The Amazon Experiment

Earlier this week, Amazon, Berkshire Hathaway and JP Morgan Chase announced a new venture into the healthcare arena.  They will be creating a new, independent company “free from profit-making incentives and constraints” to reduce healthcare costs for their employees.  Their goal of reducing healthcare costs is unsurprising.  Healthcare spending accounts for 18 percent of the U.S. economy and many companies are struggling to provide their employees with quality, affordable health insurance.  With hundreds of thousands of employees across the country, these companies certainly have a motive to reduce healthcare costs.

The details of the plan were few, but Amazon’s record of success coupled with Berkshire Hathaway and JP Morgan’s risk management and financial expertise, it is not hard to see how the move could be a game-changer. Amazon has a history of testing programs such as this on a smaller scale limited to employees before marketing them to the public. Their cloud services and Fulfillment By Amazon program both started out this way.

That they could create a company that will operate totally free from a profit motive can certainly cause one to be skeptical. The takeaway here is that companies are experimenting with their healthcare coverage and not just looking to government to solve their problems. The move encourages more companies to do the same.  The best ideas come from innovation and experimentation, Amazon is itself a prime example of that.  The free market will weed out what works and what does not. U.S. Supreme Court Justice Louis Brandeis described how “a state may, if its citizens choose, serve as a laboratory, and try novel social and economic experiments without risk to the rest of the country.”  In this case, Amazon is the state and its experiment will be useful for the rest of us whether it is a shining success or massive failure.

Free markets have historically been the source of the most efficient and cost-effective solutions to problems—regardless of the industry.  In the case of healthcare, old, outmoded ideas have been clung to with economic models that have never worked.  Experimentation in the private sector is a big step toward improvement.

In Depth: Health

There has never been a time when both federal and state jurisdictions have been more in control of American’s healthcare than it is today. Implementation of the Affordable Care Act is well in motion, and each state has considered how to address provisions of the federal law as it has…

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