance companies to lower their management fees.

Companies have to offer insurance and pay it because no one will work for them
otherwise. And companies of a certain size have to offer health care by law so
it's not going away.

~~~
yarg
Premiums are as high as they are because health care is run as a for profit
industry - health care in America is orders of magnitude more expensive than
in other countries.

If you remove the profit motive prices will drop down towards something more
reasonable, in this situation it's not unreasonable to expect that the system
could be maintained with employee premiums.

The cost of initialisation of services will be huge however, it will be
interesting to see how they spread it out - they may bear the costs for now,
and seek to recoup them providing excess capacity for service to other
companies.

~~~
aaavl2821
The traditional economic view is that private, profit seeking enterprises
actually offer better prices to consumers because of competition, while
monopoly firms charge higher prices bc they have more market power, and
government run enterprises yield lower quality products because they don't
have incentive to compete on quality. India has a very competitive healthcare
system that is largely out of pocket and while they aren't perfect, they do
pretty well considering the size of the country and their per capita gdp. On
the other hand, though it is common to praise "single payer" European systems,
these systems are not without fault. France is actually trying to learn about
innovative American models of care because their system won't be able to
afford caring for an aging population

The US system is more expensive due to weird interactions of profit seeking
and regulations, and idiosyncratic local systems, all exacerbated by lobbying
and political issues (like hospitals being major employers in most counties).
Arguably another part of the US healthcare cost premium is that the US invests
the most in innovation

It's simply not true either that healthcare is cheaper by orders of magnitude
than other countries. Using health care expense as % of GDP as a metric of
comparison, the US is at 17-18% while France / U.K. / Germany are around
10-12%

Attributing the high cost of healthcare in the US is a bit facile and
simplistic

~~~
onemore2
It's relatively easy to keep the costs low in Europe: you pay in queues and
cheap health care instead of money. That doesn't mean good-or-bad
automatically. E.g. giving birth by C-section is a rare event in Europe but
it's very common in the US, making the "born" event very expensive on average
in the US. You usually get over-testing in the US and under-testing in Europe.

If you have a suspicious mole, or a woman reports pain in the uterus, in
Europe you might wait one or two years before a doctor sees you. And then you
might get just an "everything looks fine" or a mild painkiller, and start
again to look for another specialists or just go to the private health. It's
known, but somewhat silenced, that a significant number of heart/liver/kidney
patients just die before they get to see the specialist because the system is
overloaded. This payment-by-queue drives costs down, but is obviously a bad
thing.

It's also known that the public health in Europe just don't cover some
treatments, depending on the country. Or they are so overloaded that they just
don't work. Think about that: you pay for a supposedly full health insurance,
but if you're so unlucky to catch a Hepatitis C that it's not covered because
the treatment is expensive, you just wait for your death. Costs are lowered,
for sure.

Another side effect is that the top notch specialists in Europe earns about
the same money as an average or a bad doctor working for the public health.
This causes some of the said top notch to go to greener pastures: the US. It's
very typical that the (rich) Europeans go to the US to receive cancer
treatments. Thus the US costs are driven up and the Europe costs down.

~~~
bonzini
This is complete bullshit. In many European countries you get screenings for
most common tumors (bowel, for women uterus and breast) for free depending on
your age. Cancer treatment and chronic disease treatment is top notch and you
get it for free (you pay it with taxes), like everything else. There is no
such thing as "not being covered because treatment is expensive"\---I had to
reread that sentence twice because I thought you were talking about the US.

Life expectancy is higher in most of Europe than in the US, which would be
pretty hard to achieve if people died because of "death panels" and waiting
lists to see a specialist. Plus prevention is actually a thing.

Elective surgery has a waiting list that can be weeks or months, but this
doesn't translate to everything else. If it takes months to get an NMR,
probably it was the patient that insisted to get a useless one. If your GP
marks an exam as urgent you can get it within a few days.

~~~
refurb
_There is no such thing as "not being covered because treatment is expensive"_

There most certainly is. Look at what the UK's cancer fund is going through.
It's not unusual for NICE to say "we're not paying for that". For people with
generous insurance in the US it's much more typical for the insurance company
to roll over and pay for the latest and greatest due to public pressure.

