The announcement by Amazon's Jeff Bezos, Berkshire Hathaway's Warren Buffett and JPMorgan Chase's Jamie Dimon, about a new health care company they were forming to address rising health care costs, enraged some health insurance companies. Some of these insurers were clients of JPMorgan Chase so Dimon assured them that only employees of the three companies would benefit. But Dimon recently admitted feeling annoyed by the response of the health care companies. He expected "a lot of these people we already do business with to call us up and say, ‘What can we do to help?" He expected a partnership.

So far the public response from big health insurance company CEOs has been diplomatic. Cigna CEO, David Cordani, stated in multiple interviews with the financial press that he sees the venture as "an opportunity." Aetna's CEO, Mark Bertolini, also to the financial press, said, “There is an unmet consumer need in health care." And UnitedHealthcare CEO, David Wichmann, said, "We invite innovation in health care." But Wichmann also said, "Our goal is to help people and make the health system work better for everyone. If Amazon can contribute to that, they should bring it." This refreshingly honest statement from Wichmann and his singling out of Amazon, implies that at least one big insurer considers the new company to be a competitor. But it is the sentiment expressed by outgoing CareFirst BCBS CEO, Chet Burrell, when he said, "What exactly are they going to do differently?" that is mostly likely what the big insurers are all thinking.

With Friends Like These

How long did health insurers think they could hand-deliver products that cut costs by shifting it to employers and their employees? Large employers were early adopters of skin-in-the game cost-cutting strategies like PPO and HDHP plans and know the limits of these schemes. Now, these employers want to see lower health care prices, which means health care insurers have to step up their game. To lower health care prices for their employer groups, insurance companies have to get greater price discounts from hospitals, doctors and pharmacy benefit managers, not just focus on employee behavior.

As health care prices continue to rise, hospital and doctor billing practices are under the microscope. Accusations of insurer-hospital price collusion are major news stories. Collusion involves insurers and hospitals and/or doctors agreeing to charge higher rates for medical care services that are then "negotiated down" by the health insurance company. And there is some proof that this type of collusion occurs.

NPR recently reported on an individual enrolled in a small group health plan where the insurer agreed to pay a rate that was multiples of the rate paid by Medicare and other private insurers. Neither the hospital nor the insurer would explain how they came to charge and agree to such a high rate for the service. It's standard practice for health insurers not to disclose the rates they negotiate to pay to hospitals and doctors; insurers consider this information to be proprietary. However, the lack of transparency surrounding health care price discounts can make an insurer look more like an accomplice with providers than a partner with employers.

Frenemies or Birds of A Feather

Many people think that health insurance should not be tied to employment. The huge tax advantages employers receive, the ability to pass the cost increases to workers, and the convenient justification for low wage increases, is a big problem. Despite the appointment Dr. Atul Gawande, a known public health care system proponent, to serve as president of the new venture, nothing in the announcement about the Bezos, Buffett and Dimon project suggests these three super CEOs want to eliminate the employment-based health insurance system. For now, employers and health insurers are partners with mutual benefits.

Tags: Amazon, Jeff Bezos, Berkshire Hathaway, Warren Buffett, JPMorgan Chase, Jamie Dimon, health care