This week, Amazon, Berkshire Hathaway, and JPMorgan Chase announced a partnership to change U.S. health care. The implications beyond health care are immense.


By Brad Berens

As if we needed another sign that U.S. health care is itself far from healthy, this week Amazon, Berkshire Hathaway, and JPMorgan Chase announced that they were partnering to improve health care — making the experience better for the companies’ 1.2 million employees and also reducing costs.

The shape of this new initiative is still rather fuzzy, but the ambitions are clear.

To boil things down to an absurd degree: Berkshire Hathaway owns dozens of companies that make stuff; Amazon sells and distributes stuff; JPMorgan Chase finances companies that make and sell stuff, so it’s a partnership with obvious synergies and not-so-obvious other benefits.

In this column, I want to unpack which company brings what to the table, what each company gets from this new partnership, and what it all means both for how we’ll buy and use health care, and also for how the initiative might affect the rest of our lives.

Let’s start with reducing costs. The New York Times coverage tells us that Amazon has roughly 540,000 employees (with more coming as the company launches its second headquarters), Berkshire Hathaway has roughly 370,000 employees across its more than 60 companies, and JPMorgan Chase has 250,000 employees.

Then, in the Washington Post coverage, we learn that in 2017 JPMorgan Chase spent a gulp-provoking $1.25 billion dollars on medical benefits for 300,000 employees and their dependents, or roughly $4,200 per person per year.

That note about dependents is important: it’s not just the 1.2 million employees for which a new kind of healthcare will reduce costs: it’s employees and their families. Chase covered 20 percent more people than its number of employees, so if we conservatively apply that percentage to all three companies, then we’re looking at 1.5 million people who could be members of this new health care entity. That sounds like a lot, but it’s useful to compare this number to UnitedHealth Group — the world’s largest health insurance company — which served 115 million people in the U.S. in 2016.

If this new health care company could reduce costs per individual by $1,000 each year it adds up to $1.5 billion. That’s a considerable sum for mere humans but insignificant for companies as large as Amazon ($136 billion in 2016 revenue), Berkshire Hathaway ($224 billion in 2016 revenue), and JPMorgan Chase ($96 billion in 2016 revenue).

With Amazon, Berkshire Hathaway, and JPMorgan Chase entering health care, the lesson is that tomorrow’s rivals won’t show up from obvious directions. Moreover, it will become difficult for people to make head-to-head comparisons among offerings. Different companies will package and integrate a wide variety of services in order to dig moats around their customers and prevent them from going elsewhere through a combination of incentives and deterrents.


There’s a bigger story here, and a hint about that story is visible in two related tidbits from the press release. First, the release said that this new joint venture would be “free from profit-making incentives and constraints.” Second, JPMorgan Chase Chair and CEO Jamie Dimon said, “our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.”

Freedom from having to turn a profit is not the same thing as freedom from fiscal responsibility: it just means that the initiative can play a long game without having to worry about quarterly growth numbers.

This perspective will be familiar to anybody who watches Amazon and Berkshire Hathaway. Amazon founder and CEO Jeff Bezos has famously said that the company is willing to be misunderstood by its investors for long periods of time, and Berkshire Hathaway CEO Warren Buffett has been quoted (perhaps apocryphally) as saying that his favorite holding period is “forever.”

More importantly, while the health care initiative won’t have to turn a profit itself, that does not mean that it won’t drive profit elsewhere. Losses in one part of a business that drive greater profit elsewhere is a key Amazon strategy: it sold early Kindles under cost in order to drive book sales, and its Prime service takes a loss on two-day shipping because Prime members spend nearly twice as much annually on Amazon as non-members.

Dimon’s remark about benefitting “all Americans” also strongly suggests that the health care initiative will only start with the 1.2 million employees of the three companies, get the bugs out of the new system, and then roll it out to the 325 million U.S. population.

Let’s dig into the three companies’ potential roles and benefits in this new initiative:

JPMorgan Chase

What it brings: The bank brings immense financing capacity, which will be important if the health care initiative spends several years getting started and with no immediate profit in site.

