New Amazon Conglomeration Means Healthcare Players Must Adapt to Price Transparency or Face Extinction
This new collaboration between the three corporate giants is the newest expression of frustration on the part of American employers and businesses over the current healthcare system. Healthcare costs for companies generally rise faster than inflation, eating up larger chunks of business budgets every year.(1) But if this new company is successful, American businesses will have the opportunity to offer their employees unprecedented choice in how much they pay for healthcare. If this happens, current industry players (including insurance carriers, brokerage firms and bill collectors) which have benefited tremendously from skyrocketing prices in the current system(2) will have to start behaving more reasonably, acting for consumer interests rather than their own bottom lines. If they don't, certain segments of the industryâsuch as brokers and bill collection agenciesâwill become obsolete, says
To stay relevant, current industry players must adapt to the changing healthcare marketplace:
- For insurance carriers, this means advocating for legislative changes to current medical loss ratio rules that limit profits and lessen incentives for finding and paying for lower-cost healthcare services.
- For brokers, changes may mean accepting payment based on how much they can save American companies, rather than being paid a percentage of each premium.
- And if the new company runs like Amazon already does, there won't be any outstanding bills to collect, putting bill collection agencies out of business.
For some industry players, the writing is on the wall. Some insurance brokers have already adopted a payment model that pays them based on how much money they save companies rather than collecting a percentage of every premium. And bill collection agencies already in-house at hospitals are making the switch to other customer service occupations. But insurance carriers that don't adapt to offer price comparison shopping optionsâinstead of traditional "in-network" and "out-of-network" pricesâwill see customers flock to other companies where set costs for procedures and medications are readily available.
While it isn't clear exactly how the new company would operate, there's speculation that it might offer a solution similar to Amazon's consumer-goods-competitive-pricing model. Amazon already boasts the largest direct-to-consumer marketplace online today, utilizing sophisticated search technologies to match consumers with results based on price, delivery, and verified consumer ratings for products and vendors. In partnership with Berkshire Hathaway (whose portfolio company, Geico, provides billions in direct-to-consumer insurance) and JPMorgan Chase (already a depository for Medicare and Medicaid funds and a brokerage firm for reimbursement payments to healthcare facilities and providers), Amazon is poised to create an online healthcare shopping platform. Healthcare providers and facilities will act as vendors, submitting their prices for procedures, medications, tests and bundles, along with location information.
Galvin says that startups such as his can only move markets so far and so quicklyâwhile a small number of medical price transparency tools exist, the consortium between Amazon, Berkshire Hathaway and JPMorgan Chase will be able to affect market change much faster. Galvin, whose background is software engineering, has innovated solutions and sold several companies. He initially founded MyMedicalShopper after 13Â years of studying the employer-healthcare-cost issue to solve his own company's healthcare-expense pains. Until such time as the consortium is in the marketâand if it actually comes to marketâMyMedicalShopper already does what the consortium does, just on a smaller scale. Since it started doing business, it's been saving small to midsized employers more than 33% on health insurance premiums while improving employee benefits.
Galvin says, "Until we know what this new company will actually do, we can only speculate on the changes it may bring to the market. It may take a decade or more to see these changes. In the meantime, companies advocating for price transparency will continue to offer an invaluable service to employers and individual consumersâthe knowledge they need to comparison shop for the best healthcare options at the lowest price."
About MYMEDICALSHOPPER:
Sources:
- Amazon, Buffett, JPMorgan Tackle US Health Care 'Tapeworm'.
U.S. News and World Report . - Health Care 'Tapeworm' Faces New Threat.
Wall Street Journal .Â
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