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Subject: Billionaires start health insurance company rss

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Andre
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http://money.cnn.com/2018/01/30/news/companies/amazon-berksh...

A company as of yet unnamed, but interesting that Bezos indicates;

"the new company will be "free from profit-making incentives and constraints."

and;

"The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty," said Jeff Bezos, Amazon (AMZN) founder, CEO. "Hard as it might be, reducing healthcare's burden on the economy while improving outcomes for employees and their families would be worth the effort."

and;

But as of now the companies are concentrating on a product for their own employees and family members, not a product to offer to other companies.

And Buffet says;

"The ballooning costs of health care act as a hungry tapeworm on the American economy," said Buffett. "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."

Ambitious endeavor, it will be interesting to see how successful they are, at providing an efficient, cost effective system for their employees, initially. Perhaps it's a model tht can be carried to the general public, in the long run.



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I hope they succeed.
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Shawn Fox
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I think they are mostly doomed to failure, but it is good to see someone actually trying. Buffett has been talking about how healthcare costs in the USA are a major competitive disadvantage for employing workers in this country. Certainly long term it is a massive problem as it makes the cost of labor here in the US not competitive with labor elsewhere.
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sfox wrote:
I think they are mostly doomed to failure, but it is good to see someone actually trying. Buffett has been talking about how healthcare costs in the USA are a major competitive disadvantage for employing workers in this country. Certainly long term it is a massive problem as it makes the cost of labor here in the US not competitive with labor elsewhere.


Not a problem - we'll just slash corporate taxes and gut environmental and safety regulations until we're competitive with all those socialized healthcare fascists.

#MAGA
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They only did it so they can get their hands on their employees spare part s- err organs.
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Eric "Shippy McShipperson" Mowrer
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Since these are publicly traded companies, if the new insurance company does not drive down costs of health care FOR THE FOUNDING COMPANIES, it's over. Whether it's better for the employees of those companies, the economy, or the country is incidental to that. Which is also why they have no interest in making it available elsewhere. If it doesn't make money for them, it's done. If they try any money-losing strategy, the shareholders toss them out and it's done.

Nothing is more important than making money to a publicly traded company. And these guys only own anywhere from 10-35% of these companies, so they could certainly be tossed out.

Ask me if I'm a little cynical about publicly traded companies.
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The problem with this is that it will still be subject to private property considerations - i.e. if at some point it's politically convenient for these billionaires to use the company to impact the market, they will. They do not have a mandate to provide healthcare with minimal overhead - and, in a way, if they do so at their own loss it will politically discourage building an actual solution for healthcare that doesn't depend on trusting the goodwill of billionaires.

In the long run, charity replacing basic rights is only useful for those who want to deny basic rights.
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Wendell
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One observer joked:

(1) let low-profit-margin Amazon take over healthcare as they are taking over retail

(2) nationalize Amazon.
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Mac Mcleod
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Single payer health care has a record of lowering costs and better mortality results.

And it reduces cost of older employees so it may reduce age discrimination. Which would mean more employed older people paying taxes.
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or now you belong to us BODY AND SOUL ! MU WH HA HAHA !
 
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Ken
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ejmowrer wrote:
Since these are publicly traded companies, if the new insurance company does not drive down costs of health care FOR THE FOUNDING COMPANIES, it's over.


Most health insurance companies post profits in the 20-25% range. So just taking that out of the mix saves the companies money. Unless the new company is incompetent, that is. And given the people backing it, I suspect that won't be an issue.

Quote:
Nothing is more important than making money to a publicly traded company. And these guys only own anywhere from 10-35% of these companies, so they could certainly be tossed out.


I'd have to dig to confirm the number, but I don't believe Buffet has ever been below 35% of Berkshire Hathaway. Not sure about the others.

However, if these guys got together and decided to launch the company out of their own pockets, they could fund it at a really respectable level. If they tapped their network of interest individuals, even better.