What it gets: In addition to lower health care costs for its employees, JPMorgan Chase also brings access to its customers. Not only is this an immense population (60 million households in 2016) of potential subscribers, but integrating health care with financial services would also serve as a differentiator for the bank, increasing customer loyalty and reducing churn.

As we will show in our forthcoming Future of Money and Banking report, Americans increasingly view their banks as interchangeable commodities like toothpaste or gas stations rather than as trusted financial partners and advisors, so a unique selling proposition for JPMorgan Chase is a powerful incentive.

Berkshire Hathaway

What it brings: With over 60 wholly-owned companies and more than 40 other large investments, what Berkshire Hathaway brings to the health care initiative is diversity of employees and situations. From Dairy Queen and See’s Candies to NetJets, newspapers, motorcycles, manufacturing, and much more, if this new initiative can provide health care for the full range of Berkshire Hathaway employees, then it can do so for anyone.

What it gets: As Ben Thompson observed, while Berkshire Hathaway isn’t in the health insurance business it is in the health re-insurance business, owning both Gen Re and NRG. Re-insurance helps health insurance companies to stay in business after they have to pay out big claims.

If the new health care company can reduce health care costs and improve outcomes, then that will decrease the number of claims on the re-insurance entities and make them more profitable. Exploring alternate forms of insurance in health might also benefit Berkshire Hathaway’s GEICO subsidiary in auto insurance.

In addition, Berkshire Hathaway has substantial investments in Bank of America and Wells Fargo but no position with JPMorgan Chase, so this partnership extends Berkshire Hathaway’s influence in the U.S. financial sector.


What it brings: Amazon brings immense logistical prowess, fanatical customer focus and an ambition to touch every transaction in the U.S. economy. The company also has rich experience in creating platforms for its own use that it later opens up to other businesses, with Amazon Web Services (AWS) as the most prominent example. First created to handle increases in holiday-time orders, AWS is a Software as a Service (SaaS) platform that quickly became the most profitable part of Amazon. Expect no less with the new health care company.

What it gets is a possibly decisive advantage in the ecosystem war that pits Amazon’s Alexa digital assistant against Apple’s Siri, and Google’s Assistant.

Amazon has already shown that it wants Alexa to power smart homes with the Echo devices and also to integrate with cars. Alexa will also soon work with Amazon’s Whole Foods subsidiary to keep the fridge and pantry full.

Amazon has already started edging into the pharmacy business (one reason why CVS is buying Aetna for $69 billion), so integrating a family’s health care along with the food they eat, the medicines the take, the videos they watch and the rest of the things they buy is a no-brainer.

While I argued that for JPMorgan Chase the new health care initiative will differentiate the bank and reduce churn, for Amazon the stakes are bigger because the switching costs are so much higher when Amazon has successfully drawn users into its integrated ecosystem of goods, food, entertainment health care, and more.

Like the Hotel California, eventually we’ll be able to check into Amazon’s world but never leave.

The big takeaway

A quarter century ago the idea of AT&T (a telco) and Comcast (a cable TV company) as arch rivals would have seemed ridiculous. But then Comcast started to offer internet and telephone services in an integrated triple play, whereupon AT&T countered with its own triple play of telephone, internet and entertainment (with both U-Verse and DirecTV).

With Amazon, Berkshire Hathaway, and JPMorgan Chase entering health care, the lesson is that tomorrow’s rivals won’t show up from obvious directions.

Moreover, it will become difficult for people to make head-to-head comparisons among offerings. Different companies will package and integrate a wide variety of services in order to dig moats around their customers and prevent them from going elsewhere through a combination of incentives and deterrents.

Today, when you meet new people they might define themselves by where they live, what they do professionally, where they went to school, what their hobbies are, what music they listen to, what sports they watch, or how they lean politically.

In the near future, new acquaintances might define themselves more simply by what ecosystem they live inside: Amazon, Apple, or Google.


Brad Berens is the Center’s Chief Strategy Officer.




See all columns from the Center.

February 1, 2018