Hospital Stocks Up, Insurance Stock Prices Drop After Amazon-Berkshire Hathaway-JPMorgan Announcement

Following news Tuesday morning that Amazon, Berkshire Hathaway and JPMorgan Chase will partner to create an independent healthcare company, stocks for hospitals enjoyed a boost while insurance stocks took a dive.

Hospital Corporation of America (HCP) enjoyed an eight percent boost Tuesday, while hospitals company LifePoint Health saw a nearly $2 increase to its stock following the announcement Tuesday.

Insurers did not fare as well in the wake of the news. UnitedHealth Group dropped more than $10 in early hours trading Tuesday. Health insurance provider Anthem dropped $15, losing more than five percent of its value, while Aetna also experienced about a three percent drop.

As for the stocks of the companies involved in the partnership, Amazon has been up as much as $12 from its previous close, Berkshire Hathaway has remained mostly unchanged and JPMorgan Chase experienced a slight drop.

"It is great to see our country's best business minds turning their attention to healthcare. More than 70 percent of healthcare costs are due to preventable chronic disease, which means that preventive health care services can reduce expenses by more than $1 trillion," Al Babbington, CEO of PrescribeWellness, told International Business Times. "Among other things, we need to break down the legislative and political barriers that prevent local pharmacies from going 'beyond the fill' to provide these services."

The reactions to the reported team up between Amazon, Berkshire Hathaway and JPMorgan Chase amount to purely speculation at this point, as details about how the new insurance company will function are sparse.

All that is known thus far is the joint venture is expected to try to leverage the size of the three companies to create a more transparent, affordable and easy to understand option for health insurance.

“Our people want transparency, knowledge and control when it comes to managing their healthcare,” Jamie Dimon, Chairman and CEO of JPMorgan Chase, said in a statement . “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he added.

However, there is a massive amount of potential for such a company. It is expected the major firms will attempt to contain the costs of the employer-sponsored health insurance market, which serves the majority of Americans with health insurance coverage.

Also playing a factor in the market’s reaction is the significant size of the companies involved in the three-way partnership. Amazon reportedly employs about 541,900 people globally. Berkshire Hathaway employs about 367,000 and JPMorgan Chase has more than 240,000 employees.

Insuring all of those employees adds up for companies. According to a press release issued last week, JPMorgan Chase said it spent more than $1.25 billion on medical benefits paid out for its employees and family members covered by the employer sponsored plans.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable,” Warren Buffett, Berkshire Hathaway chairman said in a statement .

In a statement, Amazon founder and CEO Jeff Bezos added, “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”