I like the experiment, myself. If I have the German health care system right, mandated basic health coverage is insurance based, but the insurers can't turn a profit on that coverage.
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perfalbion wrote:
I like the experiment, myself. If I have the German health care system right, mandated basic health coverage is insurance based, but the insurers can't turn a profit on that coverage.

This is not a solution that is going to come close to solving the problems in the US healthcare system in general. If anything, it will just make them worse, further increasing the disparity between the winners and the losers. This is not going to help the average person at all, it will hurt them. Like most solutions proposed by corporations, it is designed to increase their profits, not to improve the lives of the average person.

At best, this will lead to increasing the profits of the three companies involved, allowing them to gain market share and reduce the market share of other companies, perhaps even pushing other companies into bankruptcy. So great for Amazon, bad for anyone who works for any company that competes with Amazon.
 
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Ken
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sfox wrote:
This is not a solution that is going to come close to solving the problems in the US healthcare system in general.


Of course not. But it's a start. If the company is successful, then there's both a market pressure and an example of how things could be different to point to. I mean, if your company could buy from a non-profit offering premiums 20-25% lower premiums due to the lack of a profit margin, you don't think that will create competitive pressures?

Quote:
At best, this will lead to increasing the profits of the three companies involved, allowing them to gain market share and reduce the market share of other companies, perhaps even pushing other companies into bankruptcy. So great for Amazon, bad for anyone who works for any company that competes with Amazon.


Lots of large companies already self-insure to manage health care costs more effectively. How is this any different from that from a profit perspective? The potential upside to this approach is that the company they create has the potential to offer policies on the wider market.

Is it going to solve all our issues? Hell, no. But I'll take good incremental steps towards that, particularly since I don't consider the ACA to be too much of a step forward.
 
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Shawn Fox
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perfalbion wrote:
Lots of large companies already self-insure to manage health care costs more effectively. How is this any different from that from a profit perspective? The potential upside to this approach is that the company they create has the potential to offer policies on the wider market.

It is no different than what other companies have already done, that is exactly the point. Why do you believe that Amazon is going to be able to self insure any cheaper than IBM, GM, or any other large company has? Unless I'm completely missing something here I really don't see how this changes anything at all. It is just more of the same and it is driven 100% by a corporation wanting to drive down their own costs rather than having any desire or interest to drive down costs or complexity across the entire healthcare market.

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I don't consider the ACA to be too much of a step forward.


The ACA is fine except that it didn't remove the tie between employment and what options you have for healthcare. The problem with the ACA is exactly the same as the problem with this approach by Amazon. The ACA did not force all health insurance companies to compete on the same market. A highly fractured system where every employer attempts to run a business (healthcare) that has nothing to do with their expertise isn't going to fix anything, it is going to make the problem worse.

As long as there is a direct tie between employment and what health insurance options you have the US health industry will continue to be a terrible solution. Force the companies to compete with each other on price, all in the same marketplace, and a free market solution might actually work. It probably wouldn't, but it would be better than what we have now.

The other solution is to just move to single payer. What will never work, however, is this huge mess of a system that we currently have and that this partnership is doing nothing at all to fix.
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Jorge Montero
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Instead of self insurance, I suspect they might go more in a direction of an HMO: Given US regulation, vertical integration is probably the best think high employers can do to save in healthcare costs.
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hibikir wrote:
Instead of self insurance, I suspect they might go more in a direction of an HMO: Given US regulation, vertical integration is probably the best think high employers can do to save in healthcare costs.


That's the only thing I could think of. I mean, sure, healthcare profits are too high, but also they are dealing with incredibly high costs from service providers and suppliers, owing to the lack of transparency in the markets. JUST being your own insurer isn't going to solve those problems.

