YC: Requests for Startups

Eliminating middlemen in healthcare

In the spirit of Jeff Bezos’ “your margin is my opportunity”, we believe it’s possible to build a highly profitable business and make the system more efficient at the same time.

Didn't Amazon try this and is now shutting down part of its healthcare (pill selling) play?

They didn't go big enough: they should have become a payer/insurer. If they started with their ~1M US employees and then applied the flywheel to HC insurance, they could have essentially created a single-payer system by default.

Slightly scary to think about Amazon having a near monopoly on healthcare, but ask yourself whether our current reality is better or worse…

Amazon is already an insurer, and has been for years. They are self-insured for the health plans they offer to employees, and only rely on third-party payers for network management and claims administration. They could take that part in house but it's a low-margin business where they would have no particular advantage.

You mean they provide self-funded insurance, or are literally underwriting plans? It's quite common for companies to be self-funded/"self-insured," but rely on a large payer like Aetna to do all the work.

If they cut out the middleman, they could negotiate directly with providers and Pharma, lowering the "fully loaded" cost of their payroll. It would be a massive savings.

Once they did it for 1M people, the hard work would be over, and they could sell Amazon plans to the public.

There's no real underwriting per se. My understanding is that Amazon just pays claims as those come in. They rely on large payers to do all the network and formulary management including negotiating rates with providers. There's no reason to expect that Amazon could negotiate lower rates than Aetna, which already covers 22M lives.

In order to achieve any real savings, Amazon would have to build up a captive provider organization with practitioners as direct employees. Which all of the large payers are also increasingly doing. Basically the industry is consolidating and converging on the Kaiser Permanente business model. Eventually most US residents will obtain healthcare from a handful of huge nationwide "payvider" organizations.