Haven, the venture to disrupt U.S. healthcare formed by Amazon. com, Berkshire Hathaway and JPMorgan Chase is disbanding less than three years after its launch. When it was formed, the three companies had a lofty goal: to “provide U.S. employees and their families with simplified, high-quality and transparent health care at a reasonable cost.”
Why did it fail? There are three factors:
Insufficient Market Power: Despite their 1.2 million employees, Haven’s three constituent companies still didn’t have enough market power to wring lower prices from providers. The main reason is the consolidation of health systems that has occurred in the United States in the past 10 to 15 years. Unless an employer group has a big chunk of the local market (more than 50% of eligible employees), providers don’t budge on their prices. Since the employees of the three companies in Haven were scattered all over the country, they couldn’t dominate even one market.
Perverse Incentives: We still live in a world where the larger portion of hospitals’ beds that are utilized, the more they get paid. Consequently, the U.S. health system is focused on treating illness rather than preventing it. Unless we replace volume-based, fee-for-service reimbursement with a capitation model that pays providers a fixed amount per member per month and is tied to health outcomes, hospital leaders will still have no incentive to keep people out of hospitals unless their health system also is a health insurer — a path a handful of organizations, including Kaiser Permanente and Intermountain, have taken.
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Poor Timing: The COVID-19 pandemic has changed everyone’s focus. Providers have had to turn all energy to managing the crisis and have taken a huge financial hit because of the postponement or cancellation of elective and non-urgent procedures. They are considering no new ideas until the crisis abates, and even then they’re unlikely to take on new risks.
What can be done?
The incoming Biden administration should focus on expanding the Affordable Care Act — specifically Medicare Advantage plans — to make affordable insurance coverage available to people younger than 65. With the creation of the so-called public option, those individuals could obtain insurance on their own, and employers could offer Medicare Advantage plans at government-established rates. Thirty-five percent of Medicare enrollees choose these plans today and are highly satisfied with them.
Employers could offer competitive Medicare Advantage plans to their employees either through a public option or a tailored private exchange. They would pay 20% of employee salary into a pool to participate — a cost that would be lower than the 25% to 35% of employee salaries that they now pay for commercial insurance. This coverage could also be offered as an automatic enrollment plan for the poor, and Medicaid enrollees would be offered the same competitive options. If large corporations want to self-insure, they would still be able to do so, but at a substantially higher cost.
In this scenario, there is no mandate, only choice. It’s the one way to bring employers, insurers, providers and the government to the table in a bipartisan fashion. It just might work — nothing else has.
