A bunch of people are betting that a 70-year-old health system could hold the key to fixing out-of-control healthcare costs

Getty/Steve Jennings

Amazon, JPMorgan, and Berkshire Hathaway plan to build a new nonprofit healthcare company that will provide to their employees “simplified, high-quality and transparent healthcare at a reasonable cost.”

Depending on how that company takes shape, it could have a big impact on the role employers play in healthcare.

Bill Gurley, a general partner at Benchmark Capital, told Business Insider that the new venture could be a sign that companies are trying to create change in how employers interact with healthcare for their employees.

But there’s one piece that needs to fall into place before much change can happen, Gurley said: narrow networks.

In the US, employers are mandated to provide health insurance for their employees. The US isn’t alone in having an employer-funded healthcare system, but in many other countries, it’s supplemental to a government-run insurance system as opposed to full coverage.

Narrow networks are plans that offer fewer health providers in the hopes that it will keep costs lower and members will get better quality care than if health plan members could go to a wider selection of doctors. And Gurley thinks for the JPMorgan-Amazon-Berkshire Hathaway health venture to work, it will need to include one of those.

In the case of Kaiser Permanente, a health system on the West Coast that’s been around since the 1940s and has both a health plan and a hospital, members see the doctors Kaiser Permanente employs in network. The model is a favourite of Berkshire Hathaway vice chairman Charlie Munger.

“If the whole nation had Kaiser Permanente care, the average quality of the care would go way up and the cost would go way down,” Munger has said.

Narrow networks are becoming standard, especially among Medicare Advantage plans, or private insurance alternatives to Medicare. About 35% of Medicare Advantage members were in narrow network plans, while 22% were in broad-network plans in 2015, according to the Kaiser Family Foundation. They’re also common in the Affordable Care Act marketplace.

But still, the majority of health plans aren’t built around narrow networks, especially employer-funded plans, which proponents of narrow networks say keeps healthcare costs high.

“I don’t know how we get to reform until there’s narrow networks,” Gurley said.

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