Rather, if you set yourself up to control that pipe from start to finish (and Amazon, notably, may be in a position to control cost of supplies more tightly), IE., making health care effectively "single payer" from start to end, you theoretically have a lot of possibility to make it a LOT cheaper. Question is just whether they will be able to get enough medical suppliers and practitioners to participate. (Would help a lot if part of this effort was buying out an existing managed care group, like, say, Kaiser Permanente or something like that, and integrating that with the rest of their plan)
 
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sfox wrote:
Why do you believe that Amazon is going to be able to self insure any cheaper than IBM, GM, or any other large company has?


I don't. The difference is that the entire company they're forming is non-profit with the goal of selling their plans on the open market. {i]That[/i] is different.

Quote:
The ACA is fine except that it didn't remove the tie between employment and what options you have for healthcare.


And it doesn't controls costs. And it doesn't address issues with bankruptcy due to a medical issue. And it doesn't actually cover everyone. And it doesn't provide care that's really "affordable" when you factor in the high deductibles and large annual out-of-pocket maximums. And...

I think you get the point. The ACA was a combination of different half-measures that failed to actually do much of anything to improve the quality of care, reduce its costs, or provide universal coverage.

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The other solution is to just move to single payer. What will never work, however, is this huge mess of a system that we currently have and that this partnership is doing nothing at all to fix.


There are other alternatives. But we won't be doing those, either.
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AMK
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perfalbion wrote:
ejmowrer wrote:
Since these are publicly traded companies, if the new insurance company does not drive down costs of health care FOR THE FOUNDING COMPANIES, it's over.


Most health insurance companies post profits in the 20-25% range. So just taking that out of the mix saves the companies money. Unless the new company is incompetent, that is. And given the people backing it, I suspect that won't be an issue.


This is wildly false. Most health insurance companies make profits in the 2-4% range. This is significantly smaller than most other large companies like amazon, walmart, best buy, google, etc.

The ACA limited the loss ratio (Claims cost / premium ratio) to be 80% (for individual and SG) and 85% (for large group). This was for both ACA and non-ACA plans. That means that profit + Admin must be less than 15 or 20% depending on the product. Usually admin makes up 12-16% of that. The claim that their profits are strictly greater than 20% is completely false.
https://www.kff.org/health-reform/fact-sheet/explaining-heal...

Please point me to any companies financials that support your claim. Any company with profit margins above 15% or 20% would have to give an MLR refund to their policyholders bringing their profits back below the 15 or 20% threshold.

 
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perfalbion wrote:
Quote:
At best, this will lead to increasing the profits of the three companies involved, allowing them to gain market share and reduce the market share of other companies, perhaps even pushing other companies into bankruptcy. So great for Amazon, bad for anyone who works for any company that competes with Amazon.


Lots of large companies already self-insure to manage health care costs more effectively. How is this any different from that from a profit perspective? The potential upside to this approach is that the company they create has the potential to offer policies on the wider market.

Is it going to solve all our issues? Hell, no. But I'll take good incremental steps towards that, particularly since I don't consider the ACA to be too much of a step forward.


The difference between this and self-insurance is that it gives control of the administrative cost to the company. Self-Insured companies still need a third party administrative arrangement with a health insurer in order to get access to their claim adjudication systems, actuaries, underwriters, provider networks, etc. This costs somewhere between 10-15% of claim cost.

The bet that these billionaires are making is that they can operate leaner than the insurance company they currently have a TPA with. This is almost certainly true in the long run because their save the TPAs 2%-ish profits. However the start up cost of this is going to be enormous for them. Building a provider network alone from scratch is a huge feat. Doing it with no prior experience and having it be done correctly and efficiently will be damn close to a miracle.

I have no doubt this could be a good move for them 5 years down the road. Between now and then it will be very hard. Going from self-insurance back to insurance (even if they own their own insurance company) will mean they now have to comply with a number of regulations they previously didn't have to (such as many of the ERISA provisions). This could end up hurting them more than controlling their own admin expenses will help them.
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sfox wrote:
perfalbion wrote:
Lots of large companies already self-insure to manage health care costs more effectively. How is this any different from that from a profit perspective? The potential upside to this approach is that the company they create has the potential to offer policies on the wider market.

