In the midst of the political drama and chaos during the first week of January, it would have been easy to miss the headline announcing the disbandment of Haven Healthcare. Haven was a joint effort by Amazon, Berkshire Hathaway, and JP Morgan Chase to launch new, disruptive health care solutions to promote access, simplicity, and affordability. It is likely that most people who took notice – that is, those in the health policy world – were disappointed but not surprised. The collapse of Haven is the newest tombstone in a graveyard of attempts from employers to reshape health care. Jeff Bezos, Jamie Dimon, and Warren Buffet are among the world’s most powerful executives, wielding unparalleled insight into the inner workings of complex and emerging markets. Why couldn’t they translate this acumen to health care?
We’ve Seen This Movie Before
Haven was not the first employer-initiated effort to reform health care, nor was it the first to fail. Over the past 30 years dozens of employer-led coalitions have attempted to use the volume of their combined insured employees and their dependent family members to lower prices and improve quality. Catalyst for Payment Reform (CPR) has conducted a rigorous examination into these types of employer-led efforts; only a scant few have withstood the test of time.
There are two factors behind employers’ recurrent failures to forge their own health care solutions. First, their success hinges on market conditions often beyond their control. Second, employers fall victim to artificial hazards they create for themselves, which stem from low tolerance for risk, unwillingness to confront trade-offs, and difficulty cooperating with each other.
Market Conditions and Potential Hazards
Provider competition is the first condition necessary for an employer-initiated health care solution. The second market condition is the right composition of employer partners who can aggregate enough volume to capture providers’ attention at scale. Employers need significant member volume in a local market, generally must be self-insured, and have leadership that is directly involved and committed to the initiative’s success. These conditions are rare: provider consolidation has eroded competition in 75 percent of hospital markets and the employees of the largest self-insured employer are scattered across the country.
Market conditions are structural and outside of employers’ control, but employer initiatives often stumble because of self-made hazards that arise from employers’ own failures of logic and tunnel vision. These include: “sui generis syndrome” (i.e., we’re unique, your employees’ needs are not our employees’ needs), “misaligned incentive syndrome” (i.e., CEO wants lower costs, but if we eliminate the expensive health care chain from the network, employees will flee the company!), and the “catch-22 of jumbo employers” (i.e., believing that the largest companies can get a better deal on their own than by partnering with other employers). These traps are just as likely as the lack of the right market conditions to doom employers’ aggregated purchasing attempts.
Haven’s Downfall Was Not Inevitable
To be fair, Haven’s goals were ambitious and it faced significant headwinds. Despite the combined volume of more than 1 million employees, it lacked sufficient volume in any single locale. From what we know so far, it seems like the hazards took the lead in Haven’s disbandment. The three companies couldn’t agree on a design that was the “right fit” for all their employees; they were unwilling to make hard choices or trade-offs for fear of member abrasion; and each ultimately believed they could do better on their own.
If employers want to affect change in health care, leadership must take charge of the benefits strategy and be willing to trade off unlimited choice and individualism. To be clear, there are a few examples in the market where employer-led purchasing coalitions have achieved and sustained success. CPR’s pending research findings will offer blueprints and roadmaps for employers who want to learn from these lessons and build high-value aggregation models. But it’s equally important for employers to recognize that vendors and health plans may offer accessible off-the-shelf health care products, avoiding the need to build something from scratch.
If employers want affordable health care, they also may need to change the game from the outside by working with state and federal regulators to combat the anticompetitive forces that have made health care markets so untenable. While this is new territory for employers, it may arguably prove the best way to create more fertile soil.
