A CEO’s Prescription For Health Care Reform

Jeff Bezos, Warren Buffett, and Jamie Dimon are taking an unusual step and teaming up to form an independent health care company for their U.S.-based employees. The alliance symbolizes how frustrated American businesses are with our health care system and the rapidly increasing cost of coverage and care. While it’s unclear which aspects of their employees’ existing health coverage the companies would overhaul, whatever successes they have could set a precedent for other businesses, and more importantly, for policymakers.

Amazon, Berkshire Hathaway, and J.P. Morgan’s partnership tells us that our current health care system is flawed. Market-based health care reform, especially regulatory reforms, are needed to increase access, improve quality, and lower the cost of insurance and treatment.

The Affordable Care Act (ACA) of 2010 aimed to improve health-insurance, but it hasn’t been able to live up to its original intent. The Act has improved access a bit by expanding Medicaid to cover all people with household incomes below certain levels, but only some states have chosen to participate. Increases in coverage through voluntary consumer enrollment have been lower than expected while the number of choices has decreased. And when we look beyond access, the ACA hasn’t improved quality or reduced the cost of treatment. In fact, premiums for the ACA are expected to rise 37 percent this year.

“Currently, regulatory burdens the ACA puts on companies create a less-effective environment for innovation and creativity in health care.”

Health care differs from an idealized free market system where prices for goods and services are determined by the open market, where consumers bargain with suppliers. In that system, the forces of supply and demand are generally free from government intervention. Health care’s distinctive characteristics make a pure market approach impossible, but a primarily market-based approach to health care can drive quality, lower costs, and improve access by creating an atmosphere conducive to inventive products and plans.

Because CEOs have to strike a balance between free-market ideals and the realities of government regulations every day, they are uniquely able to help policymakers develop market-based approaches to health care. This involves more-strategic regulation and perhaps deregulation that encourages innovative and disruptive providers and approaches to health care delivery. Currently, regulatory burdens the ACA puts on companies create a less-effective environment for innovation and creativity in health care.

For example, self-insured plans have ACA reporting requirements on 1094-B and 1095-B IRS forms, which can apply even if a business is not an ACA-applicable large employer. Additionally, a plan with assets is bogged down with more extensive filing requirements, including an audit requirement if funded. More regulatory burdens include Form 5500 and Employee Retirement and Income Security Act (ERISA) reporting requirements; Patient-Centered Outcomes Research Institute (PCORI) fees; and identifying premium rate equivalents, Consolidated Omnibus Budget Reconciliation Act (COBRA) rates, and budgeting.

Unproductive regulation also is rampant in the prescription drug industry. While the most notable example of inefficient regulation in this industry occurred when Turing Pharmaceuticals increased the price of Daraprim from $13.50 to $750 a pill in 2015, there are many similar examples throughout the industry. The Food and Drug Administration (FDA) published a list of more than 200 drugs that don’t have a competing generic version as an attempt to encourage lower cost alternatives after the Turing incident. But, it hasn’t done much since then to bring actual regulatory policy reforms that lower the cost of prescription medication.

Current ACA regulations deny companies the opportunity to reach their maximum potential when it comes to innovation and creativity. Regulation should aim at fostering competition and ensuring the integrity of products and services, whether they are health care products and services—such as drugs and procedures—or insurance plans. Regulatory policy needs to encourage market entry by new and innovative types of plans and improve the quality of healthcare while protecting consumers from unsafe treatments and unqualified products.

Once policymakers reform current regulatory burdens by following a market-based approach to health care that allows creativity and competition in the industry, more companies can confidently rise to the challenge of creating products, services, and plans that allow access to high-quality, affordable care for all Americans. Kudos to Amazon, Berkshire Hathaway, and J.P. Morgan for taking the first step. We need more business leaders to step up and innovate.