~~~
bonzini
You are confusing treatment that is expensive with treatment that is not cost-
effective. Also, the parent message was not talking about cancer but hepatitis
C.

~~~
onemore2
There you go, in spanish:

[https://politica.elpais.com/politica/2017/02/22/actualidad/1...](https://politica.elpais.com/politica/2017/02/22/actualidad/1487769379_464928.html)

People died because the treatment was delayed for budget causes.

------
discodave
The not for profit part and the fact that this entity won't be owned by any of
the companies outright provides an interesting path to a single-payer system.

1\. Amazon, Berksire, JP Morgan and others create a large "payer" of
healthcare.

2\. There are no shareholders or other parties interested in making a profit
off of this payer because it is a cost center for the big (or small) companies
using it.

3\. Wait for the current iteration of the Republican party to lose influence
and single-payer to gain more traction politically.

4\. When politicians are looking for a way to create a single-payer system,
Amazon and friends offer to hand over their large payer to join Medicare,
Medicaid and VA systems to form one large government payer, effectively
nationalizing the healthcare for Amazon and co.

~~~
maxerickson
Many existing large insurers are non profits. With millions of members.

BCBS Michigan isn't the biggest one and has 4.3 million members.

------
aaavl2821
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 around improving healthcare cost / quality in the US
centers around technology, value based care, etc, the real economics, and
company's strategies, are largely driven by scale. this collaboration is a way
to immediately get a strong negotiating position in any discussion and to
provide a sizable test bed for various initiatives

~~~
adrianmonk
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
reduced economies of scale (compared to the insurance giants).

Based on some quick Google searches (queries like "amazon number of
employees"), it seems like the 3 together have a total of over 1 million
employees. That seems like a large enough risk pool to me.

~~~
dv_dt
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.

~~~
gowld
> other insurers seem to delight in creating mini single business pools

How so? How could they create a large pool? They can't force individuals to
choose their company.

> None of the large insurers also seem effective in price controlling via
> pooling drug purchases of their customers either

How do you know what your insurance is paying vs what individuals pay?

------
chatmasta
> insurance operates best at more scale, not less: first and foremost, the
> larger the pool, the more risk can be spread, as well as obvious efficiency
> gains in administration.

This may be true from the perspective of the insurance companies, but it does
not mean that premiums will be lower with a larger risk pool. The global risk
pool includes elderly and disabled people whose risk is paid for by healthy
people. Smaller risk pools of more homogenous populations can result in lower
overall premiums since they do not need to cover the highest risk individuals.
For example, a corporation is comprised of employees almost entirely under
retirement age, many age 20-30, and in relatively good health. This is why
companies are able to offer HMO plans, because by isolating their risk pool
they can more precisely model actuarial risk and thus save on premiums.

It’s not how large a risk pool is that determines premiums, but rather the
distribution of risk within that risk pool.

~~~
curun1r
Partially true, but with size comes negotiating power. It's not like health
care or prescriptions in this country have a fixed price. Insurers help set
that price and the more lives they represent, the more they can dictate to
providers and pharma what a procedure, prescription, etc will cost.

------
perseusprime11
I look at this as a first step towards understanding the complexity of
Healthcare in US with the goal to ultimately make health care more affordable
to them and their employees. This may end up being nothing which is why the
tone in the announcement was a bit on the “let’s see what happens”. This could
also be a cool move by Bezo to bolster up his image as lately the media is
hyper focused on tech companies.

------
thinkingkong
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.

~~~
Thriptic
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 employees.

Alternatively, they could pool funds and create an actual insurer.

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 provide solid coverage across the US.

~~~
mastax
> 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 provide solid
> coverage across the US.

It's possible to start small, no? One metropolitan area at a time, make deals
with local orgs, slowly transition local employees over to the new plan. The
75 employees working at the Iowa datacenter may stay on their current
insurance for a while, but I don't think that's a terribly difficult obstacle
for the idea.

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

------
mxuribe
Among the numerous neat statements, his last one - "There is no more patient
company than Amazon." \- is my favorite here.

------
akuji1993
I will not touch anything with a ten-foot-pole that J.P. Morgan Chase has
touched tbh.

------
Thinpad
Stop telling such outlandish tales, Stop turning minnows into whales

What a piece of bull c __* article.. Amazon tax amazon this amazon that and I
predicted that. Really you need to get back into your complete senses that
there are limits to what can be achieved by any organization. Its for articles
like this that paint a rosy picture and contribute to a bubble like stock
price. Can you also predict the collapse if that happens.

And to you all intelligent readers this is gonna take a long long time to
change the current system. For heavens sake don't fall for this guys crap.

------
lukateake
Am I shadowbanned?
[https://news.ycombinator.com/item?id=16273567](https://news.ycombinator.com/item?id=16273567)

~~~
B-Con
It would seem not. You got 4 points on the other one.

