What Amazon, Berkshire Hathaway, JP Morgan tell us about the US healthcare system

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Three of the United States’ largest companies, Amazon, Berkshire Hathaway, and JP Morgan, are teaming up to address rising healthcare costs. In addition to reducing the cost burden to corporations, the three companies are motivated to lower healthcare costs borne by employees.

With a promise of “simplified, high-quality, and transparent healthcare,” the partnership could displace healthcare industry middlemen, including health insurers, pharmacies, and benefits managers.

The ambitious plan will likely not materialize anytime soon. For now it signifies that healthcare costs aren’t an issue simply for the uninsured, but for those who receive coverage through their jobs.

The U.S. healthcare system depends on employers. According to the 2016 U.S. Census, 56 percent of Americans receive employer-based coverage. 

But even when insurance is obtained through an employer, the employee pays for a portion of the cost. This amount increases each year.

In 2017, employees of large companies paid for 19 percent of their annual individual premiums, and 31 percent for family coverage, according to Kaiser Family Foundation, a health care think tank. That works out to roughly $1,600 and $5,700 per employee, respectively.

Only a handful of companies completely pay for health benefits. Fortune listed 11 corporations that offer these generous packages, presumably as a way to retain talent.

Amazon, Berkshire Hathaway, and JP Morgan are wealthy enough to offer more cost-sharing for employees than smaller firms. Full-time Amazon employees pay roughly $63 per individual and $331 for a family in monthly contributions for a plan that comes with a low deductible.

Job satisfaction in the United States is tied to the insurance workers receive. Only 5 percent of employees who are unsatisfied with their health benefits remain satisfied with their jobs, according to a study from Aflac. Sixty-eight percent of Americans who are satisfied with the health benefits they receive are also satisfied with their jobs.

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Obamacare ‘exchanges’

The roughly 44 percent of Americans without employer-based coverage occupy a more complicated space of the U.S. healthcare system, especially the 16 percent ineligible for government-paid coverage. These individuals must pay for their insurance through the individual market.

These Americans typically buy insurance through “exchanges,” markets established under the Affordable Care Act (Obamacare) that are designed to resemble price aggregation services such as Kayak or Priceline. Some continue to purchase plans directly from insurance companies, which, using the same analogy, would be the equivalent of purchasing a ticket directly from an airline. Few people take this route because individuals cannot receive federal subsidies off the exchanges (Slate).

The cheapest plan for an individual earning $50,000 a year in Seattle, where Amazon is headquartered, costs $234 a month through healthcare exchanges. That’s nearly four times the monthly premium that Amazon employees must bear. And this cost is only for the premium itself – it doesn’t include some costs that come with actually getting medical treatment.

With this near-bottom level of coverage, known as a Bronze plan, insurance companies don’t begin to pay for medical costs until they’ve surpassed a deductible of $7,150. This is more than four times the threshold an Amazon employee pays.

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Not every company offers coverage offered by massive corporations, such as Amazon or JP Morgan. In limited cases, the Obamacare exchanges offer cheaper and somewhat comparable plans. CNN profiled a woman in 2014 who was paying more than $300 a month for her employer-based insurance – that was more than what was available in the individual market.

These cases are exceedingly rare, especially after the Trump administration cut federal subsidies that lowered deductibles in the exchanges.

Read more from WikiTribune about how Obamacare has changed under Trump.

Healthcare insurance is one of the greatest benefits of working for a large company in the United States. Large companies such as Amazon are able to leverage the buying power of large work forces to purchase (and then provide) generous healthcare packages. Expenses to treat one ailing worker are offset by numerous healthy employees in the same pool. 

The difference in coverage offered by large and small companies is perhaps most stark when it comes to deductibles (Kaiser Family Foundation). Employees of firms with fewer than 200 hired workers had an average deductible of $2,120, compared to $1,276 paid by those at larger corporations. Lower deductibles are the result of a larger number of workers chipping into the pot.

(Help WikiTribune report on the cost of healthcare through EDIT STORY or start your own story).

Lowering costs of job-based coverage

Outside of hiring more young and healthy workers, there’s no obvious solution to lowering employer-based coverage. Amazon, Berkshire Hathaway, and JP Morgan have not yet articulated their new approach.

Like any idea to fix the U.S. healthcare system, a major challenge will be covering workers who require extensive medical treatment, which includes those with “pre-existing conditions.” Cancer treatment for the average patient, for example, costs more than $100,000 a year, according to the American Society of Clinical Oncology. Insurance companies may want to avoid the risk of covering individuals with a history of cancer. 

Before the Affordable Care Act, insurance companies operating in the individual market could base rates on each consumer’s personal health, and deny coverage altogether for people with pre-existing conditions. This is no longer the case since the Obama-era law passed in 2010.

Employer-based plans, always cover newly hired employees, regardless of medical history. However, the high costs that come with having a hospitalized employee on the payroll are enough for some employers to flout the law.

Amazon, Berkshire Hathaway, and JP Morgan Chase are attempting to reduce healthcare costs and possibly disrupt the health insurance industry. Help WikiTribune cover this topic by contributing through EDIT STORY, or offer suggestions via TALK.

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