Amazon, Berkshire Hathaway, and J.P. Morgan Chase are teaming up to form a new healthcare company aimed at reducing costs and improving satisfaction for their employees.
“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Berkshire’s legendary chief executive Warren Buffett said in a statement. “Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
The plans remain vague and, for now at least, are confined to improving healthcare for their own employees. But health care stocks sank on the news. Amazon’s entry into a sector is generally considered bad news for incumbent companies.
The new company will focus on “technological solutions” that will seek to provide simplified and transparent health care for the three companies’ U.S. employees and their families at lower costs.
The company will be “free from profit-making incentives and constraints,” according to the statement announcing the joint venture.
That could make it difficult to administer. The pursuit of profit is a powerful organizing principle, allowing companies to detect market signals about supply and demand that are otherwise invisible to more bureaucratic organizations.
“Bureaucratic management is the only alternative available where there is no profit and loss management,” economist Ludwig Von Mises wrote in his essay Profit and Loss.
The announcement suggests that U.S. companies are moving to address healthcare reform on their own in the wake of last year’s failure to enact government reform. It also suggests that employees will benefit from the additional profitability of corporate America due to tax cuts.