It is no different than what other companies have already done, that is exactly the point. Why do you believe that Amazon is going to be able to self insure any cheaper than IBM, GM, or any other large company has? Unless I'm completely missing something here I really don't see how this changes anything at all.


Were I to hazard a guess, I’d say that Amazon, with its AmazonBasics line of products, has determined that there are whole categories of products with inflated profit margins unjustified by unpredictable demand or long tail considerations. Medical supplies and devices, usually purchased by people who don’t pay for them, seem like a natural target. So they likely won’t just be self-insuring, they’ll also be making the stuff insurance usually buys (and selling it to themselves cheaply).
 
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perfalbion wrote:
sfox wrote:
Why do you believe that Amazon is going to be able to self insure any cheaper than IBM, GM, or any other large company has?


I don't. The difference is that the entire company they're forming is non-profit with the goal of selling their plans on the open market. {i]That[/i] is different.


Technically no insurance company is really non-profit. Insurance isn't like normal business where the expense is known ahead of time and you can set the price directly at the expense.

For-profit insurance companies will have between 2-4% profit. If actual expenses exceed projected expenses, their profits decreases.

Not-for-profit insurance companies can't target 0% profit because if actual expenses exceeded projected expenses they would go out of business. Instead they have 2-4% "margin". As in "Margin of error". this functions identically to profit would in a for-profit company

In terms of operating margin and admin, there isn't a material difference between for-profit and non-for-profit companies.
 
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Keele047 wrote:
This is wildly false. Most health insurance companies make profits in the 2-4% range. This is significantly smaller than most other large companies like amazon, walmart, best buy, google, etc.


You might be discussing net profits, which tend to run in the 5-7% range. Gross profits are much higher.

Quote:
Please point me to any companies financials that support your claim. Any company with profit margins above 15% or 20% would have to give an MLR refund to their policyholders bringing their profits back below the 15 or 20% threshold.


United Health's gross profits are well above 20% quarterly for a very long time - https://ycharts.com/companies/UNH/gross_profit_margin.
 
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Keele047 wrote:
Most health insurance companies make profits in the 2-4% range.

This is true, but misleading. Profit is not a particularly useful measure for a health insurance company. By definition insurance companies return most of the money they take in to the people who paid it. Most of their revenue is just passing through. A better measure is Return on Invested Capital, which is basically how much it costs to start and run a health insurance company vs how much profit it brings. This number, about 16%, is much higher than most other industries.

Here is a slightly older Economist article that explains it.
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BTW - Walmart operates on margins that insurance companies are glad they don't touch. I went to double-check and WalMart has a great quarter somewhere in the 2.5-3.5% net profit range. Health insurers run in around double that.
 
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perfalbion wrote:
Keele047 wrote:
This is wildly false. Most health insurance companies make profits in the 2-4% range. This is significantly smaller than most other large companies like amazon, walmart, best buy, google, etc.


You might be discussing net profits, which tend to run in the 5-7% range. Gross profits are much higher.

Quote:
Please point me to any companies financials that support your claim. Any company with profit margins above 15% or 20% would have to give an MLR refund to their policyholders bringing their profits back below the 15 or 20% threshold.


United Health's gross profits are well above 20% quarterly for a very long time - https://ycharts.com/companies/UNH/gross_profit_margin.


You picked a bad example. UHC owns Optum and Catamaran, which isn't an insurance company. Optum specialized is actuarial and healthcare consulting, product development, and most importantly they are a pharmacy benefit manager (PBM). Since they are not an insurance company they are not capped at 15-20% total profit. Their operating margin has ranged from 3% to 21% depending on department and year. See page 39 of their annual financial report:
http://www.unitedhealthgroup.com/~/media/5D60EEEE258F4D2FA4B...

The operating margin for their healthcare business is between 3.7% an 4.3%, which is the high end of my range. This can be found in the same report. This is net operating margin. Their gross operating margin is around 7%.

If you look at page
 
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